Parliament group supports state’s palm oil industry

Jabu (centre), Ashworth and Helmer (left) fielding questions from reporters during the press conference. Earlier, the Modernisation of Agriculture Minister chaired a roundtable dialogue with the delegation. — Photo by Chimon Upon

KUCHING: The European Conservatives and Reformists Group (ECR) of the European Parliament has given its full backing to the state’s palm oil industry amid strong criticisms from European non-governmental organisations (NGOs) on the crop’s alleged damaging impact on the environment.

The parliament’s Committee on Agriculture and Rural Development member Richard Ashworth said ECR would defend the state’s palm oil cultivation practice against the passing of European laws that could affect the production of palm oil in the country.

The South East of England Member of European Parliament (MEP) mentioned that Sarawak had proven that palm oil was environmentally sustainable and that the industry had a phenomenal role to play in bringing wealth to the local community.

He criticised NGOs for using generic criticisms and making sweeping statements on the whole industry.

“We are conscious that there is a great deal of legislation being passed in the European Parliament within months or even years, which will heavily impact upon crops such as palm oil and in turn creating considerable effect on the prosperity of those producing the crop in Malaysia.

“We have been given great reassurance that in environmental terms, Sarawak has exceeded expectations. The agriculture development of palm oil, particularly the cooperative element with small farmers and shareholders scheme, is not just environmentally sustainable but has done enormous amount of good to lift small farmers out of subsistence agriculture and giving them a sense of involvement and dignified existence.

“On the series of ongoing debates in the European Parliament, we will make a difference. We will go back and speak on your behalf. We are on your side on this particular argument,” he told a press conference at Pullman Hotel here on Tuesday after attending a roundtable dialogue on the state’s palm oil industry.

Present were Deputy Chief Minister Datuk Patinggi Tan Sri Alfred Jabu Numpang and Roger Helmer, the MEP representing East Midlands England and member of the Industry, Research and Energy Committee.

Ashworth and Helmer were part of a delegation – including South East England MEP Nirj Deva and MEP representing Yorkshire and Humber region of the United Kingdom Amjad Bashir – on a two-day visit here to learn and better understand about palm oil crop and its cultivation, social element and environmental aspect.

Deva is also vice-chair of the Development Committee, while Bashir is also a Substitute Committee on International Trade.

Ashworth acknowledged that that there were examples of bad cultivation practices, such as the slash and burn policies of certain countries on their forests. He deemed the potential and productivity of palm oil crop and what it had achieved for the people and Sarawak as “fantastic” and should be cherished and encouraged.

Helmer also echoed Ashworth opinion on the damaging effect of what he labelled as unsubstantiated criticisms in the part of European NGOs and Green Party movement in the European Parliament.

“The Green organisation, which has so much influence in the European institution, does not focus particularly on Malaysia but are driven by an obsessive ideology and with little regards to facts. My personal view is they do a great deal of damage.

“The difference that has been made by us coming here is that we have a much clearer grasps on what is actually going on. One example is the issue of how much land have taken up for palm oil cultivation and how much land remains for the benefit of the environment.”

Citing Europe’s flawed biofuels policy as an example, Helmer mentioned that the European institution frequently introduced laws only to change it later on when the effect was found to be damaging.

Ashworth sits in a 19 strong Conservative delegation in Brussels, which is part of the ECR with 71 MEPs, and is the third largest group in the European Parliament. Helmer leads 24 United Kingdom Independence Party (UKIP) members, the largest UK delegation in Brussels. The European Parliament is composed of 751 members.

Read more: http://www.theborneopost.com/2015/02/26/parliament-group-supports-states-palm-oil-industry/#ixzz3Sqx4ONKE

Palm oil production drops most in eight years

KUCHING: Malaysian palm oil output fell the most in eight years according to official data by the Malaysian Palm Oil Board (MPOB) yesterday, a decline bigger than expected which signified greater impact from the recent floods.

Crude palm oil (CPO) production in December 2014 tumbled 22.04 per cent to 1.36 million metric tonnes against 1.75 million tonnes the previous month, the biggest drop since December 2006, according to Bloomberg estimates.

Palm oil stocks eased 11.55 per cent to 2.01 million tonnes at end-December 2014 against the 2.27 million tonnes recorded the previous month, MPOB said in a statement yesterday.

CPO stocks declined 23.61 per cent to 995,529 million tonnes, while that for processed palm oil grew 4.61 per cent to 1.02 million tonnes for the month under review.

Palm oil futures surged to a six-month high last week on concerns that the worst floods in decades in Peninsular Malaysia hurt harvesting, intensifying the impact of a seasonal decrease in output in the world’s most-used edible oil.

CIMB’s regional head of plantations and deputy head of research Ivy Ng told The Borneo Post her views that this was a ‘natural event’ as the inventory figure is broadly in line with the research houses and markets forecast.

