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 Mahamad Rodzi Abdul Ghani
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 Outlook for palm oil prices uncertain in H2

Tuesday, July 31, 2001(The Star) - MALAYSIAN palm oil producers arerejoicing over the recent surge in price but realise the sharp rise maynot last for long as authorities eye the Latin American market to keepprices firm.Melaka Tong Bee Sdn Bhd director Yang Chien Chu said that the outlook forpalm oil prices over the next six months remained uncertain."The industry was caught by surprise. It did not expect the market to comeup so fast. Of course everybody is happy. But we are still a bitconservative what will happen in the next few months," Yang told AFPduring a break at a conference on the outlook of the palm oil industry.Malaysia, the world's largest palm oil producer, watched with dismay asthe price plunged from a high of RM2,377 a tonne in 1998 to around RM800in mid-July this year."But prices have risen sharply in the last two weeks and on Friday hitRM1,180 a tonne," Yang said.One analyst attributed the price hike to the expectation that India,Malaysia's top market and world's largest consumer of vegetable oil, wouldincrease its palm oil uptake in the coming months to stock up for theDeepavali festival in November."The question is whether India could sustain the buying after thefestival. That will influence future price direction," the analyst said.Yang also said that producers would be happy for the price to stabilisearound RM1,000 a tonne to enable Malaysian exporters to compete with otheredible oil producers."We feel the market will maintain at about RM1,000, which may be ahealthier level so that we will remain competitive in the world oilmarket," he said.According to Yang, his company, which owns 10,000ha of palm oil andproduces 36,000 tonnes of the oil per year, will adhere to thegovernment's proposal to sell forward."We will try because at RM1,200 per tonne, the price is good. There is avery good margin. Good to lock up some of our production just in case itdrops back to RM700 or RM800. At RM1,200 we are making RM400 to RM500 atonne," he said.Primary Industries Minister Datuk Seri Dr Lim Keng Yaik had warned lastSaturday that the sudden sharp rise in palm oil prices was limited andproducers should cash in now."Sell now. Sell forward .... this is a good enough price. Sell whateveryou have," Lim told reporters.Malaysia produced 10.8 million tonnes of palm oil and contributed to 50%of production last year.Lim told producers at the conference that there was an immediate demandfor 300,000 tonnes of palm oil stearin for soap-making in Latin America.Acknowledging the shipping distance was long, Lim suggested that producersestablish a storage facility, either in Brazil, or Venezuela."The facility can meet any small orders from countries in the region sincestearin can be stored for a long period and the move will open new marketsfor Malaysia," he said.--AFP

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