KUALA LUMPUR: CRUDE palm oil (CPO) is likely to be higher than the RM3,500 per tonne forecast earlier as the price is not based on the actual supply and demand situation, a top industry official said.
Malaysian Palm Oil Council (MPOC) chief executive officer Tan Sri Yusof Basiron said the local industry is producing less than what it did during the same period last year despite the population growth.
“Providing further uncertainties, the drought in the US is hurting soyabean yields… all these should point to stronger prices,” Yusof said after a briefing at the Faculty of Economics and Administration of Universiti Malaya here yesterday.
He was referring to the recent undercutting move by neighbouring Indonesia, the world’s top palm oil producer.
Indonesia announced an increase in its export tax for CPO crude palm oil to 19.5 per cent for May, from 18 per cent in April.
While Indonesia’s move, which is aimed at discouraging the exports of raw materials, may be a step in the right direction to develop its downstream palm oil industry, Yusof warned that the decision could spin the industry into a vicious cycle.
“It is contributing to value disruption, that is the reality,” he said.
If Indonesia can go to the world oil market and offers lower prices than Malaysia, what is to stop Malaysia, as the second largest palm oil producer in the world, to offer its refiners a discount?
For the Malaysian players, it could also be a tough call as the decision was accepted by the Indonesian producers uncomplainingly.
Crude palm oilCPO futures have slipped recently on weaker exports data. The benchmark September contract at Bursa Malaysia Derivatives ended 1.5 per cent lower at RM3,082 a tonne, after trading in a range of RM3,080 to RM3,161 a tonne.
Malaysia’s palm oil stocks fell 4.85 per cent to 1.70 million tonnes in June 2012 from 1.79 million tonnes the previous month, said the Malaysian Palm Oil Board (MPOB).
MPOB said the CPO production in June increased 9.94 per cent to 842,838 tonnes, from 766,668 tonnes the previous month.
It is understood that Commodities and Plantation Industries Minister Tan Sri Bernard Dompok is currently in Jogjakarta for the annual bilateral discussions on commodities.
Indonesia’s recent changes to the export tax structure are expected to be discussed by the Malaysian Cabinet soon.
Apart from corporate investments heading abroad, Yusof said technology inputs for growth is key to doubling Malaysia’s RM80.4 billion exports in the next 20 years.
A new proposal will be submitted to the government soon to discuss new technologies that might help improve the yield per hectarage, as there has been little improvement in the industry’s productivity over the last 30 years.
The oil palm industry is undergoing transformation into a strategic commodity with high price potential.
The Palm Oil National Key Economic Area (NKEA) is targeted to raise total gross national income contribution by RM125 billion to reach RM178 billion by 2020.
It was through earlier research and development investments through 180 nutritional projects, which Malaysia succeeded in penetrating the US market and commanding a sizeable market share.
Palm oil imports from the US soared from 250,000 tonnes to one million tonnes during the last 10 years.
Source : Business Times
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