Astra Agro says palm oil output to rise in 2006

Astra Agro says palm oil output to rise in 2006

Naila Firdausi and Grace Nirang, Bloomberg, Jakarta

PT Astra Agro Lestari, Indonesia's biggest publicly-traded
agricultural company, said its palm oil output may rise 12
percent to 950,000 metric tons next year, helped by higher
yields.

The company plans to spend Rp 600 billion (US$60 million) in
2006 to expand palm oil and rubber plantation, Vice President
Director Benny Tjoeng said in Bogor, West Java yesterday. The
amount is 43 percent higher than Rp 420 billion set aside by the
company this year.

"We're planning new palm oil and rubber planting of between
15,000 and 20,000 hectares next year," Tjoeng told reporters.
"We've got a lot of offers" of land to be acquired, he said.

Indonesia, the world's second-biggest palm oil producer, may
produce 14.4 million tons of the commodity next year, up 9
percent from 13.2 million tons estimated for this year, Tjoeng
said. Palm oil output rose 8.3 percent to 622,396 metric tons in
the nine months ended Sept. 30, the Jakarta-based company said
Oct. 13. Astra produced 721,085 tons of the commodity last year.

Malaysia and Indonesia produce 80 percent of the world's palm
oil, crushed from an oversized pineapple-like fruit and processed
into oils used in cooking, packaged foods and in toiletries such
as shampoo and soap. China, India and Pakistan are the world's
largest consumers of the oil.

Oil palms are more mature so they are more productive, Tjoeng
said. Yields this year will rise to 18.5 metric tons of palm oil
fresh fruit bunches per hectare from 17 tons last year.

Astra Agro plans to spend as much as Rp 1.7 trillion within
seven years starting 2007 to boost its rubber plantation area to
50,000 hectares from about 2,000 hectares, Tjoeng said.

"Rubber has a good price and it will reduce our exposure to
palm oil," he said. Sales of palm oil contribute more than 80
percent of the company's sales, making it vulnerable to the fall
in the commodity's prices.

Rubber futures for May delivery, the most actively traded
rubber contract in Tokyo, gained 1.5 percent to 202 yen ($1.68) a
kilogram at the close yesterday. The futures are 55 percent
higher since the year started, as automakers snap up supplies to
meet tire demand for new cars.

World natural rubber demand increased 7.4 percent to 4.35
million in the first half of the year, outpacing the 1.2 percent
production growth, according to the London-based International
Rubber Study Group. Malaysia, Thailand and Indonesia make up
about 80 percent of the world's natural rubber output, derived
from the sap of latex trees.