04/08/2008 (Bernama), Sukabumi (West Java) - Malaysia and Indonesia Monday agreed to use the surplus from their palm oil stockpiles to produce biodiesel as part of the mechanism to boost the palm oil price.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui and Indonesia's Agriculture Minister Dr Anton Apriyantono said

both countries would continue to do so until the edible oil commodity achieve a price equilibrium in the world market.

Both ministers told a news conference here that the decision was appropriate as the price of crude palm oil (CPO) at the moment was around US$871 per tonne, the lowest in 15 months.

"We have palm oil stocks which are fetching unreasonably low price in the world market. So we want to increase its usage to produce biodiesel for the local market.

"This is only logical. If the price is low, then we might as well use the commodity ourselves," Chin said.

Chin, who described the low price as worrying, said Malaysia had 1.9 million tonnes of surplus, and an equal amount in Indonesia, which would be used for the purpose.

"The palm oil will be use to produce biodiesel if the market is not willing to pay a reasonable price for our CPO," he said.

The amount was over and above the six million tonnes of palm oil which both countries had agreed to set aside for biofuel production.

Chin hoped that the move could create a balance in the world palm oil market, resulting in a better price for the commodity.

Meanwhile, Anton said the move was to control supply in the market and prevent the price from going further down.

Both ministers gave assurance however, that the move would not result in the shortage of edible oil in the global market because it was implemented at a time when there was a surplus in the supply.

In a related development, Chin and Anton would hold a dialogue with European Union's members of parliament in Brussels in September to explain various issues pertaining the palm oil industry.

Both ministers would also attend a forum on world sustainability in London, also in September.

Earlier Chin lead a delegation from his ministry to visit a research centre for jatropha, a type of plant which can be a source for biodiesel, in Pakuwon, near here.