03/12/2007 (Forbes), Banglore  - Moody's Investors Service said it has maintained a stable rating outlook for the Asian palm oil industry as it sees favourable prospects for the sector over the coming year from positive pricing and demand trends.

Market conditions for palm oil remain strong and prices have doubled since the second half of 2006. Continued price support will come from increased consumption in emerging markets, preference for vegetable oils and demand for crude palm oil as a bio-fuel source, the ratings agency said.

However, 'expansion risk is a key challenge as upstream producers funnel higher cash flow into efforts to expand plantations and initiate bio-diesel projects,' Moody's (nyse: MCO - news - people ) senior credit officer Peter Choy said.

These can constrain free cash flow even when operating cash flows remain high, he added. -(Thomson Financial)-