April 29 (Bloomberg) -- Global palm oil imports will pick up in the second quarter as demand increases before Ramadan, Oil World said.
Purchases will climb to about 10.5 million metric tons in the April-to-June quarter from 9.6 million tons in the first quarter, with more exports expected from Indonesia and Malaysia, the largest producers, the Hamburg-based researcher said in a report. Importers will need to replenish stockpiles of vegetable oils made from soybeans, sunflower and palm in the next six months, and demand for cooking oils usually climbs before the Muslim fasting month of Ramadan, when communal meals increase, Oil World said. Ramadan is set to start June 28.
“With palm oil supplies tight, prices have appreciated from last year and are now close to soy oil and sun oil,” the researcher said. “But consumers can shift only some of their demand to seed oils, owing to their insufficient export supplies. Palm oil will thus remain the major commodity in the oils and fats sector.”
Palm oil futures are up 18 percent in the past year on Bursa Malaysia Derivatives in Kuala Lumpur amid drought concerns in parts of Malaysia, Indonesia and Thailand. Global stockpiles of eight major vegetable oils were 1.5 million tons smaller than a year earlier at the end of March, mostly because of lower palm oil supplies, Oil World said.
Even as demand increases in the second quarter, world palm oil exports will still drop to 42.58 million tons in the 2013-14 season that ends Sept. 30, less than last month’s estimate of 42.63 million tons and down 3.7 percent from the prior year, Oil World said. Higher domestic consumption in major producing countries because of government biofuel mandates also leaves fewer supplies available to export, according to the report.
Indonesia has become the world’s largest palm oil consumer at an estimated 9.1 million tons this season, up from 7.6 million tons in 2012-13, with biodiesel accounting for most of the increase in demand, Oil World said. A potential El Nino weather pattern may extend dry conditions in southeast Asia, which would have “major repercussions on palm oil production in 2015 and 2016,” according to the report.