The Star, 8/4/04 - OIL palm plantation companies are hopeful the averagecrude palm oil (CPO) price this year will surpass last year's average ofRM1,544 per tonne. Industry and market players are targeting RM1,600 toRM2,201.

According to the Malaysian Palm Oil Board, the average CPO price in thefirst quarter of this year was RM1,886 per tonne, up from RM1,585 in thecorresponding period last year.

A source at IOI Corp Bhd told StarBiz: The key development is not so muchwhether prices have peaked or will peak soon, but whether average CPOprices over the next two years will be much higher than the historicalaverage.

From a producer perspective, IOI believes the CPO price, which hoveredbetween RM1,900 and RM2,000 per tonne in the first quarter this year, isat a very good level.

Even if CPO prices were to ease to around RM1,700 to RM1,800 per tonne bythe year-end (as forecast by many industry players), it would still begood for producers.

The source said the relatively high prices were driven by low stock tousage ratios in all major vegetable oils.

This was the cumulative result of demand growth having outpaced supplygrowth for two consecutive years, the drought in 2002 that drasticallyaffected canola production, and the low US soyabean crop last year.

Plantation analysts closely monitoring IOI Corp described the group as oneof Malaysia's most efficient plantation owners; its cost of productionbeing less than RM600 per tonne.

The plantation giant would continue to focus on improving yield,productivity and cost efficiency, one analyst said, adding:The group isalso set to further expand downstream operations so that when CPO pricessoften, value will be recaptured downstream.

Golden Hope Plantations Bhd group chief executive Sabri Ahmad is alsobullish on the CPO price trend.

He said the group expected the CPO price to range from RM1,800 to RM2,000per tonne, sustainable till the end of the year.

Golden Hope has also made key moves into downstream activities to boostearnings, although the rationalisation of the group's businesses will onlybe completed next month.

United Plantations Bhd vice-chairman Carl Bek-Nielsen said CPO pricescould still trade between RM1,900 and RM2,000 per tonne in the secondquarter of this year given the current tight supply in edible oils.

Fundamentally, I believe there is potential for a short-term rally in thesoya complex on the Chicago Board of Trade, thus leading to better CPOprices.

United Plantations, one of Malaysia's oldest plantation companies, has aproduction cost of between RM730 and RM740 per tonne.