11 March 2002 (Business Times) - MALAYSIA’S palm oil prices are expectedto touch the RM1,200 a tonne level in April due to tightening supplyattributed to the effects of the El Nino.United Plantations Bhd senior executive director Tan Sri B. Bek-Nielsensaid the rainfall in Peninsular Malaysia from July last year to this monthhas shown an unusually low level which may make the return of the El Ninoa reality.“The return of the drought would have an impact on the crop during thelast quarter of 2002,” Bek-Nielsen said in a working paper at the 13thannual palm and lauric oils conference and exhibition in Selangor onSaturday.“Last Friday, CPO prices increased by RM22 to RM1,142 a tonne while theprice level for June improved by RM12 to RM1,169 a tonne,” Bek-Nielsensaid.Bek-Nielsen’s working paper is entitled “The future potential of theMalaysian palm oil and refining industry in relation to the worlwidesupply of edible oils”.The event is organised by the Malaysia Derivatives Exchange.“Under the influence of a speculative market there could be a gradualincrease in the price of palm oil and the CPO prices are expected to touchRM1,215 a tonne in April and RM1,240 a tonne in June,” he said.Bek-Nielsen added that palm kernal prices are also expected to touch RM560a tonne in April and RM650 a tonne in June.“The above indicated prices are based on the fact that the price levels oflauric oils have been depressed for more than a year.“Assuming that the Philippine’s production of copra as well as Malaysia’sproduction of palm kernel do not show substantial improvement, I believethat the price levels above will not be much removed from reality,” saidBek-Nielsen.He said in spite of the very substantial increase in the production of CPOduring 2001, the production in December showed a drop to 100,000 millliontonnes when compared to November.“It is, therefore, expected that the overall production during 2002 willbe influenced by the EL Nino effect during 2001 as well as during thefirst quarter of this year,” Bek- Nielsen said.He also outlined several factors that can be undertaken to boost CPOprices.“The replanting of between 100,000ha and 150,000ha of old palms whichyield about 3 tonnes per hectare will have a beneficial effect by reducingthe volume from entering the market.He added that the smallholders and members of Felda should be encouragedto submit a replanting proposal to the Government.“The increase in production will result in additional foreign revenuewhich in turn will ensure that the less priviliged members of the ruralsociety enjoy increasing benefits from the higher yielding oil palms.Next, Bek-Nielsen said, the potential yield of CPO must be optimised byappoximately 50 per cent from the present production of 20-21 tonnes perhectare to 31-32 tonnes per hectare.“It is mainly a question of optimising the potential yield of CPO by usingsuperior planting materials and disciplined management.”He said with the application of increasing yield, the production from thesame area may result up to a 50 per cent increase to 17.7 million tonnesof CPO from last year’s 11.8 million.Bek-Nielsen also said the absence of the level playing field in the world’s edible oil market also contributes to low prices at the moment.“I do suport the idea that Malaysian palm oil can compete with soyabeanoil and rapeseed oil in a level playing field market.“However, it is a well known fact that two of the world’s most advancedindustrial areas, namely the US and the European Union countries, found itprudent to ignore the principles of the level playing field and supportstheir farmers last year with several subsidies.”He said the American farmers receive up to 50 per cent of their revenueincome as subsidy from the Government.“For the European rapeseed farmers, their governments subsidise them 48per cent.“It is obvious such policies will not be popular with developing countriessuch as Malaysia and Indonesia.“I harbour the view that it is necessary and timely for members of theMalaysian palm oil industry to sustain the dynamic development which madeit possible for Malaysia to increase its CPO production from 51,000million tonnes in 1951 to 11.8 million last year.”

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