23/2/06 (Reuters)  -  Malaysia's palm oil exports in 2006 are likely to remain unchanged from last year, Deputy Plantation Industries and Commodities Minister Datuk Anifah Aman said on Feb 23.

"As of now, we are expecting our palm oil exports to remain more or less flat," he told a news conference on the sidelines of a conference of palm oil traders in Kuala Lumpur.

Figures from the Malaysian Palm Oil Board (MPOB) show the total export volume of palm oil products, consisting of palm oil, palm kernel oil, palm kernel cake, oleochemicals and finished products, rose 7.3% in 2005 to 18.62 million tonnes.

But total export revenue of oil palm products fell 6.1% to RM28.6 billion in 2005, against RM30.44 billion in 2004, the figures from the MPOB website show.

Meanwhile, Plantation Industries and Commodities Minister Datuk Peter Chin said Malaysian palm oil prices are likely to rise as production in the first half of 2006 will be lower in than the same period of 2005, reducing stock levels.

"The supply fundamentals of Malaysia will be influential in higher palm oil prices," Chin told more than a thousand global oils and fats dealers gathered at the two-day conference that opened on Feb 23.

The benchmark third-month crude palm oil futures on Bursa Malaysia Derivatives, May, was up RM2 at RM1,473 a tonne in Feb 23's early trade, defying a drop in Chicago soyoil which the market often follows.

Dealers had been betting since last week that the contract could breach RM1,500 -- a level seen 11 months ago -- by the time Bursa's "Price Outlook 2006/2007" conference ends on Feb 24 with bullish comments expected from global analysts.

Crude palm oil prices averaged RM1,394 a tonne last year, declining 13.4% from 2004, due to weak soyoil prices and higher domestic output.

But palm production in 2006 may not be as high as last year, Chin said.

The minister gave no numbers, but said he expected stock levels of palm oil in Malaysia -- the largest producer of the commodity -- to be down by June from a year ago due to a thinner rate of production.

China's abolition of import quotas for edible oils, adverse crop weather for South American soybeans and increased demand for biofuel -- which palm oil can also be turned into -- underpins the outlook for high prices, he added.

"For the first half of 2006, Malaysian palm output is anticipated to be lower than that of 2005," Chin said.

"The weather concerns in South America, the effects of China's abolition of TRQs, and not the least, the exciting prospects of palm oil in the global demand for biodiesel should also support the upward movement of crude palm oil prices."

Thomas Mielke, head of the Hamburg-based Oil World publication and a key speaker at the conference, said on Feb 21 world palm oil stocks were seen declining to 3.9 million tonnes by the end of March 2006, down almost one million tonnes from early January and off 400,000 tonnes from a year earlier.

In last week's issue of Oil World, Mielke said Malaysia's palm oil output would see significantly weaker growth this year and global crushings of other oilseeds would have to compensate.

For biofuel, Chin said low prices made palm oil a "very viable option" to rapeseed oil -- the green fuel of choice in European Union.

Dutch rapeseed oil is trading above US$715 (RM2,660) a tonne for March/April, about 80% more than Malaysian palm oil.

Europe is short of diesel as it has underinvested in refinery production in recent decades while motorists are increasingly switching to the fuel instead of gasoline. The EU has set a non-binding target of 5.75% biofuel content by 2010.

"Due to inadequate supply and high prices of rapeseed oil, palm oil could be a big winner here," Chin added. - Reuters