27/10/2010 (The Star Online), Petaling Jaya - With the price of crude palm oil (CPO) trading above RM3,000 per tonne, plantation companies in Peninsular Malaysia have started paying the palm oil windfall profit tax (WPT) while their peers in Sabah and Sarawak are expected to follow suit.

The WPT is imposed when CPO price rises above RM2,500 per tonne for planters in the peninsula and RM3,000 per tonne for those in Sabah and Sarawak.

Yesterday, CPO futures on Bursa Malaysia Derivatives closed off its Monday high to settle RM18 lower at RM3,053 per tonne.

Malaysian Estate Owners Association (MEOA) president Boon Weng Siew yesterday confirmed that planters in the peninsula had paid the WPT since August when CPO prices strengthened above RM2,500 per tonne.

He expected planters in Sabah and Sarawak to start paying the WPT this month should the current CPO price remain at RM3,000 per tonne or above.

While big plantation companies may have no qualms about paying the WPT, Boon told StarBiz that “MEOA members, particularly the small and medium-sized estates in the peninsula, are beginning to feel the brunt”.

“Many of them are undertaking replanting activities this year while planters in Sarawak, which are developing greenfields, have yet to generate profits due to immature hectarage.”

The last time planters had to pay the WPT was from July to September 2008 when an estimated RM260mil in WPT was collected from oil palm plantation players following the surge in CPO prices to a record RM4,486 per tonne in May 2008.

Boon said: “Although planters did not pay any WPT last year, many are still uncomfortable about the WPT which is based on CPO price and not on the actual profit of the plantation companies.”

Furthermore, it was unfair to plantation companies which were not even paying income tax to have to pay WPT, he added.

However, given the current rally in CPO prices, plantation companies would have no choice but to pay the WPT this year, he added.

Many plantation analysts have also started to revise upward their CPO price forecasts this year.

DBS Group Research in its latest report has upgraded its CPO price forecasts by 2%-11% for 2010, 2011 and 2012.

The research unit expects stronger CPO prices as weaker foreign exchange rates are expected to raise soyoil prices between 2010 and 2012 by 15% to 23%.

“We also expect a steeper-than-usual drop in fresh fruit bunches yield and potential delays in soybean planting in South America due to the strengthening La Nina to boost prices in the first quarter of 2011,” it said.

DBS is of the view that rising biofuel mandates, higher substitute demand on lower sunflower and rapeseed crop may push soyoil prices higher in the first half of 2011 to incentivise crushing should also support CPO prices.

For the current quarter, CPO futures on Bursa Malaysia Derivatives could average RM2,980 per tonne.

Macquarie Capital Securities, meanwhile, has also raised its CPO average price prediction for 2011 by 8% to RM2,851 and 2012 by 24% to RM3,068 per tonne.