April 23 2004 - MALAYSIAN palm oil prices are on track to hit RM2,200 atonne by next month despite a slight hiccup in prices and plans byPakistan to refrain from buying the commodity, analysts said.

Industry players said the overall picture is still bullish due to hugedemand from China, an anticipated lower soyabean harvest in South Americaand tight supply of palm oil in the market.

However, crude palm oil (CPO) futures prices, which have been hovering atthe RM2,000 level since early this month, dipped to RM1,950 a tonneyesterday.

The situation was aggravated by Pakistani traders sidelining themselves inthe market because of high prices, sparking concerns prices might bucklefurther.

Pakistani traders believe that the market is currently volatile and atRM2,000 a tonne, palm oil is still considered a bit expensive.

United Plantations Bhd executive director of finance and marketing MartinBek-Nielsen said, however, he expects prices to go even higher.

I expect an uptrend in prices to reappear by the middle of next month andbe on track to hit RM2,200 a tonne, he told Business Times in a phoneinterview yesterday.

Only 20 per cent of the South American soyabean harvest remains and so farPakistan move not to buy CPO unlikely to last in CPO supply as mostplantation companies have sold their stocks forward.

There is a tightness in the market right now as there is little CPOavailable next month as most companies have sold forward, he added.

Plans by the US to raise interest rates, the sudden lack of CPO demandfrom India due to its unusually good domestic edible oils harvest andhigher than anticipated CPO imports from Indonesia probably contributed tothe slight dip in CPO prices.

Meanwhile, traders said the Pakistani traders’ action to refrain frombuying is unlikely to last because the huge demand from the country’sconsumers far outpaces supply.

If Pakistan does not want to buy palm oil, it will be the one on thelosing side because palm oil is currently the cheapest edible oil tradedin the world market, said a trader.

Palm oil’s main rival, soyabean oil, is currently more expensive by US$150(US$1 = RM3.80) a tonne.

According to Malaysian Palm Oil Board statistics, China was the biggestpalm oil buyer last year at 2.5 million tonnes, followed by the EuropeanUnion (1.6 million tonnes), India (1.5 million tonnes) and Pakistan (1million tonnes).

On the Bursa Malaysia Derivatives Bhd, CPO futures rebounded to closehigher with third month July delivery closing RM8 higher at RM1,832tonnes.