“We don’t expect this event to be a key driver for CPO price or share prices of palm oil players in the near term,” she said in response to queries via email.

“With regards to the flood, our view is that players impacted by the floods may post weaker earnings as the rise in selling prices for CPO may not sufficient to offset the drop in output due to the flood.”

Output in the three east coast states on Peninsular Malaysia hit by floods – Kelantan, Terengganu and Pahang – fell 28 per cent in December from a year earlier, according to MPOB.

The Malaysian Meteorological Department anticipates isolated rains and thunderstorms are predicted over parts of Sabah and Sarawak until January 18.

Meanwhile, MPOB also said palm kernel stocks fell 20.55 per cent to 131,263 tonnes, while crude palm kernel oil lost 10.55 per cent to 162,234 tonnes.

Processed palm kernel oil stocks improved 5.51 per cent to 140,759 tonnes in December, while that for palm kernel cake stocks was 7.19 per cent lower at 350,855 tonnes, it added.

“Palm kernel production was down 21.64 per cent to 337,242 tonnes, while crude palm kernel oil output was 18.83 per cent lower at 175,030 tonnes and palm kernel cake production dropped 19.26 per cent to 192,823 tonnes.

“Palm oil exports rose 0.43 per cent to 1.52 million tonnes in December against 1.51 million tonnes in November 2014. Biodiesel exports depreciated 97.30 per cent to 614 tonnes.

“CPO imports in December slid 0.40 per cent to 52,872 tonnes, while that of processed palm oil inched down 18.26 per cent to 37,481 tonnes.”

Read more: http://www.theborneopost.com/2015/01/13/palm-oil-production-drops-most-in-eight-years/#ixzz3RRJO5t9T

Improving outlook for CPO prices with possible biodiesel subsidy hike

KUCHING: Analysts at RAM Ratings Services Bhd (RAM Ratings) forecast crude palm oil (CPO) prices to average between RM2,200 and RM2,400 per metric tonne (MT) in 2015 as RHB Research Institute Sdn Bhd (RHB Research) remains optimistic on Indonesia’s possible hike in biodiesel subsidies.

In a statement yesterday, RAM Ratings expects CPO prices to average between RM2,200 and RM2,400 per MT this year against a backdrop of ample edible oil supply and subdued consumption growth.

The weak ringgit is expected to provide a cushion against an otherwise sharper fall from 2014’s average price of RM2,408 per MT, it said.

“As a growing mature hectarage in key palm oil-producing countries underpins CPO production growth in 2015, strong soybean production in the US and expectations of a bumper harvest in South America are anticipated to keep the edible oil market well supplied,’ it explained.

“The heightened competition between edible oils could keep CPO prices in check while demand growth is expected to be lackluster. Meanwhile, weak crude oil prices reduce the economic viability of CPO use in biodiesel, notwithstanding demand from government-driven mandates.

“While we note of the increased attractiveness of CPO due to the weaker ringgit, the build-up of inventory in the medium term would be bearish on the commodity’s prices. CPO prices may be supported by the lower production in the first half of the year and potentially weakening in the second half when production seasonally peaks.”

Meanwhile, a possible spike in Indonesia’s biodiesel subsidies would provide a catalyst for palm oil prices, RHB Research said in a note to investors.

The parliament’s energy commission and the government approved an increase to 4,000 rupiah (US$0.32) a liter from 1,500 rupiah. The move needs to be passed by the budget committee in parliament, the directorate general for oil and gas at the Energy & Mineral Resources Ministry said Thursday.

RHB Research said this translates into a positive margin of US$40 per barrel for biodiesel producers.

“This proposal still has to get parliamentary backing, but should it go through, would help provide a boost to CPO demand, assuming the B10 mandate is fully implemented in Indonesia.

“This law, if passed, would be a positive catalyst for palm oil prices,” observed RHB Research’s analyst Alvin Tai. “A US$0.40 per litre subsidy translates into US$63.60 per barrel. Currently the biodiesel margins (with no subsidies) are at minus US$23 per barrel.

“Therefore, with this subsidy, biodiesel producers would be able to make a positive margin of US$40 per barrel, excluding transport costs.”

Prior to the crude oil price drop, logistical and infrastructure problems hindered the implementation of Indonesia’s B10 mandate.

“Assuming these issues are resolved and Government is able to finance the additional subsidies, biodiesel producers in Indonesia would require up to three million tonnes of CPO to meet the B10 mandate in 2015.

“In 2014, Indonesia’s biodiesel demand was about 1.7 million tonnes. We highlight, however, the risk of crude oil prices dropping further, which could dampen margins and the feasibility of this flat subsidy rate. It would probably be better, in our opinion, if Indonesia adopts a more robust subsidy method, perhaps like Malaysia’s cost-plus method.

“Although the near-term upside for palm oil prices appear to be on the cards, our average price assumption of RM2,500 per tonne could be slightly optimistic and may be subject to downward revision,” the analyst added.