JAKARTA, Nov 8 (Reuters) - Benchmark Malaysian palm oil prices must stay at around 2,200 ringgit ($720) a tonne for two months in order to stimulate demand for the edible oil and reduce high stock levels, a leading industry analyst said on Thursday.
Malaysian palm oil prices have already lost about a quarter this year to trade at around 2,400 ringgit ($780) a tonne, as stocks rise in top producers Indonesia and Malaysia and demand slumps, hit by a global economic downturn.
But palm prices must fall further within the next 4 to 6 weeks to lure buyers and cut back inventories, said Dorab Mistry, head of edible oil trading at Indian conglomerate Godrej Industries.
He made a similar call at an industry conference in Malaysia in October.
"One thing is crystal clear. Futures are very overpriced at present," Mistry said in a speech to be delivered at an industry meeting in the Chinese city of Guangzhou.
"A period of short-term pain will be rewarded with ample long-term gain."
Last month, second-largest producer Malaysia said it would cut export taxes next year, which has helped support crude palm oil prices. The government also said it would scrap duty-free export quotas.
Mistry said that by January, the government would have to announce loopholes and exemptions to this new export tax regime to allow substantial duty-free exports of crude palm oil, otherwise monthly exports will fall.
"In their euphoria, plantation groups and their cheerleaders have overlooked one simple but significant fact," Mistry said. "In the last fortnight, palm oil has completely priced itself out of any meaningful energy demand," he added.
Palm oil is used as a cooking oil, biofuel and in cosmetics.
Seasonally strong production may have driven Malaysian palm oil stocks to another record high in October, a Reuters survey of five plantation firms showed this week.
Inventory levels may have grown 7.5 percent in October to 2.67 million tonnes from a previous peak of 2.48 million in September, the poll showed.
Malaysian palm oil stocks are likely to increase further in November and December, Mistry said, adding that they will total 3 million tonnes by Jan. 1 next year.
Crude palm oil production will be 18.4 million tonnes by Malaysia this year and 27.5 million by Indonesia, he estimated.
Output prospects next year had brightened as a result of the fadeout of the El Nino weather event and better rain, he added.
Turning to rival edible oil soyoil, Mistry said prices of soybeans, now trading at about $15.18-1/4 a bushel, would depend on the weather, acreage and pace of planting in South America, and crucially, releases from Chinese state reserves.
"If the state reserve releases another 2 million tonnes of soybeans between now and March, Chinese imports will be reduced to that extent, and prices need not rise to $18," he said.
"Prices around $16 will be sufficient to see us through until new crop Brazilian supplies come to market." ($1=3.0615 Malaysian ringgit) (Reporting by Michael Taylor; Editing by Clarence Fernandez)