Palm oil prices surge on Malaysian move<\/p>\n
KUALA LUMPUR (Reuters): Malaysia's pump-priming measures for
\npalm oil have caused prices of the commodity to jump at least $20
\na ton in two weeks, making it pricier than soyoil in the world's
\nmost important market -- India.<\/p>\n
A 500 million ringgit (US$131.6 million) fund to replant oil
\npalm fields and a plan to burn 400,000 tons of crude palm oil to
\ncut back on production are among recent initiatives taken by
\nMalaysia to boost palm oil prices.<\/p>\n
As a result, Malaysia's benchmark palm oil futures, the third-
\nmonth contract, was trading at 889 ringgit a ton at 0710 GMT on
\nMonday -- up 100 ringgit ($26.30) from the closing on March 6.<\/p>\n
On the physical market, refined bleached deodorised (RBD) palm
\nolein for June was offered at $267.50 a ton -- up $20 from two
\nweeks ago.<\/p>\n
While the higher prices have fulfilled the government's aim of
\nappeasing poor farmers and helped them earn short-term profits,
\nthe moves seriously hurt palm oil's competitiveness against
\nsoyoil in markets such as India, traders said.<\/p>\n
India, palm oil's biggest consumer, recently raised import
\ntaxes for RBD palm olein to 92.4 percent, meaning a typical
\nMay\/June shipment at an FOB price of $267.50 a ton would end up
\ncosting $582 with taxes, freight and insurance.<\/p>\n
South American soyoil, while costing around $300 a ton FOB,
\nstill ends up cheaper than palm oil at $530 a ton after
\nrefinement and freight costs, largely due to an import levy of
\nonly 45 percent.<\/p>\n
"At this rate, which Indian buyer will want to buy olein when
\nhe can get soyoil at a discount of $50?" asked a trader in Kuala
\nLumpur.<\/p>\n
Dealers said with a projected crop of 60 million tons this
\nyear, South American soya growers seemed poised to take a big
\nchunk of the Indian market from Malaysia and Indonesia, the
\nworld's two largest palm oil suppliers.<\/p>\n
The current rally in Malaysian palm oil also meant that
\nIndians who had bought forward at $20 to $30 a ton lower than
\nexisting prices could sell at profit and dump the physical oil
\nback into the local market and buy soyoil, dealers said.<\/p>\n
"This defeats the objective of wanting to clear our palm oil
\nstocks," said another trader in Kuala Lumpur.<\/p>\n
The Malaysian government has thought of various ways to get
\nrid of an additional 500,000 tons of crude palm oil expected in
\nthe market this year in an effort to maintain last year's output
\nof 10.8 million tons.<\/p>\n
Apart from replanting oil palm grounds and burning oil as
\nfuel, it is also working out a pact with Indonesia to keep prices
\ncompetitive and to jointly market palm oil to India and China.<\/p>\n
But experts such as private crop forecaster Ivan Wong are
\nmaintaining their estimates that Malaysia will produce around
\n11.7 million tons of palm oil in 2001.<\/p>",
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