News
01.12.2009
Crude palm oil prices set to decline
The negative impact notwithstanding, the debt crisis in Dubai may have one positive effect — easing cost pressures as commodity prices fall.
After remaining stable for about six months, crude palm oil prices had started to escalate in the last four to five weeks, leading to worries of a build up in cost pressures for FMCG companies. Palm oil goes into the making of toilet soaps, while crude oil price impacts packaging and transportation costs.
After remaining stable for about six months, crude palm oil prices had started to escalate in the last four to five weeks, leading to worries of a build up in cost pressures for FMCG companies. Palm oil goes into the making of toilet soaps, while crude oil price impacts packaging and transportation costs.
Companies like Hindustan Unilever (HUL) and Godrej Consumer have benefited from low commodity costs in terms of delivering better volumes by maintaining prices of finished goods. Cost savings have resulted in better margins for companies enabling them to invest more on promotional spends with the objective of improving market shares.
Costs of companies had been impacted the most when crude oil peaked at $147 a barrel in July 2008. Strong commodity headwinds propelled FMCG product prices up, pushing price-sensitive consumers to buy cheaper products.
Fears of a rising commodity cycle returned when, in the last one month, crude palm oil started to firm up. Crude palm oil futures were up 0.68% to Rs 341.90 per 10 kg at the Multi Commodity Exchange.
However, after Dubai's debt problems came to light, crude oil tumbled 2.5% to $76.05 per barrel on the New York Mercantile Exchange.
Since palm oil mimics crude oil, the commodity is expected to decline, which could ease cost pressure concerns.
timesofindia.indiatimes.com
