10/12/2007 (Food Navigator) - Crude palm oil production is up 4.4 per cent from October in Malaysia, according to the Malaysian Palm Oil Board, but this has not led to a fall in prices amid the current volatility of the crude and soya oil markets.

The total output of crude palm oil (CPO) totalled 1.65m tonnes in November, compared to 1.58m tonnes in October.

Meanwhile, CPO stocks shot up 25 per cent to 976,589 tonnes as the amount of imports far exceeded the quantity at exports, with exports decreasing by 7.8 per cent and imports dramatically increasing by 402.5 per cent, impacting on palm oil costs.

The total palm oil stock, including processed oil, increased 16 per cent to 1.81m tonnes.

However, the price of CPO per tonne averaged 31.62m ringgit (€6.5m), an increase of 6.57 per cent from the previous month. The cost further increased last month following a five week low, which had resulted from large fluctuations in the crude and soya oil markets.

Palm oil is a form of vegetable oil obtained from the fruit of the oil palm tree. It has become increasingly popular for use in food and cosmetic products, but is also now used as a biofuel as an alternative to expensive and damaging fossil fuels.

Malaysian palm oil futures depend largely on the crude and soya oil markets, with strong crude oil prices fuelling a demand for palm oil, which can be used as a biofuel.

The cost of crude oil reached a record $100 a barrel in November, but has since dropped again below $88 a barrel.

The maintained high prices of palm oil is a classic example of the increased demand for biofuels having a knock-on effect on the food ingredients market and, in turn, pushing up food prices.

However large food companies are thought to be amongst those opting for palm oil in place of fossil fuels as they consider it a greener alternative to conventional petrol and diesel. But according to Greenpeace, it is having the opposite effect.

Last month, the environment charity released a report that named the contribution major food companies are making to increased carbon emissions through the destruction of Indonesia's peat swamp forests to produce palm oil.

Every year, 1.8bn tones of greenhouse gas emissions are released by the degradation and burning of Indonesia's peatlands, the report said. Indonesia is the world's second largest palm oil producer, after Malaysia.