10/10/2012 (Bernama) - Malaysia and Indonesia, the world's largest palm oil producers, have reaffirmed their cooperation to strengthen palm oil prices through a supply management mechanism.

The methods of doing this are yet to be discussed.

Malaysia and Indonesia currently account for close to 90 per cent of global palm oil production.

The palm oil industry is an important component of the agriculture sector in Malaysia occupying more than 70 per cent of planted area, while in Indonesia 4.6 million farmers are involved in the industry.

The reaffimation of the cooperation was contained in the joint statement issued after Malaysia's Plantation Industries and Commodities Minister Tan Sri Bernard Dompok and Indonesia's Agriculture Minister Suswono met here on Monday.

The meeting was aimed at exchanging views on recent developments in crude palm oil (CPO) prices, which have dropped significatly from the fourth week of September 2012.

"The fall in prices from September to early October has been very drastic, it has dropped RM1,000 per tonne. Today the price is at RM2,192 per tonne of CPO," Dompok said.

Both ministers also noted that the decline in CPO prices was contributed by, among others, slower growth in the global economy and weaker demand from major importing countries such as China and Europe.

They also noted that the market scenario has been further aggravated as a result of buyers delaying purchases.

In the longer term, both countries also agreed to strengthen bilateral cooperation in addressing new and evolving barriers to palm oil use. In France, for example, there is a growing move to label products containing no palm oil under the pretext that palm oil contributes to environmental degradation and health risk.

Speaking to Malaysian journalists, Dompok said Malaysia plans to manage the supply by using more palm oil in the country such as for biodiesel.

The present Malaysian government policy, he said, is to ulitise about 500,000 tonnes of biodiesel from the implementation of B5 nationwide.

Malaysia is also looking into the possibility of using biodiesel for power generation with the price of CPO currently lower than that of crude oil, besides planning to replant 300,000 hectares of oil palm plantations with the current low palm oil price.

Dompok said his visit to Indonesia was to discuss areas of cooperation with the Indonesian Agriculture Minister and the Trade Ministry, with a view to bringing about stability in palm oil prices.

It was also aimed at seeing that the stakeholders in the palm oil industry, including the growers, the millers, the refiners and the government, could have their just rewards.

In 2011, Malaysia produced 18.9 million tonnes of CPO from a planted area of 5 million hectares, while in 2012 CPO production is estimated at 18 million tonnes.

Indonesia produced 22.5 million tonnes of CPO last year from a planted area of 8.9 million hectares, and this year is estimated to produce 22.6 million tonnes of CPO.