KUALA LUMPUR (July 30 2003) : Malaysia's crude palm oil futures, which setthe tone of global palm oil prices, are hovering at their lowest levels in14 months on fears of rising output in main producing countries, industrysources said on Tuesday.
Output in Malaysia and Indonesia, which account for 75 percent of globalpalm oil production, will pick up this year mainly due to higher yieldsand maturing plants, they said.
Malaysia, the world's largest producer, is set to produce 13.0 million to13.5 million tonnes of crude palm oil in 2003, up from 11.9 million tonnesin 2002.
Indonesia's production could reach 9.5-9.8 million tonnes in 2003, up from8.5 million tonnes last year.
"Malaysia's production has been impressive in the first half of thisyear," said one plantation analyst in Kuala Lumpur.
"It's true we've had a replanting programme but young trees are alsomaturing," said the analyst, referring to a scheme launched in 2001 toreplace old trees and support prices.
Rising output may increase tension between the two countries, which arecompeting bitterly in the global edible oil markets.
Palm oil accounts for 20 percent of the global oils and fats market ofaround 135 million tonnes a year.
Some analysts said global demand for oils and fats may only rise about 2.5percent this year against four percent last year, due to slack demand fromkey consumers such as India, China and the United States.
Malaysia needs to constantly boost exports because domestic consumption isflat at 2.0-2.5 million tonnes a year.
Indonesia's domestic consumption is also stagnant at 3.5 million tonnes ayear.
Crude palm oil is refined into RBD palm olein, which is used as cookingoil and also finds its way into soap and margarine. 130 countries consumepalm oil.
On Tuesday, the benchmark October contract in Malaysia's crude palm oilfutures was seven ringgit lower at 1,303 ringgit ($342.89) atonne.-Reuters