Palm & Vegoil Price Outlook for the next half year By Dorab E Mistry Godrej International Limited

Full Title of my paper Outlook for World Vegetable Oil Prices 6 th China International Oils & Oilseeds Conference Guangzhou

Congrats to DCE & BMD There is great uncertainty & volatility Futures markets are very important to offset price risk Macro economic situation will profoundly affect price behaviour I shall try and stick to fundamentals

Events so far Correctly predicted Malaysian CPO production in 2010 at 17 mln mt Correctly predicted bumper rise in Malaysian CPO production in 2011 to 19 mln mt and Indonesian to 25.5 mln mt Correctly predicted market bottom at 2800 Ringgits

CPO production slowing In recent weeks, CPO growth is slowing Malaysian production will only get to 18.8 mln mt Indonesian production will only get to 25.2 mln mt Total growth in supply will slow from 6 mln estimated earlier to only 5.5 mln mt

CPO Production The Biological Cycle is slowing down from November 2011 Production in 2012 will be flat in Malaysia and will grow slowly in Indonesia Rough estimate :Up worldwide by 2 mln mt Better estimate will be released on 2 December at Bali conference

Palm oil Stocks Stocks have not risen much Price discount of palm oil has kept demand strong and stocks low My price forecast for a Bottom at 2800 Ringgits was correct. From November, prices will rise and this should prevent stocks from falling too low

CHINA Domestic prices always below import cost Crush margins were also very thin Problem of food price inflation was tackled with vigour Strong RMB helped Now monetary policy may loosen and State Reserve may import larger tonnages

Incremental S&D – Soybean situation is comfortable but La Nina threat remains Farmers refuse to sell at low prices Crush margins are very bad US bio diesel production – bullish Growth in crush will be 5 mln mt with extra 1 million tonnes of soya oil in 2012

Incremental Supply Sunflower oil: Very big crops in Russia & Ukraine in Next year could be flat Rapeseed oil: Bullish outlook due to bio diesel use and lower crop in China Cotton oil & Gn oil: Up 0.5 mln mt Lauric oils : Coconut oil not recovering yet and CPKO will be up by much less in 2012

Oct 10 - Sep 11 Oct 11-Sep 12 Soya oil + 1, ,000 Rape oil Sun oil Gn & Cotton Palm + 5, ,000 Total supply + 8, ,300 Incremental Supply

Incremental S&Ds Supply Up 4,300 Demand Up 6,000 Food Demand up 3 to 3.5 mln mt Bio diesel demand up 3 mln mt

PRICE OUTLOOK - assumptions Normal growth in the world Strong Dollar will fade by February 2012 China and India will loosen monetary policy and reduce interest rates EU and USA will begin to cut their deficits

Price Outlook Palm : CPO futures will climb to 4000 Ringgits by June 2012 By January 2012, CPO futures will climb to 3300 and then gradually keep rising I expect Brent crude oil will trade between US$ 105 and 120 per barrel

Price Outlook Soya oil : Will rise to US$ 1450 FOB Argentina by June 2012 Chicago bean oil futures will rise to 65 to 70 cents per pound by June 2012 Sunflower oil: Will be same as soya oil for most of the time Rape oil : at a premium over soya oil

Price Forecasts Lauric oils Palm Kernel oil has bottomed out at US$ 1000 cif Rotterdam and will climb to US$ 1600 by June 2012 Coconut oil will be US$ 100 higher

What can negate the bullishness? If Equities fall, commodities will also fall Contagion is the biggest threat

China domestic economy, growth, imports and prices are very important Next year, as China grows faster, prices will rise, farmers will prosper Next paper– 2 December at GAPKI conference in Bali GOOD LUCK & GOD BLESS Conclusion