30-07-2008: By Lu Jing Shia
PETALING JAYA: Crude palm oil (CPO) futures fell below the RM3,000-per-tonne mark for the first time this year due to higher output and slower exports after having made significant gains throughout the early half of 2008. At the close yesterday, CPO for benchmark October delivery fell RM32 per tonne to RM2,969, while contracts for August and September dropped RM69 and RM17 per tonne to RM2,986 and RM2,984, respectively. CPO prices hit a record RM4,486 per tonne in March this year amid soaring crude oil prices, but have since tapered down with declining global oil prices. Crude oil price has fallen by almost US$25 per barrel since a high of almost US$149 per barrel about three weeks ago. Light, sweet crude was trading at US$124.73 (RM407.87) on the New York Mercantile Exchange yesterday.
Industry observers said the CPO prices had softened due to increased stockpile and that it would be temporary. They are optimistic of the commodity’s long-term outlook. TA Securities senior analyst James Ratnam said the general outlook for CPO futures would remain above RM3,000 per tonne, while the issue of high output would soon be settled when countries such as China replenished its reserves.“Seasonally, palm oil production is higher in the second half of the year than in the first. Exports actually increased from last year but the production still grew at a faster pace, resulting in the current lower market price,” he said. Ratnam echoed Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui’s assessment of current global market sentiment.
Speaking at a seminar titled Alternative Raw Material for the Panel Board Industry in Malaysia in Serdang yesterday, Chin said the government was closely monitoring the present trend to see whether it was for the short term or a longer period. He said the government was also looking at encouraging higher CPO exports and turning more of the commodity into fuel and for domestic use, such as cooking oil. “If excess stock in our country has caused traders to delay, or not buy, or delay buying, then we will take appropriate measures to ensure that stocks will not remain high,” said Chin.
Statistics released by the Malaysian Palm Oil Board on July 10 noted that higher production and slower exports caused the country’s stockpile to rise to a record of 2.04 million tonnes in June from 1.91 million tonnes in May. Exports, however, declined from 1.20 million tonnes in May to 1.12 million tonnes in June. Chin said while a decline in crude oil prices would have an impact on CPO prices, he remained optimistic that CPO prices would not fall below RM2,000 per tonne. “Palm by itself already has a huge market and the world is short of oils and fats. Furthermore, Malaysia, Indonesia and Argentina are the only countries in the world that are net exporters of oils and fats. So I don’t see prices coming down at any drastic level,” he said.Chin also said the plummeting CPO price would not affect the government’s RM60 billion target for palm oil exports this year.
Meanwhile, commenting on the mounting pressure from non-governmental organisations (NGOs) that accuse palm oil industry players of irresponsible practices, Chin said the government was looking at how influential the campaigns carried out by these NGOs were.“These are aspects that are not necessarily manipulating the price in the market, but we are looking at them in order to see which part has a direct influence on this price trend,” he said.
