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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

11/11/2002

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Mahamad Rodzi Abdul Ghani

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NULL

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INDONESIA PALM OIL PRODUCERS DISMISS SHORTAGE FEAR
JAKARTA, Nov 7 (Reuters) - Indonesian palm oil producers dismissed onThursday concerns over tightness in the world's second largest producer,saying there was no need to raise export taxes as domestic supply wassufficient ahead of religious holidays and the year-end.Although confirming exports have been on the rise in the past fewmonths, they said the increasing output has allowed them to ensuresufficient supply to local cooking oil processors."Yes, exports are rising, but we are still able to meet demand of anaverage 250,000 tonnes per month from cooking oil processors in Java,"Nafis Daulay, chairman of the Indonesian Edible Oils Association (AIMMI)told Reuters from Medan, the capital of main growing area North Sumatra.Daulay said Indonesia's palm oil output this year is seen rising toaround nine million tonnes, while local consumption is stagnant at aroundthree million tonnes of crude palm oil (CPO) equivalent."We have five, or even six million tonnes to be exported. Raisingexport taxes will only kill the industry. What do we have to do with theexcess stocks if we can't export them?" Daulay said.AIMMI data shows Indonesia's monthly palm oil exports have risen tobetween 550,000 and 600,000 tonnes of CPO equivalent since August from anaverage 400,000 tonnes.The government said on Wednesday it may hike export taxes on palm oilto curb exports and ensure a sufficient supply ahead of religious holidaysand year-end.Cooking oil, which in Indonesia is mostly made from palm oil, is asensitive commodity in poverty-stricken Indonesia and significantshortages can lead to social unrest.The country currently imposes a three percent tax on crude palm oil(CPO), and one percent on refined, bleached and deodorised (RBD) palm oil,RBD palm olein and crude olein.

LOCAL PRICES SURGELocal prices of crude palm oil, the raw material of cooking oil, haverisen to two-year highs this week as rising international prices promptedproducers to export rather than supply the local market.That has created domestic tightness ahead of the Muslim Eid al-Fitrfestivities and the year-end when demand normally surges.CPO prices reached 3,965 rupiah/kg at the state marketing centre'sbiweekly tender on Thursday, the highest in almost two years, and traderssaid it may break the 4,000 rupiah level soon due to tight supply andstrong demand.Derom Bangun, chairman of the Indonesian Palm Oil Producers Association(GAPKI) said the sharp rise in CPO prices was due to soaring internationalprices, prompted by fears of lower output of soyoil, a direct competitorof palm oil, and huge demand particularly from India."Prices are rising but there is a possibility of a sharp fall if Indiais well-covered. And the market is a bit overdone now," he said.Indonesia's tax news lifted Malaysian CPO futures on Wednesday astraders said the tax hike, if it takes place, would benefit world numberone Malaysia.One Kuala Lumpur freight broker said India has slowed down the intaketo monitor price movements in Malaysia."Shipment bookings to India have reached 200,000 tonnes so far this forNovember, and I think it's going to buy an additional 100,000 tonnes. Butit's not a fantastic number," said one broker.India normally buys around 400,000 tonnes of palm oil from Malaysia andIndonesia a month."As a broker, I think the palm oil market is a bit overdone. Everybodysays the gains are a bit fictitious and people expect to see a technicalcorrection," said the broker.