The world demand for cooking oils is expected to exceed supplies limited by inclement weather conditions, prompting the commodity to extend its rally, Bloomberg reports.
Indonesia and Malaysia, the largest producers of oil-palm, have been afflicted by La Niña, a weather system that has dumped heavy rains on the Far East and caused drought conditions in South America, where soybean crops are suffering. Oil supplies are in peril and prices are primed to increase.
"The period of greatest tightness will be between February and May 2011 and we need prices to rise now in order to rein in demand and to stimulate plantings," Dorab Mistry, Godrej International director, said at a conference in Bali on Thursday.
Having traded vegetable oils for 30 years, Mistry said this season's version of La Niña is enormously strong.
"It must affect crops in South America," he said. "The present indications are that we shall lose at least 5 million tons of soybeans. Most analysts underestimated the effects of the El Niño of 2009 and appear to be doing the same with La Niña."
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