Archived News

WASHINGTON, U.S. 4/1/2002 (The Associated Press) -The AgricultureDepartment is deciding whether to make a cut in the subsidy rate forsoybeans that could anger farmers but save taxpayers as much as $1 billionor more.Government studies say that the subsidy rate for soybeans is too highrelative to other crops and is encouraging farmers to grow too much soy.Last year, farmers harvested 74 million acres of soybeans, 11 million morethan in 1996, when the subsidy rate, or ``loan rate,'' was raised to $5.26per bushel. It has not been changed since.``There is an incredible disparity between what the market is signalingand what the loan rate is signaling,'' said Keith Collins, USDA's chiefeconomist.USDA spokeswoman Alisa Harrison said Thursday that the department willannounce a decision on 2002 subsidy rates sometime this month.Representatives of soybean growers have met at least twice withAgriculture Secretary Ann Veneman in recent weeks to urge her not to lowertheir subsidy rate. Under the 1996 farm law, USDA could cut the rate aslow as $4.92 per bushel, which would save the government more than $1billion.Soybeans are a major crop in several states likely to have close Senateelections this year, including Arkansas, Iowa, Minnesota and South Dakota.Those races could decide which party controls the Senate in 2003.``It is extremely important to soybean producers that that source ofrevenue and income protection stay there,'' said Bart Ruth, a Nebraskafarmer who is president of the American Soybean Association.The government guarantees farmers a minimum income for grain, cotton andsoybeans by providing subsidies when market prices fall below a fixedlevel. Soybeans were selling for more than $7 a bushel in the mid-1990s,well above the $5.26 subsidy rate, but have since dropped to nearly $4.The subsidy rate for corn is $1.89 per bushel, while market prices areslightly over $2, so growers receive no payment for that crop.USDA has paid about $4.5 billion in subsidies on all 2001 crops, with $2.7billion of that going to soybeans alone.A 1999 study by the General Accounting Office said that the subsidy ratefor soybeans would cover about 250 percent of the cost of growing them,while the corn rate would cover about 150 percent of the cost of producingthat crop.Soybean growers insist there would be plenty of demand for their crop, ifthe dollar wasn't as strong as it is. A strong dollar makes U.S. cropsmore expensive than those from countries such as Brazil that have weakercurrencies.In a letter to Veneman this week, Senate Agriculture Committee ChairmanTom Harkin, D-Iowa, warned her against making what he said was a rumoredreduction of $500 million in soybean subsidies. ``Clearly this is not atime when farmers are in a position to absorb further losses in income,''he said.Lawmakers are considering cutting the soybean subsidy rate as they makerevisions in the 1996 farm law. Soybean acreage would in turn becomeeligible for other types of payments it doesn't receive now.

U.S., Jan. 1--BLOOMINGTON,(Journal Star)--If the past year was big forethanol, 2002 may be the year biodiesel moves into the fast lane.Biodiesel is a mixture of vegetable oil and diesel fuel that reducesengine emissions. It will help in finding use for the glut of soybean oilpresently on the market.As a renewable fuel, it's been in the shadow of ethanol, the corn-basedfuel, but biodiesel showed signs of stepping out on its own in 2001."The growth over the last few years has been tremendous. In 1999, weproduced 500,000 gallons of biodiesel. In 2001, we produced 25 milliongallons," said Judd Hulting, domestic marketing manager for the IllinoisSoybean Association in Bloomington.Biodiesel is sold to three basic markets, Hulting said. "Our threeaudiences are farmers, municipal fleets and over-the- road trucks," hesaid.The over-the-road trucking market is a huge one, using 35 billion gallonsof diesel fuel a year, he said.But to crack that market, biodiesel has to drop in price. Currently the B2blend (diesel fuel with 2 percent vegetable oil) adds 3 to 5 cents agallon to