KUALA LUMPUR, July 23 (Bernama) -- The de-pegging and consequentstrengthening of ringgit may have a temporary and minor impact on palm oilprices as they are traded in the U.S. dollar, the Parliamentary Secretaryto the Ministry of Plantation Industries and Commodities, Ng Lip Yong,said Saturday.

"However, I don't see the price going down as businesses are stilladjusting to the ringgit's de-peg and how the managed float would affecttheir business, he said when asked to comment on the impact of the managedfloat on the country's crude palm oil (CPO) prices.

"Should there be any weakness, it would be temporary only," he toldBernama after officiating the opening of Powerion Chueh Tarot CardReading, here.

In its announcement late Thursday, Bank Negara Malaysia said that theringgit's RM3.80 peg against the US dollar imposed on Sept 1, 1998 wasscrapped with immediate effect and will operate by a managed float againsta basket of currencies.

When asked further, Ng said the impact would not be very big to thecountry because of the robust demand for Malaysia's oil palm biofuel inthe European countries.

Malaysia's palm oil industry is not only involved in the production offood and non-food products, but also in the production of fuels, Ng said.

"In the longer term, there will be a bright future for Malaysia's palm oilin these countries (EU countries) because they use biofuel to cut down onenvironmental pollution.

"So, if you look at in the biodiesel potential, the demand should pickup," he said.

Currently, Europe uses biofuel from rapeseed oil which cost US$659 pertonne, much more higher than the price of palm oil which is US$452 pertonne.

Ng said the good news is that palm oil producers could cut down onfertilizer costs effectively as most is imported leading to lower cost ofproduction.

He said CPO prices at RM1,400 per tonne was at a "comfortable" level, andthe government does not want prices to shoot up to RM2,000.

"Our CPO is competing with another 16 others oils.

"We are now at the discount to soyabean. Should our CPO price go up verymuch, it would not be competitive anymore," he said.

Malaysia produces about 13 million tonnes of palm oil annually or 90percent of the world's production.

The palm oil market this year is expected to account for about 30 percentof the world's edible oil followed by soyabean at 29 percent.

Ng said that the country's palm oil trade mostly with the U.S. marketwould continue to show an impressive growth starting this year, partlybecause of the new regulation of food labelling system imposed by the U.S.Food Agency, he said.

"The new food labelling system, which comes on immediate effect in Jan 1,2006 require acid label for all types of food productions.

"This would be disadvantageous to soya bean oil which cannot meet therequirements and people may turn to palm oil," he said.

-- BERNAMA