palm oil output will increase strongly, driving an increase in

stockpiles in Malaysia, the second-largest producer after Indonesia,

according to James Fry, managing director of LMC International.

The increase will widen the discount that palm oil trades at

compared with soybean oil, Fry said in a prepared speech at an oils and

fats conference in Kuala Lumpur today. Palm oil at RM2,500 (US$799) a

metric ton “best reflects” the demand and supply of the tropical oil

used in foods and fuel, Fry said.

Palm oil output in Malaysia may climb 3.4 per cent to 18.4 million

tons next year, according to a government forecast on Oct. 15. Indonesia

may produce 19 million to 20 million tons, according to the country’s

palm oil association. The two represent about 90 per cent of output

worldwide.

Stockpiles in Malaysia rose in September to 1.71 million tons, the

highest level in seven months, according to that country’s palm oil

board on Oct. 11. Palm oil on the Malaysia Derivatives Exchange closed

at RM2,919 yesterday after rising 29 per cent from the year’s low of

RM2,270 on July 7.