PRIMARY Industries Minister Datuk Seri Dr Lim Keng Yaik yesterdaycriticised the United States and some European countries, which produceedible oils, for providing various backups to their farmers to grow morein times of supply glut.

He said they should instead give greater focus on supply rationalisationand creation of new demand to ensure that the price of edible oils,including palm oil, stay favourable.

"Here in Malaysia, during the time of supply glut we have initiatedseveral measures to reduce supply in the hope that price will recover tomore reasonable levels for our oil palm farmers.

"But on the other hand, developed countries like the US and members of theEuropean Union are giving all kinds of supports to their farmers to growmore which would exacerbate the supply glut," he said.

"I am not sure whether these countries have other agendas apart fromwanting to help their farmers to tide over hard times," Dr Lim said whenaddressing 1,400 participants from more than 40 countries at the 2001International Palm Oil Congress in Kuala Lumpur yesterday.

"Whatever it is, I suppose it would be more constructive for the market ifthese farmers are compensated for growing less instead of encouraging themto grow more." Dr Lim added that the decision by the American and Europeansoybean farmers to expand planting knowing fully well that prices did notjustify such a move did not augur well for the whole edible oils business.

"I think their governments should be more responsible," he said.

He added that people all over the world consumed 19 million tonnes of palmoil a year out of 113 million tonnes of oils and fats.

"Malaysia supplies half of the world's palm oil," he said.

Malaysia, among its many initiatives to keep palm oil prices favourable,had in March announced a RM200 million incentive to replant 200,000ha ofoil palm trees this year to reduce 600,000 tonnes from the supply side.

Dr Lim said long periods of depressed prices were not in the interest ofthe industry.

Likewise, it would not be in the interest of the industry to have longperiods of high prices, he said.

"Both situations are not sustainable because high prices will moveconsumers away, whereas low prices will ‘kill' producers.

"So what is needed is a price level which is remunerative for producersand fair to consumers. To achieve this, there must be some balance betweensupply and demand in the market." He said to balance supply and demand,there should be supply restraint or rationalisation and creation of newdemand.

Dr Lim suggested that rationalising the supply could partly be donethrough replanting.

"Replanting will have positive impact on prices as it will immediately cutoff supply of oil to the market." On creating new demand, Dr Lim said itwas timely for all in the edible oils trade to counter the ongoingcampaigns by certain quarters to persuade people to reduce their fatintake.

21 August 2001Business Times