the cost of diesel while B20 is 15 to 20 cents more a gallon.But help may be coming from Washington. Legislation could reduce thefederal tax on biodiesel as well as establish a timetable for increases inrenewable fuel use, he said.Congress may require that all motor vehicle fuel sold in the United Statescontain a minimum amount of renewable fuel. "That would be huge," saidHulting of how the legislation would impact biodiesel.But other things are happening on the renewable fuel front.The Environmental Protection Agency's emission standards for new trucksand buses will take effect in 2007.An agency-mandated reduction in sulfur in diesel fuel (in 2006) shouldspur a boom in the biodiesel market, said Joe Jobe, executive director ofthe National Biodiesel Board in Jefferson City, Missouri.Some fleets aren't waiting for regulations to take effect."After Sept. 11, we had a trucking firm call who asked, 'What can I do?'"said Mark Dehner, market manager for Growmark Inc., a farm supplycooperative in Bloomington."Sept. 11 spurred people to be more cognizant of what's going on. Peoplearound the country decided that if we can grow it (fuel) here, let's doit. Let's have more control over our own destiny," he said.Growmark rolled out its own homegrown fuel campaign in November, providingethanol and biodiesel to farmer members throughout the Midwest, Dehnersaid.The terrorist attacks triggered "an emotional reaction" by customers whowanted to use homegrown fuels, said Chris Miller, spokesman for WorldEnergy in Chelsea, Mass., the nation's largest supplier of biodiesel.The movement towards biodiesel is good news for soybean farmers, said BradGlenn of Stanford, president of the Illinois Soybean Association."In 2001 we saw a lot of great things happen. About 15 states -- evenHawaii -- passed some sort of tax enhancement for biodiesel last year.Unfortunately, Illinois wasn't one of them. Hopefully, we'll see successin 2002," he said.Glenn said education and distribution are the two biggest needs for asurge in the use of the renewable fuel. "We don't have the terminaldistribution that ethanol presently enjoys," he said.Two Illinois bus fleets recently conducted tests with biodiesel, saidHulting of trials at Illini Swallow Co., Champaign, and theChampaign-Urbana Mass Transit District."The fleet managers said it worked great but it comes back to cost. Whenyour're buying thousands of gallons of fuel, every penny counts," Hultingsaid.But fleets that have to meet stringent federal guidlines remain a targetmarket for biodiesel, he said. Transit systems in Cincinnati and KansasCity recently announced plans to use biodiesel in some buses.

30 Decsember, 2001 (Business Times) - TAN Sri Borge Bek-Nielsen drinksneat two tablespoons of the red palm oil every day, convinced it containsall the magical properties that make a man healthy, wealthy and wise.

21, December, 2001(Oil World) - During the past two years the domesticsupply gap for oilseeds in the European Union continued to widen, asoilseed production declined sizably from 17.3 Mn T in 1999 to only 14.2 MnT this year. The increase in crushings and imports during the past twoyears was mainly on account of soybeans. For Oct/Sept 2001/02 we peg EUsoybean imports from third countries at a record 18.0 Mn T (up 0.4 Mn) andsoybean crushings at 17.2 Mn T (up 0.9 Mn). Also the EU import dependenceon oils and fats will continue to rise this season, as interior productionis insufficient to cover the growth in demand for food and non-foodpurposes. EU imports of 17 oils & fats from third countries are estimatedat 5.6 Mn T in Oct/Sept 2001/02, which is almost matching the oil importneeds of India, the world’s largest oil importer. Rising EU imports areseen particularly for palm oil and sun oil. EU soya meal disappearance isexpected to surge to a record 28.6 Mn T in Jan/Dec 2001 and to 28.8 Mn inOct/Sept 2001/02. For the 12 oilmeals we publish details on production,trade and disappearance.

KUALA LUMPUR, Sat. (29 December,2001) - The Malaysian plantation industrywill collapse if workers are given monthly salaries.

