Malaysia's 2005 palm oil exports may rise 6.7%

Bloomberg, Kuala Lumpur

Palm oil exports from Malaysia, the world's biggest supplier of the commodity, may rise as much as 6.7 percent this year because a drop in prices has made the edible oil more attractive to buyers, Oil World said.

Malaysia's palm oil exports may rise to as much as 13.5 million metric tons this year, from 12.6 million tons in 2004, Thomas Mielke, director of the research company, said at the Annual Palm and Lauric Oils Conference in Kuala Lumpur.

"We're going to see big exports because of world demand and low prices," Mielke said today. Hamburg-based Oil World's estimates are closely watched by traders of edible oils.

Plantations companies in Malaysia and Indonesia, the world's top palm-oil producers, expanded cultivation between 2001 and 2003 to take advantage of higher prices.

Prices have dropped about 30 percent in the past year because the scale of expansion raised concern about excess supply. A record U.S. harvest of soybeans, used to make a rival oil, also helped push down palm-oil prices.

Palm-oil futures prices in Malaysia will probably trade between 1,400 ringgit and 1,550 ringgit this year as concern about the additional output eases, Mielke said.

Palm oil for delivery in May fell 9 ringgit, or 0.7 percent, to 1,385 ringgit a metric ton on the Malaysia Derivatives Exchange at 12:29 p.m.

Malaysian palm oil production may rise about 5 percent to 14.7 million tons in 2005, Mielke said. Production increased by 4.7 percent in 2004, according to preliminary figures from the Malaysian Palm Oil Board.

Lower rainfall in the Malaysian state of Sabah and parts of the peninsular may limit yields, Mielke said. In 2004, Sabah had about 80 percent of the rainfall it normally receives, raising the possibility of an El Nino developing, he told delegates in his presentation.

Brazil's Harvest

A drought in Brazil, the world's second-largest supplier of soybeans, may reduce excess supply following a record harvest in the U.S., supporting global prices of edible oils, Mielke said.

Oil World has cut its estimate for Brazil's soybean crop to 58 million metric tons this year, compared with a January estimate of 63.4 million metric tons, he said.

Vegetable oils such as soybean and palm, will also benefit from higher crude-oil prices, which are fueling demand for alternative fuels.

Palm oil can be processed into cooking oil and foodstuffs such as margarine and chocolate.

It can also be made into chemicals used for the manufacture of soap. Benchmark prices in Kuala Lumpur climbed 43 percent in 2001 and 43 percent in 2002.