CPO price rise brings cheer(Business Times)THURS, 19 July 2001 - The rise in palm oil prices, ifsustainable, is good news for the industry, the smallholders and theMalaysian economy in general.

Since last month, the industry has been seeing an uptrend in the prices ofcrude palm oil, closing at RM1,180 per tonne on Tuesday.

"We hope that the rise is based on fundamentals and not speculative andtherefore sustainable," said a Primary Industries Ministry official.

The official, who declined to be named, said while in all markets therewould always be the element of speculation, he hoped that the market wasrational.

According to him, fundamentally the industry could forecast the supply ofCPO because the amount could be based on the hectarage planted around theworld.

"Also, barring unforseen circumstances such as bad weather and unknownhazards such as a boycott on genetically modified products, most riskscould be discounted," he added.

On Tuesday, a TA Securities Bhd analyst forecast that the bear cycle forpalm oil had ended and that CPO prices were expected to be sustained aboveRM1,000 for the year and average RM1,200 next year.

The official said he hoped the recent rise in prices was a result ofstrategies the Government took such as cutting back supply, diversifyingthe market, promoting new markets, increasing market share and the use ofbio-fuel.

A ministry statement on Tuesday said two years ago the price of palm oildipped significantly due to over-production of edible oils and fat.

Last year, the global production of edible oils and fat had continued itsdownward trend.

The price of soybean oil and sunflower seed oil fell 20.8 per cent and22.7 per cent respectively while tallow, lard, fish oil, rapeseed oil,groundnut oil and cottonseed oil fell 20 per cent.

However, the price of palm oil dropped the most, by 29.9 per cent, thusaffecting producers and smallholders.

In recognition of this, the Government set up a special Cabinet committeeto increase the income of smallholders.

Chaired by Deputy Prime Minister Datuk Seri Abdullah Ahmad Badawi, thecommittee came up with strategies to strengthen the price of palm oil.

One strategy is the oil palm replanting scheme which encourages thefelling of trees more than 25 years old.

In the scheme, the Government has targeted 200,000ha for felling andreplanting by year end.

With this step it is hoped that CPO production will be reduced by 600,000tonnes.

It is hoped that the reduction will raise prices.

In March, the Government set aside RM200 million as incentive payment —RM1,000 for each smallholder who replant oil palm and RM1,100 for thosewho replant rubber trees.

As at July 10, applications — of which 57 per cent were from private landholders — for felling reached 150,045ha.

In view of the keen interest shown by the oil palm smallholders andplantation owners, the Malaysian Palm Oil Board has decided to extend theclosing date to July 31.

Meanwhile the eligibility criteria remains, specifically that all fellinghas to take place before Dec 31.