Palm oil rebound not in sight;stocks, demand drag

Ballooning vegetable oil stocks and fast-declining interest from funds in volatile commodities may hold off a recovery in palm oil prices until next year despite its fall to a level much lower than rival soyoil.

Palm oil's discount to soy oil has more than doubled to $450 a metric ton in just six months as palm has lost half its value since hitting a historic high in March, triggering market talk that palm might have gone too low too soon and would bounce back.

But analysts said rising output in Malaysia and Indonesia and bumper crops in China and India would boost supplies and reduce export demand. And with a worsening financial crisis, funds are fleeing assets that have seen wide price swings recently.

"Panic has forced funds and investors to sell out palm oil,"said Martin Bek-Nielson, executive director of United Plantations Bhd. "Cash is now king in an environment when stocks are ballooning, exports are dwindling and the global economy is getting shattered."