Recovery in Malaysian output, rising Indonesian harvests seen
$100/barrel crude oil makes soyoil competitive for biofuel
Tight vegoil stocks mean no room for weather shocks
JAKARTA/KUALA LUMPUR, March 7 (Reuters) - Strong production of southeast Asian palm oil is the best hope of boosting cooking oil supplies as competitor soyoil gets soaked up to make biofuel, its attraction redoubled by unrest in Libya that has driven crude oil to more than $100 a barrel.
Vegetable oil markets had braced for a fall in palm oil prices in the second half of 2010, on expectations of strong output from top producer Indonesia, as it harvests a bigger acreage, and as No.2 supplier Malaysia improves yields.
But the new threat of unrest in Libya disrupting crude oil supplies has brightened biofuel's allure, which could prompt farmers in the Americas to channel soyoil into the energy sector to profit from high prices and demand.
Palm oil will then have to fill the food gap as countries from Bangladesh to Egypt buy more of the edible oil to rein in soaring food prices and fend off civil unrest.
Markets will price this in. Malaysian palm oil has dropped nearly 3 percent this year, although rising food demand could wipe out the losses in the first quarter. U.S. soyoil got a headstart with a rise of 1.5 percent, thanks to its appeal for biofuel use, and could strengthen.
"Looking ahead, it appears likely that there will be an increasing onus on palm oil to help ease the current tightness in world vegetable oil supplies," said Anne Frick, senior oilseed analyst with Prudential Bache Commodities.
"Consumption of vegetable oils, particularly soybean oil, in industrial usage is increasing," she added.
Estimates from the U.S. Department of Agriculture (USDA) reflect this view. Palm oil's global ending stocks in the year to September will hover at 3.15 million tonnes, the tightest in seven years, but 14 percent higher than soyoil's balance.
The dynamics between palm oil and soyoil, which compete for use in cooking oil, margarine and biofuel, will dominate the Bursa Malaysia Palm Oil Conference this week that draws in nearly 2,000 delegates from the global edible oils industry. For the latest updates PRESS CTR + D or visit Stock Market news Today
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