29/09/05 (The Star) - THE price of crude palm oil (CPO) is expected toease to about RM1,320 per tonne by year-end but will likely strengthen toRM1,480 per tonne by the middle of next year.

Oils and fats expert Dr James Fry said the CPO price would start to betraded higher by the first quarter of next year, mainly due some supplytightness and increasing interest in biofuel.

"The emergence of biofuel demand, especially from Europe, is set to propelthe demand for vegetable oils, including CPO, and influence the price ofthe commodity," he said.

He was speaking after presenting a paper on The Global Economy and theOutlook for Palm and Soybean Oil Markets at the Malaysian Palm Oil Board(MPOB) Palm Oil International Congress in Subang Jaya yesterday.

Fry, who is Britain-based LMC International Ltd managing director, said anadditional demand of one million tonnes of vegetable oils was likely to becreated next year as a result of new biofuel plants being set up inEurope.

For the rest of this year, Fry expects Indonesia's willingness to acceptlower CPO prices than Malaysia would keep local palm oil stocks at afairly high level, resulting in lower CPO prices.

Dr James Fry

MPOB researcher Ramli Abdullah, in his paper on Econometric Analysis ofProduction and Price Forecast of the Malaysian Palm Oil, said CPOproduction was projected to increase further due to more oil palm areasreaching maturity as a result of a replanting programme introduced in 2001and 2002.

He said that for this year, CPO production was expected to hit 15.4million tonnes, a 10.6% increase from last year.

MPOB has also targeted CPO production to reach 18.7 million tonnes in2010, 20.15 million tonnes in 2015 and 21.8 million tonnes in 2020.

On Sabah's oil palm-related activities, POIC Sabah Sdn Bhd chief executiveofficer Dr Pang Teck Wi said the development of the identified palm oilindustrial clusters (POICs) in Lahad Datu, Sandakan and Kimanis wasprogressing smoothly.

He said the POICs would provide the infrastructure and supportingfacilities for the development of palm oil-based downstream activitiesinvolving the production of pulp and paper, poultry feed and organicfertilisers as well as biomass and biofuel projects.

Pang said: "The development of biofuel is very much in tandem withobjectives outlined under the National Bio-Fuel Policy for Malaysia toexplore alternative energy source in light of the rising crude oilprices."

He said biotech was another new growth sector and Sabah had beenidentified as one of the potential biotech centres in Malaysia