05/9/06 (foodnavigator-usa.com) - Palm oil could cost about 10 per cent more next year, according to the Malaysian government, as interest in its use for biofuel continues to grow.
Crude palm oil is expected to average MYR1,500 (€321) per tonne this year, up 7.6 per cent on 2005. And it could rise a further 10 per cent to MYR1,650 in 2007, according to the country's 2006/07 Economic Report.
Palm oil prices on the futures market are at their highest for more than two years, boosted by rising demand for renewable fuel amid concerns over soaring costs for traditional energy sources.
The oil is also seeing increasing demand as a cooking oil and as an ingredient in foods. Consumption of palm oil by the food sector is growing thanks to its cost advantages over other vegetable oils. Food makers may also be responding to recent efforts by countries like Malaysia to promote the health benefits of the oil.
Malaysia has also forecast improved yields for the coming year, and higher prices will "contribute toward higher production", boosting exports by more than 4 per cent.
Total palm oil production is set to increase by 4.3 per cent this year to 15.6 million tonnes, and by a further 3.8 per cent next year to 16.2 million tonnes.