'Palm oil to trade above RM3,000'


KUALA LUMPUR: OIL palm planters can look forward to another prosperous year as palm oil prices is expected to trade above RM3,000 per tonne due to global demand for the edible oil outstripping supply.

There is continued strong demand for palm oil from traditional markets, with India and China buying large quantities of palm oil to feed its burgeoning population, said the Malaysian Palm Oil Council deputy chief executive officer Dr Kalyana Sundram.

"Prices are unlikely to drop below RM3,000 per tonne. Generally, we feel that the price will be firm for the crude palm oil (CPO). It will be a good year with the first half exciting and the second half, challenging," he told reporters here yesterday.

"We should be able to export more palm oil this year, possibly breaching 18.1 million tonnes. There is higher demand from Turkey, the Philippines, Nigeria and Vietnam," he added.

Sundram was presenting his forecast at a luncheon talk titled "Crude Palm Oil - the Next Supercycle" organised by MIDF Amanah Investment Bank Bhd. 

His bullish forecast takes into account that this year's palm oil output is seen to rise by two per cent to 19.33 million tonnes as more trees mature and bear more fruit bunches, particularly in Sarawak.

On this year's CPO export quota, Sundram confirmed that Malaysians with refineries abroad could ship over three million tonnes of tax-free CPO. That works out to be 15.5 per cent of the country's 19.3 million tonnes CPO output forecast. "Like previous years, there's no change in the CPO export quota. It's still business as usual," he said.

He explained that the decision by the Plantation Industries and Commodities Ministry to maintain the export quota was to safeguard the refining industry. The decision also quelled rumours that the government might abolish the duty-free CPO export quota while keeping the 23 per cent export tax for processed palm oil. Currently, Malaysia does not tax refined palm oil exports.

Indonesia, as the world's biggest palm oil producer, now wants more downstream investments and production of refined palm products. Since October 2011, the Indonesian government has drastically widened the gap between CPO and refined export taxes. As a result, crude palm oil and crude palm kernel oil are cheaper for downstream producers there. Like Malaysia, refined products shipped out from Indonesian shores are also tax-free.

Also present at the luncheon was MIDF senior vice-president research head Zulkifli Hamzah. He said the Indonesia palm oil tax structure had dampened palm oil prices. "We think palm oil prices is likely to average at RM2,950 per tonne this year. The wide gap in the Indonesian palm oil tax structure has pulled prices down," he said. 

"It's not all that bearish though. We need to be mindful of the possibility of the US government implementing its third quantitative easing measure in printing more money. If this materialises, it will weaken the US dollar and cause commodity prices to rise," he added.

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