09/04/2010 (Bloomberg) - A decision by China to allow its currency to appreciate may help to boost exports of palm oil from Indonesia to the world’s fastest-growing major economy by at least 21 percent, according to a producers’ association.

Shipments of palm oil and byproducts to China may gain by at least 500,000 metric tons this year from 2.37 million in 2009, Fadhil Hasan, executive director at the Indonesia Palm Oil Association, said in an interview. A rise in the yuan would make palm oil, traded in dollars, cheaper for Chinese buyers, he said.

“If China really moves forward with the plan to revalue its currency, of course it will benefit us,” Hasan said by phone yesterday. “How much we can really benefit from an appreciation, it will all depend on the basic condition, which is demand.” Indonesia is the world’s largest palm oil producer.

The association’s assessment may reinforce expectations that an appreciation of the yuan will stoke demand for commodities from China, potentially driving prices of agricultural goods and metals higher. That may help to boost producers’ profits and increase global trade.

U.S. Treasury Secretary Timothy F. Geithner met in Beijing yesterday with Vice Premier Wang Qishan amid rising speculation the Chinese central bank may allow the currency to rise. The yuan has been pegged at about 6.8 per dollar since July 2008 to aid the Asian nation’s exporters during the global recession.

Citigroup Forecast
Citigroup Inc.’s David Thurtell forecast last month that a yuan revaluation should benefit all commodities. In 2005, the Reuters/Jefferies CRB Index, which tracks 19 commodities, surged about 10 percent in the six weeks after China ended a decade- long peg of about 8.3 per dollar in July. That “could be repeated,” Thurtell said.

An appreciation of the yuan “will make our commodity cheaper,” said Hasan from the association, which represents planters. Palm oil exports from Indonesia to China accounted for 15 percent of 15.5 million tons of sales in 2009, the association said on Jan. 29.

Palm oil futures have risen by about 23 percent over the past six months to yesterday as drier-than-usual weather in Malaysia, the second-largest producer after Indonesia, curbed yields. The most-active contract on the Malaysia Derivatives Exchange advanced 0.6 percent to 2,514 ringgit ($787) a ton at 10:40 a.m. in Singapore.

‘Everything They Import’
Investor Jim Rogers, author of “A Bull in China,” who has predicted a continuing commodity boom, said yesterday that China will eventually allow its currency to appreciate to help fight inflation. “Everything they import will go down in price,” Rogers said.

Yuan forwards rose the most in six weeks yesterday in Hong Kong after the New York Times reported that China’s government is “very close” to announcing a change in its currency policy. The model for the shift would be the 2005 revaluation, when the yuan was allowed to rise 2.1 percent overnight, the report said.

Palm oil, about 90 percent of which is cultivated in Indonesia and Malaysia, is used in foods, as a cooking oil and as a fuel additive. India is the world’s largest importer of the tropical commodity.