Saturday, 26 July 2008

Malaysia to take steps to arrest drop in CPO price

I think we can safely assume European importers etc. are sourcing alternatives, or palm oil from elsewhere. Now, if only we can persuade Australian and US importers, retailers etc to also take similar action, we could save a lot of forests and orangutans. We have to leave this to those of you in these countries, though if the Europeans can do this, anyone surely can!

Saturday July 26, 2008 MYT 3:31:00 PM The StarOnline, Malaysia

Malaysia to take steps to arrest drop in CPO price


MIRI: A sharp drop in the price of crude palm oil (CPO) on the international front has raised alarm bells in Malaysia; as the Government had targeted this vital edible oil to bring in up to RM60bil in revenue for our country this year.

The past one week has seen the price of crude palm oil tumble from more than RM3,500 per tonne to RM3,095 per tonne, a worrying decline that may jeopardise the RM60bil target.

The Ministry of Primary Commodities and Industry will initiate urgent measures to arrest the drop.

Minister Datuk Peter Chin Fah Kui said steps must be taken to ensure the decline in the price does not become a long-term trend.

"The ministry expected palm oil to contribute up to RM60bil in revenue to the country's coffers this year, but the constant drop in the global price may upset this target. The drop in the price has been quite substantial. Early this year, crude palm oil fetched up to RM4,000 per tonne. Now, it is RM3,095 per tonne.

"We view this trend with anxiety. We are worried this may be the start of further decline in the price of palm oil. We must counter this so as to maintain a good price," he told a press conference here on Saturday.
Chin said several factors have caused the drop in the price.

It is now summer in Europe and there has been less demand for palm oil from these European countries.

Malaysia's stock of crude palm oil has also reached a very high volume of two million tonnes, creating an excess in supply, thus pulling down the price.

There has also been an increase in the harvest of temperate edible oil like sunflower oil, soy oil, rap seed oil and other vegetable oil, thus lowering the demand for palm oil.

It is also due to possible speculation in the global market.
Chin said his ministry is preparing measures to arrest the decline. Among the measures are:

* Lowering the current stock of crude palm oil in Malaysia by exporting crude palm oil overseas to counties like India, Pakistan, China and also to the Middle East, instead of just exporting refined palm oil;

* Increasing export during the coming winter months to western countries to be used as bio-fuel;

* Increasing the usage of crude palm oil for more bio-fuel production in Malaysia;

* Encouraging power producers in Malaysia to use crude palm oil as raw materials for their energy production; and

* Encouraging more industries and factories to use crude palm oil instead of diesel as their feedstock fuel.

Chin said the good thing that comes with this fall in crude palm oil price is that more of the oil could be channelled towards the production of bio-fuel in Malaysia.

"We have 10 bio-fuel plants in the country now, but only three are operating because the price of crude palm oil and palm olein was too high previously.

"Now that the price has dropped, the bio-fuel producers will have to pay less for the crude palm oil. This may result in them buying more crude palm oil to produce more bio-fuel. In fact, over the past two weeks, there has already been an increase in the amount of bio-fuel produced," he said.
Chin will visit Indonesia next week to discuss with his counterpart there on more measures that Malaysia and Indonesia can jointly undertake to try to maintain a good price for crude palm oil globally.

Malaysia and Indonesia together contribute 85% of the global supply of palm oil.