Palm Oil Advancing 23% Hurting Unilever as Stockpiles Decline to 1974 Low - Bloomberg

At a time when consumers are focused on food costs that are within about 3 percent of a record, stockpiles of edible oils needed to make everything from noodles to fish sticks are dropping to a three-decade low.

The combined stocks of nine oils will plunge 25 percent to 9.39 million metric tons this year, or about 23 days of demand, the fewest since 1974, the U.S. Department of Agriculture estimates. Palm oil prices will climb as much as 23 percent to 4,000 ringgit ($1,324) a ton by Dec. 31, based on the median in a Bloomberg survey of 11 analysts and traders.

As the global population expanded 85 percent in the past four decades, demand for edible oils rose almost ninefold. While that’s raising costs for Unilever, the second-largest consumer goods company, it will also help Sime Darby Bhd., the biggest publicly traded palm-oil producer, report a fourfold gain in earnings this year, analysts’ estimates compiled by Bloomberg show. The forecast price rally, which may quicken should flooding return to plantations, will stoke inflation that caused central banks from Brazil to China to raise interest rates.

“The world cannot afford any crop problem this year, anywhere,” said Steve Nicholson, a commodity procurement specialist at International Food Products Corp., a distributor and adviser on food ingredients in Fenton, Missouri. “Without a cushion of inventories, any production hiccup in the northern hemisphere this year will be catastrophic and leave today’s prices looking cheap.” More ...