Jul 23 2009 10:41AM
(For a related analysis, please click on [ID:nKLR467407])
By Niluksi Koswanage
KUALA LUMPUR, July 23 (Reuters) - Almost half of the world's population of 6.7 billion people, who live in Asia and the Middle East, will celebrate a string of festivals starting in August, fuelling orders for palm oil, sunoil and soyoil cargoes.
Here are some questions and answers about festival demand in these regions and what could happen:
WHAT EFFECT DOES FESTIVAL DEMAND HAVE ON VEGOIL MARKETS?
It shores up prices. Palm oil output in top producers Indonesia and Malaysia seasonally rises in the second half and growing interest in palm oil cargoes during the festival season helps to control the stock build-up and support Malaysian benchmark prices , plantation analysts and traders say.
For U.S. soyoil markets <0#bo:>, veering between tight supplies in the old crop months and prospects of a bumper harvest in the fall, festival demand will keep prices steady.
WHICH COUNTRIES BUY VEGOILS IN A BIG WAY FOR ASIAN FESTIVALS?
The leaders of the pack are China and India, where a growing middle class spends more on vegetable oils as import taxes are systematically removed and economic growth speeds up.
India has more festivals such as the Muslim month of fasting called Ramadan starting in mid-August and the Hindu religious holiday of Diwali in October, since it is home to the world's second largest Muslim, and biggest Hindu, populations.
China has the mid-Autumn festival in early October, where vegetable oils are used in mooncake pastries and other delicacies, although swelling stockpiles of soyoil will make it less of a global buyer.
Muslim countries such as Pakistan and Bangladesh, and those in the Middle East, consider Ramadan to be one of the five pillars of Islam, in which evening feasts follow daytime fasts.
WHAT'S DEMAND GOING TO BE LIKE?
It's a mixed picture for vegetable oil imports for festivals. Most destinations from China's Tianjin Port to the Red Sea ports have storage tanks brimming with vegetable oils after exploiting cheap prices since late last year to snap up bargains.
India will lead the charge for purchases as the South Asian nation could have a poor soybean crop on account of the slow start to the monsoon while China has ample soybeans with crushers and in government reserves along with a record rapeseed harvest.
Traders say vegetable oil imports could exceed 8 million tonnes forecast by the Solvent Extractors Association for oil marketing year ending in Oct, up 27 percent from a year ago.
Palm oil imports during the crucial July-October buying period for festivals in India could rise 10 percent to up to 2.3 million tonnes from the same period a year ago, traders say.
In the remaining four months of the current year beginning November, India may import 450,000-500,000 tonnes of soft oils, including about 380,000 tonnes of soyoil.
China, on the other hand, will look more at palm oil due to ample soyoil stocks, but demand will still be muted. Overall palm oil imports should be in the range of around 300,000 tonnes in the lead up to the mid-Autumn festival, traders say.
As for the Middle East, an additional 150,000 tonnes for Ramadan alone is usually sufficient. But traders say demand might be 70 percent lower on ample stocks.
HAVE THEY EVEN STARTED BUYING AS YET?
There have been some deals but business has not been that aggressive, especially for the Middle East, whose imports of Malaysian palm oil for July 1-20 were up only 6.9 percent, according to cargo surveyor Intertek Testing Services.
Traders say it's partly because prices of refined palm olein, used in cooking oil, are $655 a tonne and buyers across the Middle East and Asia are waiting for a drop of at least $50-$60 before entering the markets in a big way.
No comments:
Post a Comment