By Sameer Mohindru
   Of DOW JONES NEWSWIRES


  KUALA LUMPUR (Dow Jones)--Global vegetable oil prices may find support during
the next quarter as palm oil stocks fall in Southeast Asia and soybean
production remains low in south America, but the outlook is bearish for the
second half of 2009, according to analysts.

  Three of the five analysts who gave their forecasts at the conclusion of a
three-day vegetable oils conference here said palm oil prices could potentially
fall to around MYR1,500/ton despite the current euphoria over dwindling stocks.

  Prices are hovering around MYR1,920/ton now.

  But a major worry for most participants was the narrowing gap between the
prices of palm olein and crude soyoil, as palm oil prices rose in recent months
amid falling stocks and strong demand.

  Malaysian palm oil stocks are estimated to have fallen to a 14-month low of
1.56 million tons at the end of February.

  London-based analysts, Dorab Mistry and James Fry said palm olein may briefly
sell at a premium to soyoil but this will result in a shift in demand away from
palm oil.

  The global economic slowdown that will result in an overall decline in demand
will also weigh on prices, they said.

  "This year, we must pay attention to demand rather than supply," noted
Mistry, the London-based director of India's Godrej International.

  Edible oil demand growth may be no more than 2.0 million tons this year
compared with the usual rise of 4.0 million tons to 5.0 million tons, he said.

  Demand for vegetable oils to make biofuels, which had pushed up prices to
record highs during the last two years, may remain  unchanged or register a
very modest growth of less than 500,000 tons, he said.

   Fall In Production Seasonal, Won't Last


  Fry said the fall in palm oil output in Malaysia is only seasonal while the
stock-output ratio is still not very tight.

  In neighboring Indonesia, strong production and large stocks may continue to
weigh on prices, said Richard Kastilani, director of Tropical Oil Products
Ltd., an exporter of palm oil.

  He said Indonesia started the year with a large stockpile of 2.7 million tons
of palm oil and is heading for another year of record production which may hit
22.4 million tons in 2009.

  By the end of the year, Indonesian inventories may surge to 3.3 million tons,
he said.

  Kastilani said prices are likely to move between MYR1,550 and MYR2,000 during
the next four months.

  According to Mistry, while prices may test MYR2,100 during the next few
weeks, they can fall to MYR1,500 during the second half of 2009.

  Fry had an even more bearish forecast, predicting CPO could  fall to
MYR1,400-MYR1,500 this year.

   Lower Soyoil Output May Support Prices


  However, some have pegged their hopes on a sustained drawdown in stocks
during the April-June quarter and a smaller soybean crop in South America.

  That could help CPO rise by $70-$100/ton to an average $640/ton, cost and
freight Rotterdam, in the first half of 2009, said Thomas Mielke,
editor-in-chief, Oil World, a Hamburg-based industry publication.

  Mielke said palm olein prices may even rise to $670/ton, free-on-board
Malaysia, from the current level of $615.

  He said South America's soybean production this year will likely be around
106 million tons, down from 115 million tons last year and way below earlier
expectations of around 118 million tons.

  The tight supply of soyoil will have to be offset by higher exports of palm
oil, said Anne Frick, New York-based vice-president of Prudential Bache
Commodities.

  Frick said CPO prices are likely to move between MYR1,700/ton and
MYR2,300/ton for the rest of the year.

  Several traders argue that if freight cost are taken into account, palm oil
will continue to be the cheaper alternative in most Asian markets despite the
price gap with soyoil narrowing considerably.

  "In times of recession, when buyers are more price-sensitive, they will buy
the cheapest oil which is palm oil. The narrowing difference in prices doesn't
take into account the freight and refining costs of soyoil," said an executive
at a global trading company.

  He said palm oil also has a captive market in India where duty waiver on CPO
imports is likely to push inflows to an all time high of more than 5.5 million
tons.

   That could boost prices to MYR2,200/ton by June, Kuala Lumpur-based analyst
M.R. Chandran said.