Bloomberg News

Palm-Oil Output May Fall on Oilseed Sowing, Rabobank Says

February 13, 2012

(Updates with Rabobank comments starting in third paragraph.)

Feb. 13 (Bloomberg) -- Palm-oil production may fall as farmers reduce the amount of land planted with oilseeds, Rabobank International said.

Output in Malaysia, the world’s second-biggest producer, will drop about 5 percent this month to 1.22 million metric tons, Rabobank said in a report today. U.S. and Chinese farmers will sow fewer oilseeds because corn is more profitable to grow, it said. Adverse weather in South America and India will curb global oilseed output and erode inventories of palm oil, according to the report.

“Reduced global availability of rapeseed and soybeans in major palm oil-importing countries will further draw down palm- oil stocks,” Rabobank said. “China’s domestic oilseed production is likely to decline as growing grains is more profitable for farmers.”

Palm oil gained 5.1 percent in the past six months on the Malaysia Derivatives Exchange, partly as dry weather in South American threatens soybean output. Consumers will use more palm oil if soybean and rapeseed oils are unavailable.

Soybean production globally will total 251.5 million tons and growers will harvest 60.8 million tons of rapeseed, the U.S. Department of Agriculture has forecast. That’s probably too high, Rabobank said, pointing to the weather.

“USDA is overestimating global soybean and rapeseed production, which will reduce the availability of alternative vegetable oils,” the bank said. “We see further downside risk to supplies as oilseeds struggle to find additional acreage during the upcoming North American planting window, which will increase the shift of end-user demand to palm oil.”

--Editors: Dan Weeks, Nicholas Larkin.

To contact the reporter on this story: Tony C. Dreibus in London at tdreibus@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.


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