07/11/2008 (Alibaba.com), Jakarta - Indonesia and Malaysia will work together to reduce record high palm oil stocks in a bid to shore up prices of the country's main agricultural product, senior government officials said Thursday.

Indonesia will replant 50,000 hectares of oil palm plantations next year, taking advantage of a period of high palm oil stocks to rejuvenate plantations more than 25 years old.

The replanting will reduce the production of crude palm oil by 75,000-100,000 metric tons compared with this year's production, Ahmad Manggabarani, director-general for plantations at the Agriculture Ministry, said.

Indonesia will likely produce around 19 million tons of CPO this year, he added.

Manggabarani also said Indonesia will likely consume 2.5 million tons of palm oil for biofuel production next year when the country starts to make the use of biofuel blends mandatory nationwide.

Traders and industry players said the replanting program will do very little to support prices as the volume affected is too small, but Indonesia's consumption of biofuel products should support, if not lift, prices.

"At the moment, markets in the West are reluctant to use palm oil-based biodiesel due to environmental reasons," said a Singapore-based CPO trader.

"So, countries like Indonesia and Malaysia should try to create a domestic market for their CPO rather than rely on outside forces - at the very least the domestic demand created would be a substitute for declining demand from the West and help support the current flagging prices."

Indonesia's announcement to replant and create downstream industries for CPO comes on the heels of Malaysia's announcement last week it aims to reduce CPO output next year by 700,000 tons by replanting 200,000 hectares of oil palm and make the use of biofuel blends mandatory.

Indonesia's Agriculture Minister Anton Apriyantono met Malaysia's Plantation Industries and Commodities Minister Thursday to discuss those plans and other measures to be undertaken by both countries in preventing further falls in CPO prices.