KUALA LUMPUR: The current drought that is affecting production at key palm oil plantation areas and falling inventory will continue to support rising crude palm oil (CPO) prices, according to experts.

The benchmark CPO futures contract on Bursa Derivatives had risen 5.3% this year at yesterday’s close of RM2,801 a tonne, just off its highest level in 17 months.

Malaysian Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron to reporters that prices would probably range between RM2,600 and RM3,000 a tonne this year.

“The drought and low stock levels consistently over the last six months (are causing the CPO prices to go up). People have been importing because of the cheaper CPO price but now as that the stockpile is not large, we cannot continue to sell it cheap,” he said after a roundtable session at the Palm & Lauric Oils Conference and Exhibition 2014 yesterday.

The bullish outlook was shared by Felda Global Ventures Holdings Bhd, one of the biggest planters in the world.

Its president and chief executive Emir Mavani Abdullah predicted yesterday that CPO prices would hover between RM2,500 and RM3,000 in the period on strong demand amid a low production period that typically run until April and that the drought was also affecting the industry.

Meanwhile, Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas said Malaysia’s plan to ramp up biodiesel production may support CPO prices.

The minister said a proposal to implement the B7 programme next year will result in annual use of 700,000 tonnes of palm methyl ester, according to Bloomberg.

The B5 version will be extended nationwide this July, taking demand to 500,000 tonnes. B5 is a blend of 5% palm methyl ester and 95% of fossil diesel. The B5 version will be extended nationwide this July, taking demand to 500,000 tonnes. B5 is a blend of 5% palm methyl ester and 95% of fossil diesel.

Source : The Star