Kuala Lumpur, 31 December, 2001 (Business Times) - THE year has indeedbeen good and momentous for Malaysia’s palm oil sector albeit with a fewhiccups here and there, but overall it has been fruitful with the stageand fundamentals all set in place for a promising year ahead.The palm oil industry has proven to be resilient in the face of so manyunpredictable scenarios and obstacles in 2001 but towards the end of theyear it has somewhat changed for the better.Crude palm oil (CPO) prices for the first half of the year were batteredincessantly and was quoted at a ten-year low at RM696 per tonne inFebruary.In the early part of this year and most of last year, palm oil pricescontinued to be battered in the face of intense competition from the world’s 16 other vegetable edible oils.Soyabean, rapeseed, sunflower and sesame oils to name a few, continue toharangue palm oil in the world’s edible oil market contributing to its lowdemand and depressed prices.To make matters more complicated, forecasting CPO prices in the openmarket is akin to a rollercoaster ride and no one can be accurate aboutit.With such a scenario, the livelihood of 420,193 smallholders nationwidewas affected which saw them earning meagre income of between RM150 andRM250 a month.Realising this, the Government put on its thinking cap and shifted to highgear in finding solutions on how to help alleviate the hardships of thesmallholders and the industry as a whole.Together with all the other relevant government ministries and agencies,it did all it can with the Primary Industries Ministry at the helm andcaptained by its minister Datuk Seri Dr Lim Keng Yaik.To name a few, they include the Malaysian Palm Oil Board (MPOB), theMalaysian Palm Oil Promotion Council (MPOPC), Tenaga Nasional Bhd, FederalLand Development Authority, Rural Development Ministry, Rubber IndustrySmallholders Development Authority and the private sector.The sector has also received first-hand attention from Deputy PrimeMinister Datuk Seri Abdullah Ahmad Badawi who chairs a Cabinetsub-committee on “Raising the Income of the Smallholders”.To further attest to the Government’s commitment in alleviating thehardships of the sector it embarked on several initiatives to uplift thealready sagging industry.In March, Dr Lim mooted an idea inconceivable to a few — burn CPO in powergenerators and industrial burners to generate power.The idea will help to off-take production figures which is expected tobreach the 11.5 million-tonne mark by year-end compared with 10.6 milliontonnes last year.Under the plan, some 500,000 tonnes or 5 per cent of annual productioncould to be removed from the market.Tentatively, between 20,000 tonnes and 30,000 tonnes of CPO were to beburned at Tenaga’s power generators.It was a noble idea while it lasted but to date nobody is really sure whathas happened to the initiative since prices were at the RM700 a tonnelevel then compared to the RM1,100 to RM1,200 tonne level currently.It is understood that to date, less than 10,000 tonnes have been burned.Understandably, the industry did not foresee that almost 90 per cent ofTenaga’s power plants are gas-fired and not fuel-fired.For palm oil to be burned, it must first be blended with a diesel variant,medium fuel oil, before it can be burned in the generators.Malaysia’s palm oil industry regulator, the MPOB has also been known toundertake research and development works on biofuel over the past decade.Industry observers questioned what happens when prices of CPO become veryattractive? Do we simply burn it away?But Dr Lim has always maintained the Government’s commitment that theinitiative will not stop and is still on the agenda.Malaysian Palm Oil Association (MPOA) chief executive M. R. Chandran hadsaid in October the initiative has been put on hold except on a researchand development basis.The MPOA groups 96 plantation companies in Malaysia and is seen as adominant force in the industry with a total landbank of over 1.6 millionha.The Government had also in March introduced the replanting scheme, again abrainchild of Dr Lim, for smallholders to replant their ageing oil palmand rubber trees.With a fund of RM200 million allocated by the Government, RM1,000 will bepaid out for every ha of oil palm trees replanted and RM1,100 for rubber.The idea was aimed at removing 600,000 tonnes of CPO from the market byend 2002 with the replanting of 200,000 ha.But the scheme had received lukewarm response when prices improved in thesecond half of 2001 with farmers reluctant to cut trees when the priceswere attractive.Dr Lim said as in October, the replanting scheme which ends in December31, has only seen the replanting of a mere 136ha compared with a total of185,000ha which the MPOB has received in replanting registrations andapplications.Despite the various government efforts, no change or improvement could beseen over the horizon.Prices of CPO continued to be battered for most of 2000 and the first halfof this year, trading well below the RM1,000 