12/28/2004 BUSINESS TIMES - A NEW ruling on the labelling of foodproducts, scheduled to take effect on January 1 2006, may have promptedstrong purchases of Malaysian palm oil by the US in recent months.

The ruling, proposed by the US Food and Drug Administration (FDA),requires food companies to list the amount of trans fatty acids as well assaturated fats in all processed foods.

Trans fatty acids, which are believed to cause heart diseases and obesity,are present in soyaoil but not in palm oil; hence, the stronger offtake ofpalm oil.

According to the Malaysian Palm Oil Board, palm oil exports to the USjumped 55.4 per cent in the first nine months of the year to 326,825tonnes from 210,302 tonnes in the same period a year ago.

Exports to the US last month rose 53 per cent to 36,222 tonnes from 23,680tonnes in October.

Research house Mayban Securities Sdn Bhd said the substantial increase inexports to the US is a likely result of the FDA's ruling on labelling.

"Several US food producers have switched out of soyaoil to advertise theabsence of trans fatty acids in their products," it said in a recentresearch note.

The research house anticipates crude palm oil (CPO) prices throughout theyear and into the first quarter of next year to remain firm as a result oflower output against good demand.

It said average CPO price year-to-date is RM1,680 a tonne, 8 per centhigher than the average registered in the same period in 2003. "As such,our full-year average CPO price target of RM1,600 a tonne remains intact.

We are still maintaining our average." On a cumulative basis, MaybanSecurities said, palm oil exports will remain firm this year.

China bought some 2.53 million tonnes, while the EU took 1.74 milliontonnes of palm in the first 11 months. In the same period last year, Chinaand the EU bought 2.33 million tonnes and 1.57 million tonnesrespectively.

Mayban Securities said that firm exports to the EU are believed to belinked to the stance against genetically modified organisms which areprevalent in soyabean. Jordan has emerged as one of the largest buyers ofpalm oil this year, importing close to 450,000 tonnes as at Novemberagainst the 48,000 tonnes in the corresponding period last year. MaybanSecurities said this is essentially due to the sanctions imposed on palmoil exports to Iraq (which has historically been buying about 200,000 to250,000 tonnes of palm oil annually). Now, palm oil is channelled to Iraqvia Jordan, it said.

The research house does not expect offtake from India in the near term toexperience further declines because of poor domestic production ofvegetable oils.

India's output of winter oilseeds, sown in June and July and harvested inOctober and November, is estimated to have fallen to 12.6 million tonnesfrom 13.9 million tonnes in the previous year because of patchy rains insome areas. Production of groundnut, one of the main winter oilseeds, hasdropped to 3.9 million tonnes from 5.3 million tonnes last year.