Palm oil prices set to rise amid weaker output

Malaysia's palm oil output, down 4 per cent in the first half from a year ago, is likely to fall further as the government continues to chop down unproductive oil palm trees.

"Replanting is a two-pronged strategy. It will immediately cut off some oil supply into the market, but, in the mid-term, oil yield will improve," Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said.

The minister is optimistic of buoyant palm oil prices in the months ahead.

In an interview in Putrajaya yesterday, Dompok said he had told the Malaysian Palm Oil Board (MPOB) to speed up replanting efforts. "The RM200 million budget has been allocated, MPOB must speed up the implementation," he said.

Asked to comment on conflicting price forecasts by several plantation analysts, Dompok said: "Analysts and traders like Dorab Mistry can forecast from time to time. But you have also seen their predictions were not accurate.

"Palm oil prices are essentially subjected to market forces. You also have to consider the strength of the US dollar against ringgit and the amount of rainfall in oil palm plantations.

"If you ask me, I would not be able to give a specific forecast to palm oil prices. But I can assure you the government is committed to tightening palm oil supply in the immediate term."

Last year, Malaysia produced 17.7 million tonnes of crude palm oil. In the first six months of this year, the output was only 7.92 million tonnes, about 4 per cent less than a year ago.

Dompok estimates this year's palm oil output at 17 million tonnes, 700,000 tonnes less than last year's all-time high. "There is already a supply shortage, compared to last year, because of replanting. Also, since many smallholders cut back on fertiliser usage a year ago, we're seeing smaller and fewer fruit bunches," he said.

Yesterday, the third-month benchmark September contract on Bursa Malaysia’s Derivatives Exchange fell RM20 or 1 per cent to RM1,990 per tonne, the weakest level since March 30.

One Response to Palm oil prices set to rise amid weaker output

  1. Palm oil insider 16 July 2009 at 17:18

    Malaysia and now also Indonesia, are two of the three NET EXPORTERS of oils & fats for the whole world. Just imagine, 2 countries in the world supplying the fats & oils needs of the whole wide world of more than 100 countries.
    This is infact an undisputable fact that the world owes Malaysia and Indonesia a grateful favour where they can get their constant supply of high quality palm oil.
    By right when you have a closed to "monopolistic'
    supply position in the world, you can dictate good premium for your palm oil i.e. sell your palm oil at the good prices you want.
    But Malaysia has not been doing that. They humbly let the market decides the reasonable prices that they can fetch at times.
    With the many years of research into the goodness and uses of palm oil, the world now cannot go without palm oil,i.e. the world is ADDITIVE to palm oil.
    Therefore the market prices may go down and go up
    but eventually the mssage is crystal clear-a price premium has to be given to palm oil with all the hard work that Malaysia has put in for 50 years!

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