25/6/04 - CRUDE palm oil (CPO) prices are expected to strengthen in thenear to medium term due to stronger demand and low stockpile of the world’s other 16 edible oils and fats.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kuisaid there is an overall feeling of bullishness prevailing in the marketright now as players anticipate an uptake in not only palm oil, but alsoother edible oils such as soyabean, rapeseed and sunflower oils.

The CPO price setback a few weeks ago was just temporary because there isstill strong demand for palm oil worlwide, he told reporters at theMalaysian Palm Oil Board headquarters in Bangi yesterday.

He said CPO price could stabilise at RM1,500 a tonne, or climb slightlyhigher.

However, even a price of RM1,500 a tonne would make a lot of people happy,as it is higher than the cost of production.

Plantation companies’ cost of production varies from as low as RM400 toRM900 a tonne.

Chin said palm oil demand would grow in tandem with economic growth incountries such as India and China which are getting more prosperouseveryday, said Chin after opening a seminar on transfer of technology.

CPO prices have fallen 21 per cent to hover around RM1,500 a tonne fromRM1,900 a tonne in January, mainly due to fears that China would freezebank loans to its edible oils importers as part of its efforts to slowdown the sizzling economy.

Kumpulan Guthrie Bhd group chief executive, Datuk Abdul Wahab Maskan, saidlast week that CPO prices have the potential to rebound up to RM2,000 atonne by year-end due to good demand globally and low stockpile of theworld’s other 16 edible oils.

Malaysian Palm Oil Association (MPOA) chief executive officer, M.R.Chandran, said last Tuesday that palm oil price was expected to be higherat about RM1,700 a tonne due to the possible shortage in production of thecommodity,

There might be hiccups on prices in the next few months but would not beserious. Palm oil price should not be too high, such as at RM1,900 atonne, as it is not good, said Chin.

Chin also said the Government may introduce a support scheme should CPOprice fall below RM1,000 a month.

He added that the Government may also revoke the licences of some of thecountry’s 385 millers which underperform, producing an oil extraction rateof less than 15 per cent.

Only less than 10 per cent is underperforming but nevertheless they areweighing the industry down.

Please buck up or we would revoke your licence, he said.

In the first place, the idea of issuing licences is for the industry toperform and comply.

During the event, Chin also launched a quality standard for the industryto benchmark the Deterioration of Bleachability Index in the sales of CPO.

The inclusion of the quality standard will start on July 1 2004 and willbe monitored by the MPOA and the Palm Oil Refiners Association.

MPOB director-general Tan Sri Dr Yusof Basiron said the standard may beextended to international contracts for buyers such as from China andIndia so that they can determine the quality of the CPO before they startto buy.