a tonne level.CPO averaged at an all-time high of RM2,377 in 1998 to RM1,449.50 in 1999and RM996.50 for the whole of 2000.In July last year, CPO prices averaged RM1,016 per tonne before trading atRM695 a tonne in February, its lowest in a decade.After going through depressed prices for almost the good first half of2001, the sector looked set to be further dragged into the doldrums whensuddenly things changed for the better in the second half of the year.Just when everybody thought such a scenario would continue, CPO pricessuddenly surged 143 per cent across the board at the Malaysian DerivativesExchange to breach RM1,000 on July 12 for the first time in 13 months.It was attributed mainly to a drop in production by 3 per cent to 897,063tonnes in July from 924,855 tonnes in June.That was the catalyst that turned the sector around, and prices have neverlooked back since.Few saw it coming and since then, prices began to firm up to increase atRM987.50 a tonne end-July and went to a high of RM1,215 a tonne in August.Although it dipped slightly in September due to the attacks on the US toRM999 a tonne, it has since began its steady climb to increase 21.5 percent to close between RM1,100 and RM1,200 a tonne last week.Since then, most plantation companies on the Kuala Lumpur Stock Exchange(KLSE) have recorded improved earnings in the third quarter of 2001primarily due mainly to the strong performance of CPO prices.The big boys of the industry such as Sime Darby Bhd, IOI Plantations Bhd,Kuala Lumpur Kepong Bhd and Golden Hope Plantations Bhd, can now breathe asigh of relief after being squeezed by low prices for a larger part of theyear.Most industry observers are in consensus that prices will never touch 1997’s RM2,000 a tonne level again.Chandran, however, said that as long as CPO prices stay above the RM1,000a tonne mark, companies will be happy.“A price of RM1,000 is good enough because it is higher than the cost ofproduction for plantation companies which vary from RM600 a tonne to RM800a tonne.”Most are optimistic that for the larger part of 2002, palm oil prices willaverage RM1,200 a tonne or at least for the first quarter of 2002.Meanwhile, a CIMB plantation analyst concurred saying that the currentrainy season also augurs well for the sector.“The wet spell which is yet to be over will prevent workers fromharvesting oil palm fruits or fresh fruit bunches, which will result in adrop in production and a rise in prices,” said the analyst.To add further to the good news, China formally became the 143rd member ofthe World Trade Organisation last Tuesday, a development that augurs wellfor Malaysia.The republic is set to increase its palm oil import quota to 2.4 milliontonnes from 1.4 million tonnes this year at low tariffs under atariff-rate-quota system.Traders said 70 per cent or 1.68 million tonnes of the 2.4 million tonnesmay well be bought from Malaysia with the balance to be supplied by itsbiggest rival Indonesia.Influential Indian trader Dorab Mistry of Godrej International said duringa recent visit to Kuala Lumpur, palm oil may see a price of RM1,600 pertonne, for at least in the near term.He added that other good news which augurs well for palm oil is theexpected supply crunch of up to 2.5 million tonnes in the production ofrapeseed and sunflower oil, competitors of palm oil.All this is certainly encouraging news for Malaysia. In fact, awareness ofthe nutritional and health aspects of palm oil has grown by leaps andbounds.According to the MPOPC, the marketing and promotional arm of the country’spalm oil sector, palm oil exports in certain countries have jumpedsignificantly.In countries such as Iran, Morocco, the US and the Association ofSouth-East Asian Nations member countries such as Myanmar, Laos, Cambodiaand Vietnam, exports had surged significantly over the past year.Its boss Datuk Haron Siraj said in Iran, for example, from January toAugust this year Malaysia’s palm oil exports increased 2,000 per cent to60,000 tonnes compared with 3,000 tonnes for the corresponding period lastyear.“Likewise, in Vietnam from January to November, the country’s palm oilexports increased 197 per cent to 191,245 tonnes compared with 96,936tonnes,” said Haron.And furthermore, Malaysia is establishing counter-trader arrangements withseveral countries including India, China and the US which will see thepart-payment of construction projects and locomotives in palm oil.Haron, meanwhile, said the country is due for its second round ofreplanting from the current crop which started in the 1960s.Malaysia is the world’s largest producer of palm oil producing 8.32million tonnes in 1996 worth RM9.4 billion.Last year, it produced 10.38 million tonnes worth RM12.47 billion with aplanted area of 3.37 million ha nationwide. Production is expected to hit11.5 million tonnes this year. If prices average RM1,000 a tonne for thewhole of 2002 and exports amount to 10 million tonnes, earnings of RM10billion can be expected from this sector in 2002.

