27/02/2008 (The Star Online), Kuala Lumpur - Strong demand for biofuels will be the catalyst driving prices of agriculture commodities higher.
Singapore-based Frost & Sullivan director, global consulting Chris de Lavigne said the global supply tightness in oilseeds this year would take years to balance while the world market continued to look for ways to grow more crops, especially for bioethanol production.
He said 2007 was the year of the domino with crude palm oil (CPO) becoming a major beneficiary, given the tight supply of soyoil following increasing corn usage in the US for ethanol and soybean for biodiesel production in Latin America.
“I believe for CPO to hit the RM4,000-per-tonne level will be quicker than what we think,” de Lavigne said in his paper Will biofuels continue to influence high vegetable oil prices? at the Palm and Lauric Oils Conference 2008 yesterday.
He said it was a reality that CPO was now trading at US$1,000 per tonne compared with just a forecast made in May last year.
Another speaker, Carotino Sdn Bhd executive director U.R. Unnithan said palm-based biodiesel would still be the most cost-effective diesel substitute in a free world market.
“Based on local data and practices, palm biodiesel stands out as an excellent environment-friendly fuel in terms of energy efficiency, green house gases emission reduction and sustainability issues,” he said in his paper Palm biodiesel the cost-effective environment-friendly fuel.
Unnithan said palm, as a raw material, offered the best yield improvement potential, thus alleviating the food-versus-fuel problem.
On the current status of palm biodiesel projects in Malaysia, he said there were 15 plants on the ground from 92 licences issued with many unable to operate due to negative margins.
Major market distortions affecting palm biodiesel include the US$300-per-tonne tax credit on exports out of the US, CPO export tax out of Indonesia creating artificial CPO subsidy for biodiesel production, import duty of 4.6% on Malaysian palm biodiesel into the US and the weakening US dollar which erodes further margin for palm methyl ester producers.