31/08/05 JAKARTA, (Asia Pulse) - The rupiah's depreciation will increasethe competitivenss of Indonesian crude palm oil (CPO) on the internationalmarket and raise the price of fresh oil-palm fruit at the farmers' level,an industry spokesman said.

"The competitiveness of our CPO in the international market will surelyincrease, especially so since the currency of Malaysia - Indonesia'sstrongest competitor in the intenraational CPO market- is strengtnening,"Derom Bangun, chairman of the Indonesian Palm Oil Producers' Association(GAPKI), told ANTARA in a telephone interview from Medan, North Sumatra,Tuesday.

He said although the CPO price in the international market was stable, thecommodity's price in rupiah would increase.

"Automatically, the price of fresh palm fruit will also rise," he said.

The CPO price on Tuesday reached US$360 to US$365 per ton.

But Derom also said he was sure the increased competitiveness ofIndonesian CPO in the international market would not trigger massiveexport of CPO as had happened at the beginning of the monetary crisis inmid-1997.

"Based on our experience in the past few years, the market mechanism forCPO is quite good, thus (producers) can focus on meting domestic CPOdemand. Don't worry that the rupiah's depreciation will tempt us to exportCPO on a massive scale," he said.

But Derom admitted the rupiah`s depreciation might also increase theprices of CPO derivative products such as edible oil in the domesticmarket.

"The percentage of the price increase is proportionate to the rupiah'sdepreciation. If the rupiah rate declines by five percent, the edible oilprice will increase at the same rate," he said.

However, Derom ruled out the possibility of an edible oil shortageoccurring as had happened in 1998 when the rupiah dropped sharply.

In 1998, he said, the world CPO price reached its highest level at US$600per ton as the El Nino phenomenon had damaged palm oil harvests andvegetable oil production dropped.

"Such conditions do not exist today. I do not know whether the impact ofhurricane Katrina in the US will damage harvests in the country," he said.

GAPKI predicted Indonesian CPO exports this year would reach 9.6 milliontons, and as of May exports has reached 3.9 million tons.

Total CPO production in 2005 was expected to have increased to 13.6million tons, from 12.2 million tons in 2004.

(ANTARA)