Friday August 6, 2004 - THE outlook for crude palm oil (CPO) prices is notas bearish as many expect, said Plantation Industries and CommoditiesMinister Datuk Peter Chin Fah Kui.

Datuk Peter Chin Fah Kui (right) presenting a mock cheque to winner ofPrice Outlook Conference 2004/2005 contest, Raja Norrashidah Raja Honram,after the minister's visit to Bursa Malaysia. Looking on are Datuk HarunSoraj (second from left) and Yusli Mohamed Yusof.

He said although the price of the commodity had fallen substantially fromthe peak of RM2,000 per tonne in March, the current RM1,400/RM1,500-levelwas expected to be sustainable.

The big captains of the industry believe that the present level could besustainable.

So we are not heading right down to the floor,'' the minister told a pressconference after his first official visit to Bursa Malaysia in KualaLumpur yesterday.

Chin said demand from the traditional markets remained firm. We don't seeany reduction in exports compared with last year, he said, adding thatthere would be continued efforts to cultivate new markets.

Malaysian Palm Oil Promotion Council chief executive officer Datuk HarunSoraj said the expected higher production level in October and Novemberprompted anticipation that CPO prices would head lower.

However, he said imports of CPO had increased in the first half year inBangladesh and Iran. Furthermore, the bigger palm oil import quota inChina would help support the demand, he added.

Malaysian Palm Oil Board director-general Tan Sri Dr Yusof Basiron pointedout that the average CPO price indeed went up by 15% to RM1,740 per tonnein the first seven months of the year from RM1,517 in the previouscorresponding period.

He said the increase in oil palm production in October would be absorbedby higher demand for edible in the year-end festivals such as Deepavaliand Hari Raya Aidilfitri.

In addition, CPO prices are now trading over a discount of US$150 (RM600)per tonne. This would help boost demand for CPO, he added.

Bursa Malaysia chief executive officer Yusli Mohamed Yusoff said theexchange was looking at ways to spur interest in palm kernel futurescontract (FPKO) as sometimes not a single contract was traded in a day.Trading on the palm kernel futures contract is disappointing. We will seehow to improve it,'' he said.

FPKO, which was launched on Feb 20, is the first lauric oil futures in theworld. According to Bursa Malaysia's statistics, a total of 403 FPKOcontracts have been traded from February to May. No contract was traded inJune.

Bursa Malaysia head for retail investor (group business development) AllanAu-Yong said the lacklustre interest in the newly launched FPKO was mainlydue to the absence of players in the market.

We (Bursa Malaysia) are trying to get counter parties to come in. I thinkwe have a good number of market makers already. We will now focus ongetting the counter parties,'' he said.

There are currently four market makers for the FPKO contract - KualaLumpur Kepong Bhd, IOI Corp Bhd, Kuok Oil and Grains Sdn Bhd andSingapore-based Wilmar Trading Pte Ltd.

This is the second time such contract was launched by the exchange. Anearlier crude palm kernel oil futures contract fizzled out due to thintrading volume and lack of participation by major players in 1992 and1993. Hence, certain industry players are rather sceptical of theprospects of FPKO.

Nonetheless, Yong said it took years for any new futures contract to buildup trading interest.