15/5/06 KUALA LUMPUR,  (Reuters) - Malaysian palm oil prices will range between 1,450 and 1,500 ringgit per tonne this year, driven by rising demand for biofuels, and reach between 1,500 and 1,600 ringgit in 2007, an industry official said on Monday.
"Once we get more biodiesel plants in commercial production, not only in Malaysia but throughout the world, there will be more demand of oil plant and other oilseeds," Sabri Ahmad, chairman of trade body the Malaysian Palm Oil Association, told reporters.

"In 2007, we are quite optimistic that the price of palm oil will hover between 1,500 to 1,600."

This range translates to between $417 and $444 at current exchange rates.

Malaysia's new biodiesel plants will begin producing in July or August, Commodities Minister Peter Chin said this month, helping to boost palm oil prices by 8-10 percent this year and cut stocks of the oil, as the world rapidly adopts alternative fuels.

With oil prices rising more than 18 percent this year to about $72 a barrel, countries around the world are increasingly turning to "green" fuels that can be produced from renewable resources such as sugar, corn and palm oil.

"In Europe today, 50 percent of total rapeseed oil supply goes into biodiesel production, so if we move to the future, under the Kyoto protocol, the use of biofuels is expected to increase," Sabri added.

"Here we believe that palmoil can complement rapeseed oil to produce biodiesel."

The benchmark third-month July contract was up 23 ringgit at 1,471 ringgit per tonne in the morning session on Bursa Malaysia Derivatives, which saw total turnover of 5,746 lots of 25 tonnes each.

Exports estimates for May 1 to 15 by cargo surveyor ITS were down 14.6 percent from the corresponding April period, at 508,214 tonnes. Societe Generale de Surveillance, another surveyor closely watched by the market, is due to release its estimates later on Monday.

Sabri said producers were looking to improve oil extraction methods and production capacity would increase by about 300,000 tonnes this year to 15.3 million tonnes, although production was affected by a mild drought.

Sabri, who is also the chief executive of Golden Hope Plantations Bhd , said the company had obtained approval to acquire an additional 50,000 hectares of land in Indonesia over the next five years.

In Malaysia, land expansion would be limited, but Golden Hope would focus on improving crop yields, he said. ($1=3.6 ringgit)