Palm-Oil reserves in Indonesia, the world'slargest producer, may total about 4-M metric tons, twice as much as estimated, according to Godrej International Ltd., which forecast a rise in Malaysian stockpiles to a record.

"It is difficult to be Bullish on Palm-Oil prices," Dorab Mistry, a director at Godrej International Ltd., told a conference in Singapore, citing the stockpiles, slower economic growth and rising output.

The tropical oil may trade between 2,900 Ringgit ($930) and 3,300 Ringgit a ton this month and next, he said. The most-active contract declined as much as 2.1% to 2,927 Ringgit a ton on Malaysia Derivatives Exchange Thursday.

The reserves of the 2 largest producers may limit price gains even as soybean, which can be crushed to produce a rival seed oil, is poised to extend a record rally after drought curbed supplies.

Benchmark Palm Oil in Malaysia has dropped 7.5% this year, helping restrain gains in global food costs spurred by the worst US drought in more than 50 yrs.

"The big story of 2012" is the stockpiles in Indonesia, Mr. Mistry told the gathering organized by Goldman Sachs Group Inc. (NYSE:GS) Thursday, according an advance copy of his remarks "Normal stocks of Palm products in Indonesia in the last 2 yrs have been of the order of 3.5 to 4-M tons, as against the normal, conventional "guesstimate" of 1.5 to 2-M tons."

Palm Oil, the most-consumed vegetable oil, is used in everything from instant noodles to soaps and biofuels.

Mr. Mistry, based in London, has traded vegetable oils for more than 30 yrs. Indonesia does not release official data on stockpiles and production, with export estimates available from the Indonesia Palm Oil Association. Malaysia does issue figures.

Palm Oil prices have dropped in Y 2012, extending last year's 16% fall, while Soybean rallied 44%.

The divergence has widened Palm Oil's discount to Soybean Oil to $323 a ton Thursday, the biggest difference since Y 2008, according to data. The Nov-delivery Palm Oil contract ended the morning session at 2,938 Ringgit in Kuala Lumpur.

"These hidden, ignored Palm Oil stocks in Indonesia are the Key reason for the dismal performance of Palm Oil," said Mr. Mistry, who said he looked into Indonesian holdings after tax changes in Y 2011. "Until recently, it has been the opinion of most analysts that Indonesia hardly kept Palm Oil stocks and that Malaysian Palm Oil stocks were bigger."

Palm-oil stockpiles in Malaysia probably rose to an 11 month high of 2.14-M tons in August from 2-M tons in July, according to the median survey of analysts and plantation companies Wednesday.

Inventories reached a record 2.27-M tons in November 2008, according to data from the nation's Palm Oil Board. Mr. Mistry did not give an estimate.

Output in Malaysia may rise about 2-M tons in Sept and Oct driven by a seasonal upswing, and Y 2012 production may be 18.2-M tons, Mr. Mistry said. Indonesian production may peak in November, with annual output of about 27-M tons compared with 25.2-M tons last year, he said.

"A big portion of stockpiles in Indonesia are due to the very tardy logistics," said Mr. Mistry. "It can take up to 2 months for the fresh-fruit bunches harvested in Kalimantan to be converted into refined Palm products and exported," Mr. Mistry said. Kalimantan is the Indonesian portion of Borneo Island.

Soybean may rally to as much as $20 bu in December, while Corn may rise to about $9 bu. The most-active Soybean contract reached an all-time high of $17.89 on the Chicago Board of Trade on 4 September, while Corn reached a record $8.49 bu on 10 August.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.