SINGAPORE (Dow Jones)--Tight rapeseed supply this crop year may prompt price-sensitive buyers to switch to palm oil, Macquarie Research said. Macquarie forecast ending stocks in the year that began July 1 at 5.4 million tons, down nearly 7% from 2009-10 ending stocks, as global production is expected to be steady amid firm demand. Rapeseed production in 2011-12 will likely edge upward to 58.8 million metric tons from 58.7 million tons in 2009-10, it said. "We anticipate that rapeseed prices will stay high in comparison to the rest of the vegetable oils complex," Macquarie said, predicting that the elevated prices will encourage substitution to other oils. Palm oil production is strong and stocks are building in the world's No. 2
producer, Malaysia, weighing on prices. End-June stocks were at a 17-month high of 2.05 million tons in Malaysia, according to data from the Malaysian Palm Oil Board, and some traders expect
them to continue increasing due to strong output forecasts for July even as exports decline. Benchmark crude palm oil futures on Malaysia's derivatives exchange tumbled to a 2011 low last week due to the surplus.
-By Surabhi Choudhary, Dow Jones Newswires; +65 6415 4086;
surabhi.choudhary@dowjones.com