KUALA LUMPUR: Crude palm oil (CPO) prices may rise to RM3,000 per tonne next year on the back of an increase in demand, especially from India, says Deputy Plantation Industries and Commodities Minister Datuk Nasrun Mansur.
He said India needed palm oil from Malaysia to support its biodiesel industry.
“The Indian government has introduced biodiesel blends in its market and is currently negotiating to import our palm oil,” he told reporters at the Palm Oil Familiarisation Programme (POFP) 2016 here yesterday.
The CPO price hit RM2,798 per tonne on Wednesday last week, the highest recorded so far this year.
Nasrun said the government is working tirelessly to utilise existing palm oil stock in the country to ensure price stability.
“If our (palm oil) products are dependent on overseas demand, prices will not be stable, as there may be a time when imports will fall short of demand,” he added.
Nasrun said India was Malaysia’s biggest importer of palm oil, exceeding China last year.
Malaysia’s total palm oil production in 2015 amounted to an all-time high of 19.96 million tonnes.
Exports totalled 17.441 million tonnes worth RM41.23 billion.
In 2015, palm oil and palm oil products contributed RM62.22 billion to the country’s export earnings and employed more than 600,000 people in all sectors of the industry.
“To further strengthen (position), the Malaysian Palm Oil Board will be opening two regional offices, namely in Mumbai (India) and Tehran (Iran), to facilitate technical support and advisory services,” said Nasrun.
Meanwhile, a Reuters article said crude palm oil prices are seen averaging at RM2,678 per tonne in 2016, up nearly 18 per cent from last year, boosted by demand from top consumer India and replenishment of stocks by China, according to the Malaysian Palm Oil Council (MPOC).
Benchmark palm oil prices on the Bursa Malaysia Derivatives Exchange have surged 11.3 per cent so far this month on the back of tight supplies and improving export data.
Palm futures closed 0.1 percent higher on Friday at RM2,578.
“In 2016 palm oil prices will average at RM2,678 per tonne, stabilising in a range between a low of RM2,162 and a high of RM3,195,” said Yusof Basiron, the chief executive of MPOC, in remarks posted online for a palm oil seminar.
The forecast price, up from palm’s year-to-date average of RM2,528, is on the back of strong demand from the world’s two largest consumers, according to Yusof.
India will maintain its position as the world’s largest consumer and importer of palm oil, he said, while China is expected to import more oils and fats for the rest of the year.
“The utilisation of the high carryover stocks in China caused them to import less oils and fats especially in the first half of 2016, but imports will be increased to replenish stocks in the second half of 2016,” said Yusof.
Palm oil shipments from Malaysia, the world’s second largest producer after Indonesia, rose 26.5 per cent in the first 20 days of August from the same period in July on improving exports to India.
Yusof also pegged Malaysia’s output at 19.1 million tonnes this year and Indonesian production at 32.8 million tonnes.
“(Malaysian) production from August onwards is expected to be higher as the dryness associated with effects of El Nino in early 2016 no longer hampers the production of palm oil,” he said.
Rapidly rising palm oil prices, however, could narrow its spread with rival soyoil, reducing its competitiveness.
The share of palm oil in India’s edible oil imports is already seen falling to a record low in this marketing year, as its price rally slashes its discount versus soyoil.
Palm’s discount to soy is around US$110, compared with a spread of US$140 a year ago. — Bernama
