KUALA LUMPUR, Oct 5 (Bernama) -- Malaysia should adopt the Indonesianapproach to the pricing of processed palm oil (PPO) to ensure thesustained development of its palm oil industry, said chairman of Palm OilRefiners Association of Malaysia (Poram) Toh Pang Huat on Friday.

According to Toh, Indonesian palm oil refiners sell their PPO products atthe international market price "(less the production cost) before pricingthe crude palm oil (CPO) in their country".

"As such, they do not have much problem like high stock levels," he saidin his chairman's address at the 24th AGM of Poram here.

He said local CPO price was higher than that of Indonesia and this couldaffect the market for Malaysia's palm oil.

Toh said the current downturn in the price of CPO was temporary: the priceof the commodity was expected to recover "in the next two quarters".

He added that the downside potential on prices would be limited as stockswere not expected to rise to the alarming level of 1.527 million tonnesreported last year.

"Maximum stock levels will reach 1.3 million tonne but there is apossibility of (the level of stocks being drawn down) to below 900,000tonne in the first quarter of next year," Toh said.

Malaysia and Indonesia are the world's largest producers of palm oil butMalaysia has a larger palm oil processing industry than does Indonesia.

The trading of CPO futures contracts (for "price discovery" and hedgingpurposes) in Malaysia done through the Malaysia Derivatives Exchange,formerly known as the Kuala Lumpur Commodity Exchange (KLCE).

In Malaysia at present, the pricing of fresh-fruit bunch (FFB) and otheroil-palm plantation products is mainly done on the basis of market reportsissued by the Malaysian Palm Oil Board (MPOB). -- BERNAMA