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 Mahamad Rodzi Abdul Ghani
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 Bloomberg News
 Indonesia Set for Record Palm Oil Crop, Bangun Says

May 2 (Bloomberg) -- Indonesia may produce a record 17.4 million tons of palm oil this year, surpassing Malaysia as the world's top grower, as higher yields and acreage offset the effect of a drought last year, an industry official said.

``This is because of higher productivity,'' Derom Bangun, the head of the Indonesian Palm Oil Association, said. Malaysia may harvest 16.5 million tons in 2007, Minister for Plantation Industries and Commodities Peter Chin Fah Kui said March 13.

The two Southeast Asian nations, which grow about 85 percent of the world's palm oil, are trying to expand output and benefit from surging demand, led by China. The commodity is used as a cooking oil, to make soaps and as a fuel additive. Bangun forecast in January output of 16.4 million tons this year.

Still, the revised forecast ``seems a bit high,'' Christine Salim, an analyst at PT Samuel Asset Management in Jakarta, said today. Bangun's figure is ``not in line with current conditions,'' in particular impact from dry weather.

Indonesia produced 15.9 million metric tons of the oil in 2006, higher than earlier expected as productivity improved, said Bangun, speaking at a conference in Jakarta. His initial forecast for last year had been for a crop of 15 million tons.

Palm oil futures on the Malaysia Derivatives Exchange have averaged 1,999 ringgit ($584) this year, 38 percent more than the same period in 2006. The most active contract closed at 2,214 ringgit yesterday. Malaysia is closed for a holiday today.

Chinese Imports

Palm oil demand was rising faster than supply, Bangun said. Plantations can supply an additional 2 million tons of the oil a year, while global demand was rising by 3 million tons, he said.

China, the world's biggest buyer of vegetable oils, imported 414,965 tons of palm oil last month, 26 percent more than a year ago, according to data from the Beijing-based customs office released April 24. Imports may rise 20 percent in the year through September to 6 million tons, Wang Xiaoguang, an analyst at Galaxy Futures Brokerage Co, has said.

India, the second-biggest vegetable oil buyer, may import at least 5 million tons in the year to October, 14 percent more than last year, A. R. Sharma, president of the Solvent Extractors' Association of India, said today. Palm oil would account for up to 3.7 million tons, from 2.7 million, he said.

Indonesia plans to add 1.5 million hectares of oil palms over the next three years, Rosediana Suharto, the chairwoman of the Indonesian Palm Oil Committee, said today. The government committee promotes biofuel use and job creation in rural areas. The country currently has about 6 million hectares of oil palms.

``With demand and supply in this condition, I can see palm oil at $750 to $800 could be reached soon,'' Samuel Asset Management's Salim said,

Malaysian Palm Oil Board ( MPOB ) Lot 6, SS6, Jalan Perbandaran, 47301 Kelana Jaya, Selangor Darul Ehsan, MALAYSIA.
Tel : 603 - 7802 2800 || Fax : 603 - 7803 3533