March 4 2004 - PRICES of crude palm oil (CPO) futures may test the RM2,500a tonne level by middle of this year should soyabean oil supply succumb tounfavourable weather conditions.

United Plantations Bhd vice-chairman and executive director (corporateaffairs) Carl Bek-Nielsen said a shortfall in soyabean oil harvest thisSeptember will prompt CPO prices to test this level that was last seen in1998/1999.

Due to unpredictable weather, the US is expected to harvest about 67million tonnes of soyabean oil, an 18 per cent drop from earlier estimatesof 74.8 million tonnes, he told reporters in Kuala Lumpur yesterday.

Bek-Nielsen had earlier delivered a paper on the industry’s price, supplyand demand outlook at the annual Palm and Lauric Oil conference andexhibition. The event was launched by Primary Industries Minister DatukSeri Dr Lim Keng Yaik.

Industry players and Dr Lim had anticipated the CPO price to breach theRM2,000-mark soon. It currently hovers at the RM1,950-RM1,980 a tonneregion.

Golden Hope Plantations Bhd group chief executive Sabri Ahmad also said onTuesday that the CPO price could reach RM2,200 by October.

Bek-Nielsen said the soyabean producers are currently facing extraordinaryweather conditions such as 400 per cent rain content or extremely dryconditions.

That is why we see such high palm oil prices. However, we are reaching theend of its violent bull rally because by the second half of the year, CPOprices could drift lower at between RM1,700 and RM1,800.

Bek-Nielsen said the drop in CPO prices depends on the yield of thesoyabean oil harvest.

CPO is now the cheapest traded edible oil in the world market. Thecommodity is traded at a discount of US$150 (US$1 = RM3.80) a tonneagainst its main competitor, soyabean oil.

Bek-Nielsen said lower stocks in the world’s four major edible oils palmoil soyabean, rapeseed and sunflower in 24 years have also contributed tothe strong palm oil price. The four edible oils represent 80 per cent ofthe world’s traded edible oils.

He added that demand from China imports of eight major oils, gained acombined 50 per cent increase last year.

He said China’s per capita consumption of edible oils and fats in2003/2004 is almost 18kg, below the world’s average of 19.7kg, which meansthere is still more room for growth in edible oils in China.

Meanwhile in his working paper, Bek-Nielsen said Malaysia’s maincompetitor, Indonesia, is also catching up fast, producing 75 per cent ofMalaysia’s CPO and is expected to surpass Malaysia in the next three tofour years.

He added that Malaysia produced 13.3 million tonnes of palm oil last yearwhich is expected to grow to 13.6 million tonnes this year.