KUALA LUMPUR, Dec 21 (Reuters) - CPO production fell 6.7 percent or76,400 tonnes to 1.065 tonnes in November.The decline was 20,000 tonnes less than our estimates.Production dropped 11.2 percent or 78,600 tonnes to 625,200 tonnes inPeninsular Malaysia. East Malaysia in contrast registered a marginalincrease of 0.6 percent or 2,200 tonnes. This was contributed entirely bySabah, where production peaked at 373,800 tonnes or 10,000 tonnes morethan October.On an annual basis, production in the country contracted 8.6 percentor 100,000 tonnes. This was due solely to a 106,600 tonnes contraction inPeninsular Malaysia. For the 11 months ended November, production amountedto 10.855 million tonnes. This represents a growth of 9.7 percent over thecorresponding period of last year.We tentatively estimate output in December to record a month-on-monthdecline of around 180,000 tonnes or 17 percent. The margin of error forDecember could turn out to be larger than normal because of uncertaintieson the decline in the number of working hours arising from the Hari RayaAidil Fitri/Christmas holidays and monsoon rains in East Malaysia.PO offtake in November exceeded our estimate by 30,000 tonnes when itreached 1.13 million tonnes, or 85,000 tonnes more than October. This wasdue to stronger than expected PO exports of 982,941 tonnes, an increase of81,400 tonnes over October and 85,300 tonnes more than a year earlier.The November exports are the highest so far this year -- most likelyfor the whole of this year -- and exceeded the previous high of 978,143tonnes posted in March but fell somewhat short of the all-time-record of1.005 million tonnes registered in October last year.The MPOB reported exports to India and Pakistan rose 42,300 tonnes and15,900 tonnes to 182,800 tonnes and 119,100 tonnes respectively inNovember.The two other major buyers, the EU and China, reduced their offtake by8,600 tonnes and 25,900 tonnes to 143,200 tonnes and 136,600 tonnesrespectively.Surveyors figures also show a hefty shipment of 45,000 tonnes toNigeria. This raised Nigeria's offtake so far this year to around 75,000tonnes compared to 85,200 tonnes in 2000. Equally significant andnoteworthy, three times in the last 12 months when monthly exports surgedto or near a million tonnes, the following months will see a big drop of100,000-120,000 tonnes. It would not surprise us if exports this monthfollow the pattern. We tentatively estimate exports to drop some 115,000tonnes this month.PO stocks dropped moderately by 43,500 tonnes to 1.294 million tonnesat the end of November or 16,000 less than our estimate. CPO stocks fell28,900 tonnes to 748,900 tonnes while PPO stocks were down 14,600 tonnes.We maintain our estimate that PO stocks will be drawn down to around1.16 million tonnes at the end of December this year.A drop in PKO output of 10,400 tonnes helped to avert stocks of theoil reaching our estimate of 370,000 tonnes. MPOB reported PKO stocks rosea mere 284 tonnes to 353,345 tonnes at end-Nov. Total of stocks PK/PKO,oil basis, were also practically unchanged at 407,100 tonnes. The price ofPKO meanwhile widened its discount to CPO in the domestic market to around100 ringgit on Mon-Wed this week.Given that the near-term fundamentals of PO and, to some extent, ofglobal oils and fats have not changed much in recent weeks, it is no realsurprise the trading range of PO this week is quite similar to thecorresponding period of last month. Likewise for SBO, China has formallyjoined the WTO on December 11. While the agreed-upon significantly highertariff-rate quotas (TRQs) for imports of PO and other oils for 2002 willsoon be issued, one should not hastily assume Chinese importers will rushto fully utilise the quotas.

KUALA LUMPUR, Dec 26 (Reuters) - Malaysian palm oil futures extendedgains on market-friendly exports data, but some players were cautious asthe market was scheduled to switch to screen-based trading later thisweek, traders said on Wednesday.At the close, the benchmark third-month March futures closed 24ringgit up at 1,170 ringgit ($307.89) a tonne, just below key resistanceof 1,180. Volume was slow at 649 lots."A lot of people don't want to take new positions because they have noidea how this electronic trading will affect the market," said one traderin Kuala Lumpur.An official at the Malaysian Derivatives Exchange (MDEX), which tradespalm oil futures, said the market would abandon the open cry system andswitch to screen-based trading starting on Friday."It is confirmed the electronic trading will start on Friday. I thinkit should be okay because we have conducted a lot training and all that,"he said.Traders said the market was comfortable with the exports data forDecember 1-25 which cargo surveyor SGS put at 804,352 tonnes, slightlydown from 891,397 tonnes in November 1-25.They said the data was encouraging because it showed a significantjump in exports between December 20 and 25, adding that exports couldreach 900,000 tonnes in the whole of December.SGS put December 1-20 exports at 578,143 tonnes.Separately, traders said China has almost used up its palm oil importquotas for 2001, but lack of official word from Beijing on next year'squotas is keeping market in the doldrums.China, one of the world's major palm oil buyers, is set to import 2.4million tonnes of palm oil in 2002, up sharply from this year's 1.4million following its entry to the World Trade Organisation (WTO).Between 5,000 and 10,000 tonnes were still available from this year'squota, traders said. In the absence of other market-moving news during thecurrent holiday season, any clues on China purchases would help set themarket tone."We all agree the current quota is almost used up. The remainingamount is so insignificant that it's not worth mentioning," said onetrader who deals with Chinese buyers."We don't know when China is going to issue the quota. But Iunderstand China will not roll over the unfinished quota into next year,"he said.At the physical market, January crude palm oil (CPO) for southern andcentral regions was bid at 1,120 ringgit a tonne and offered 1,130ringgit.Deals were reported at 1,130 ringgit for south.

