Palm Oil Gains to Record on Demand for Food, Fuel

According to Bloomberg:

Dec. 26 (Bloomberg) -- Palm oil prices in Malaysia, the global benchmark, rose to a record today as global demand for vegetable oils for food and alternative fuel outstripped supply.

Oilseeds and vegetable oils are gaining from Chicago to Dalian on concern world inventories are dwindling as demand rises in China and India and governments subsidize the use of edible oils for fuel. Soybeans may lead gains among non-energy commodities next year, according to Goldman Sachs Group Inc.

Soybeans and soybean oil in China, the biggest consumer of the commodity, also soared to records as traders speculated demand may outpace supplies from government stockpile sales and imports. Soybeans in Chicago reached a 34-year peak and soybean oil the highest for at least 33 years on Dec. 24.

``The outlook for the grain, oilseed and vegetable oil markets remains very positive,'' Michael Coleman, Singapore- based managing director of Aisling Analytics Pte, which runs a $1 billion commodity hedge fund, said today by e-mail.

``To see significantly lower prices we'll need a combination of demand rationing and excellent harvests to allow a rebuilding of inventories,'' he said. ``That probably means significantly higher prices first.''

Palm oil for March delivery rose as much as 57 ringgit, or 1.9 percent, to 3,087 ringgit ($924) a ton on the Malaysia Derivatives Exchange today before closing at 3,080 ringgit a ton.

Supply Shortage

``Palm oil prices have gone up in spite of record-high stockpiles in Malaysia because the market is anticipating tight supply next year,'' Alvin Tai, analyst at OSK Research Bhd., said by phone from Kuala Lumpur today.

Palm oil inventories in Malaysia, the second-largest producer of the commodity, climbed 16 percent to a record in November as output reached its highest ever, the Malaysian Palm Oil Board said on Dec. 10.

Agricultural products have been among the best-performing commodities this year. Palm oil has gained 56 percent, soybeans 75 percent and soybean oil 62 percent. Goldman Sachs raised its 12-month forecast for soybeans by 61 percent to $14.50 a bushel from $9 a bushel in a Dec. 11 report.

Soybean oil futures traded on the Dalian Commodity Exchange have risen 40 percent this year. The most-actively traded contract for May delivery gained 200 yuan, or 2 percent, to close at 10,146 yuan ($1,382) a ton.

China, the biggest buyer of vegetable oils, imported 29 percent more of the commodities in the first 11 months of this year compared with a year earlier, customs data showed Dec. 11.

Imports of vegetable oil totaled 7.71 million metric tons from January to November, the Beijing-based customs office said. Palm oil imports gained 7.1 percent in the first 11 months while the country's imports of soybean oil and canola oil almost doubled and gained eight-fold respectively.

Indonesia and Malaysia produce 90 percent of the world's palm oil, the main substitute for soybean oil.

- Warning Notice to all low income readers, kindly proceed to back up at least 2 months worth of instant noodles and essential food to prepare for the tsunami of food price hikes. Prediction of this new year food prices will go up in stages and it will come when the "breaking point" comes or the national "signal" to hike food prices comes from government or any national level to signal the mass hike in food prices.

The situation now is desperate for food stalls to keep food prices low to be "competitive" while the hike in cost of raw food materials, utilities and higher rental. The decisions for some stall owners who don't have deep pockets to wait until the signal to hike food prices will face the fate of closing down businesses and go under big food court names to work for others.

The hike in food prices that I speculate can go as high as $7 to $10 depending on the cost of the raw materials, cooking oil, rental and utilities. The prices had been suppressed for very long for many coffee shops and might be targeted for renovation into modern looking food courts that sells food at much higher prices.

Soon there won't be any cheap food left in Singapore for the benefit of the low income people, I won't even want to speculate other countries plight in this new wave of inflation. I personally feel that many will start to save on eating lunch and cook their own food at home however the supermarkets are going to raise their food prices after Chinese New Year and it won't be pretty.

I almost can feel the pressure between my ears telling me that don't panic and be happy that we still have jobs and security. Prosperity and growth in a illusion of peace in slavery and hardship does nothing to other countries and there will be chaos in other countries with strikes and protest.

Food export from food producing countries will almost certainly curb exports due to higher domestic demand and soon countries like Singapore may have to grow their own food to sustain the huge population or face the consequences of paying high cost of food. Alternatives to expensive food will slowly diminish from the market and what's left will be branded and repackaged "quality" food that not everyone can afford.

The rich will push this concern straight to the drains especially those government sectors that have huge pay hike and big fat bonus to cushion the hike "temporarily" but what can we do?

Solutions is to make more high paying jobs to the general public!! It must be fast otherwise there won't be a peaceful Singapore soon! MRT will have much more disruption due to suicides and more violent robberies in broad daylight!!

This equilibrium of peace and prosperity is non-negotiable and must be enforced strictly but the lives of the poor will not be able to sustain their 3 meals soon!

For those worried, kindly back up periodically 2 weeks to 2 months worth of essential food stuff in case of hoarding at the last minute before the price hike.

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