Further boost for local palm oil industry?

(Business Times)10 July 2001 - THE Malaysian palm oil sector, recoveringfrom a two-year price slump, can expect a further boost if talk of a planby Indonesia to curb the commodity's exports proves to be true.

The world's second largest palm oil producer is said to want to cutexports because of a growing shortage of cooking oil in the republic.

"This will be done gradually, starting in November," a source toldBusiness Times in Kuala Lumpur yesterday.

The exercise will also likely see an increase in export duty for crudepalm oil, from the current 3-5 per cent, to discourage sale of thecommodity abroad, he said.

Last year, Indonesia produced 6.9 million tonnes of palm oil, of which 4.2million tonnes were exported, up from 6.25 million and 3.32 milliontonnes, respectively, in 1999.

Malaysia produced 10.6 million tonnes of the commodity in 2000, andexported 9.08 million tonnes, compared to 10.55 million tonnes and 8.91million tonnes, respectively, the year before.

Traders said should Indonesia go ahead with the export curbs, Malaysiawould be the biggest beneficiary in terms of export market share.

"We have to wait for confirmation," one of them said.

According to the latest figures from the Malaysian Palm Oil Board (MPOB),Malaysia sold 4.37 million tonnes of palm oil in the first five months of2001, up 30 per cent from 3.34 million tonnes in the corresponding perioda year ago.

And crude palm oil prices have strengthened to RM893 a tonne last weekfrom RM795.50 in June and RM743 in May.

Indonesia is also facing a drain on its domestic palm oil supply fromplanters switching to the currently more lucrative crop of coconut.

"There's a sudden interest by Indonesians to produce coconut oil which isfetching a good price right now. . . . US$320-US$370 (US$1 = RM3.80) pertonne (Rotterdam price) compared to US$260-US$280 for palm oil," anothertrader said.

Indonesia is the world's second biggest producer of coconuts after thePhilippines.

In 2000, it produced 837,000 tonnes of coconuts and exported 723,000tonnes, and in 1999, 491,000 tonnes and 350,000 tonnes.