Saturday, December 29, 2001 - THE Malaysia Derivatives Ex change (MDEX)began its first day of fully electronic trading yesterday.MDEX said in a statement that it ended open outcry floor trading onThursday and commenced electronic trading yesterday for the Crude Palm OilFutures and 3-month Klibor Futures.“The full range of MDEX products, including KLSE CI Futures and Optionscontracts are electronically traded,’’ it said.At closing yesterday, MDEX registered 231 contracts on the 3-month KliborFutures, 891 contracts on the KLSE CI Futures and 460 contracts on theCrude Palm Oil Futures.MDEX chairman, Abdul Jabbar Majid said the successful migration intoelectronic trading was another significant achievement in the developmentof MDEX as a comprehensive derivatives exchange.“Going fully electronic is indeed an important step for MDEX to enhanceefforts in providing efficient and cost-effective services for all itsmembers and investors,’’ he said. “This development also expands thecapability of MDEX to offer a wider range of products and services, thuscontributing to a higher degree of competitiveness for MDEX as acomprehensive derivatives exchange.’’ – Bernama

KUALA LUMPUR, Dec 25 (Bernama) -- Sandeep Bajoria, the past president ofthe Solvent Extractors Association of India (SEA), wants New Delhi toimpose fairer duties on all edible oils. Currently, soya oil is slappedwith an import duty of 45 percent while crude palm oil attracts a duty of65 percent in India.

KUALA LUMPUR, 26 DEC,2001 (BUSINESS TIMES) - TRADERS and industry insidersare doubtful that China will import the 2.4 million tonnes of palm oil ithas pledged next year as the country’s purchase will largely be determinedby the price factor from now onwards.Although China’s entry into the World Trade Organisation (WTO) will allowa bigger intake of Malaysian crude palm oil (CPO) into the country,competition from other edible oils will also become more stiff andMalaysia should be mindful of this development, they said.“It will all depend on price competitiveness; whichever oil that iscompetitive for them, they will import it,” an industry insider toldBusiness Times.According to a news report last week, Malaysia expects China to announcein early January a quota for imports of CPO in 2002, following Beijing’sentry into the WTO on December 11 this year.Primary Industries Minister Datuk Seri Lim Keng Yaik was quoted as sayingthat under the WTO, China has committed to import at least 2.4 milliontonnes of palm oil next year but it could take more with encouragementfrom Malaysia and Indonesia, the world’s two largest producers.“I don’t think China will import more than that,” a CPO dealer said.“The 2.4 million tonnes import quota does not necessarily mean China willimport more palm oil. You have to remember that there is also a 2.5million tonnes import quota for soya oil,” he said.According to trade sources, as a result of trade liberalisation and theestimated increase in domestic consumption, China’s import of edible oilscould be in the range of more than four million tonnes by 2005.Palm oil is expected to account for about two million tonnes of the total,should the price difference between soyabean oil and palm oil remainsmall.Between January and November this year, China has bought 1.12 milliontonnes of palm oil from Malaysia, making it the second largest buyer afterIndia. The country bought 1.02 million tonnes of palm oil from Malaysialast year.Meanwhile, industry insiders were pessimistic that the Government’s oilpalm replantation scheme — which has recently been extended for anothersix months until June — will attract favourable response from growersfollowing the significant increase of CPO prices over the last few months.Under the scheme, which was launched early this year, the Governmentoffers oil palm growers RM1,000 cash for each hectare they cut down andreplant.The scheme was aimed at reducing the country’s CPO output, thus pushing upthe commodity’s prices which had been hovering around RM750 a tonne atthat time.However, CPO palm oil prices have since improved by nearly RM400 a tonneor 50 per cent, hence offsetting the incentives offered under the scheme.“It doesn’t make sense for them (oil palm growers) to replant their cropbecause they are now getting enough returns for whatever they areproducing,” a trader said.“Unless the Government starts forcing them to do so, not many of themwill,” he added.An industry observer said cutting down oil palm crop will only serve as a “quick fix” solution for the oversupply situation because once thereplanted trees are all grown up and mature, the same problem will onceagain reappear and repeat its vicious cycle.It has been reported that despite the economic crisis in 1997, Malaysiahad expanded its oil palm plantation area by 150,000ha to 200,000ha a yearand as a result, the country’s production figure is expected to continueto grow over the coming years.“We got into this problem because we expanded (the crop planting) veryfast,” he said.“If we can cut the trees today, in three to five years we will have thesame glut again... unless we are ready to absorb them (CPO) and notproduce more,” he said.Under the Government’s replantation scheme, the target was to cut down200,000ha of oil palm but so far, only 44,000ha have been cleared.The Government had forecast that land given over to oil palm would total3.5 million ha in 2002.

