(Bloomberg) -- Palm oil futures will stay strong at least until March on an increase in export levies by top grower Indonesia, with supplies seen tight during the first two months of 2022, according to veteran trader Dorab Mistry.

The most-used vegetable oil is expected to trade between 4,000 ringgit ($955) to 4,400 ringgit per ton during the October-February period, before slightly dropping in March, Mistry, director at Godrej International Ltd., said at the Globoil conference on Saturday. Futures have averaged 3,908 ringgit so far this year, according to data compiled by Bloomberg. 

Higher benchmark prices may potentially curb purchases by top importer India in the coming months as the festive-season buying by the South Asian nation will almost be over by next month. Malaysian stockpiles may swell further going forward, after surging 25% in August from a month earlier.       

Palm oil prices will be underpinned by Indonesia’s biofuel mandate and higher export taxes, Mistry said. Indonesia last month raised its palm oil export duty for September to $166 a ton from $93 a month earlier following a rally in the tropical oil. Any move by Indonesia to increase its export tax generally boosts demand for Malaysian palm oil and supports futures in Kuala Lumpur.

Mistry said benchmark prices may slide to 3,200 ringgit-3,800 ringgit during April to September on expectations of favorable weather conditions for oil palm trees. The commodity has jumped more than 23% this quarter mainly on supply concerns and a rally in soybean oil, palm’s closest food and fuel substitute.

Other main points from Mistry’s presentation:

  • Mistry’s April-September price outlook is based on assumptions that there will be no damage due to adverse weather conditions, no further increase in biofuel mandates, and the coronavirus situation will stay under control
  • Palm oil production in Malaysia will recover only after Ramadan next year
    • Output seen rising to 19.2 million tons in 2022 from 18.2 million this year on easing labor shortage
    • Indonesian output will rise by at least 1 million tons
  • World vegetable oil supplies will be higher by 5 million tons in 2021-22, compared with a rise of 2.5 million tons a year earlier. Demand growth will remain unchanged at 4 million tons
  • India’s edible oil imports in 2021-22 are seen at 13.4 million tons, compared with 13.44 million a year earlier. Palm oil purchases are likely to fall to 7.65 million tons from 8.21 million
    • Soybean oil imports may rise to 2.9 million tons from 2.88 million tons, while sunflower oil purchases may advance to 2.5 million tons from 1.95 million
  • India may reduce taxes on rapeseed oil imports due to high local prices
  • China is unlikely to import 100 million tons of soybeans next year. It may buy lower volumes of rapeseed. Oilseed crushing may drop
  • Global sunflower oil prices should dip from December onward and trade below soybean oil on free-on-board basis
    • Big sunflower crops are emerging in Ukraine, Russia and parts of Europe

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