Thursday, December 27, 2001 (TheStar) - THE palm oil industry sees betterprospects next year as its fundamentals remain intact – in particular,strong anticipation of higher crude palm oil (CPO) prices boostingearnings of plantation companies, and market talk that new World TradeOrganisation (WTO) member China plans to raise its palm oil import quotain 2002.Market players and analysts are highly optimistic the average CPO pricenext year will likely be around RM1,100 to RM1,150 per tonne, in contrastwith the difficult times this year when the price plunged to a year’s lowof RM663 per tonne in February. Prices have since recovered to aboutRM1,100 per tonne currently.They expect the MPOB's weighted average price for CPO this year to be atRM950 per tonne.PPB Oil Palms Bhd executive director and chief operating officer Khoo KheeMing said: “We look favourably to the CPO price remaining at the currentlevel of RM1,100 per tonne or perhaps better next year as, fundamentally,the situation has indeed improved with higher demand against weaker supplyin the final quarter of this year.’’He expressed confidence that next year “this most badly affected industry”would be able to reap the benefits of the cost-cutting exercises justundertaken.A spokesperson for a leading oil palm plantation company said: “Thedetermining factor for the pricing of CPO next year lies in the policiesand approaches to be undertaken by major importers, particularly China andIndia.’’She said she believed the inclusion of China as a member of the WTO wouldhave a major impact.Instead of its previous passive stance of having a fixed quota valid for acertain period (i.e. every three months), she sees China becoming anactive player, sourcing from various palm oil markets as and when itrequires the commodity.“Personally, I believe this would lead to lesser volatility in the marketand result in the price of CPO strengthening and stabilising in the nearfuture,’’ she said, adding that CPO sellers also expected the market to bebullish next year.“Of late, buyers from China |and India were believed to be asking forprompt oil, which could lead to shipment of oil in the immediate monthssuch as December this year and January next year.’’On the local front, KAF Research plantation analyst Noor Azwa Mohd Noorsaid the market scenario seemed fundamentally sound, with Malaysia’s palmoil production seen declining by 2.1% next year (against an estimated 8.9%growth in 2001), underpinned by continued replanting as well as theexpected tree stress period, which occurs every three to four years.There is also the possibility of weather changes due to the El Nino effectcausing a further reduction in production next year.Palm oil production for this year is estimated at 11.7 million tonnes.The US Department of Agriculture also forecast a tightening edible oilstocks scenario next year, led |by a slowdown in the rate of palm oilproduction.On the demand side, Azwa said she expected China, which is seen increasingits import quota of palm oil by 71% to 2.4 million tonnes next year, toemerge as Malaysia’s biggest palm oil buyer.KAF Research forecasts the |average CPO price at RM1,150 per tonne nextyear and RM1,200 per tonne in 2003.Azwa pointed out that since |1990, there were two occasions when the CPOprice increased by more than 20% year-on-year – in 1994 |and 1998.In both these years, plantation stocks outperformed the KLSE CompositeIndex (CI).If history repeats itself, she added, “plantation stocks should|outperform the CI next year.’’KAF Research’s top plantation picks are IOI Corp Bhd and PPB Oil Palms.