CPO price seen rising to $500 per ton in 2003
Adianto P. Simamora, The Jakarta Post, Jakarta
The price of crude palm oil (CPO) is predicted to jump up to US$500 per ton in 2003, far higher than the end of this year's price target of $400 per ton, according to a report from ING Securities.
But chairman of the Indonesian Palm Oil Producers Association (Gapki) Derom Bangun was less optimistic on the price outlook for next year.
"Based on the current tight supply and demand, we hope the CPO price can stay at around $400 per ton for the remainder of the year.
"But a target of $500 per ton in 2003 is still very high, and I am afraid that edible oil producing countries will also start planting more crops in next year's season," Derom told The Jakarta Post.
ING estimated that the higher CPO price was due to the tight supply of edible oils from major growing areas due to poor weather conditions.
The shortage in the supply of edible oils will increase demand for CPO and thus force its price up.
"We have upgraded our forecast by 11 percent to $500 per ton to reflect the lower global supply of other edible oils (for example soybean oil) than previously expected," ING said.
It said that Oil World was projecting the global CPO price to average at $520 per ton for the next season.
"Hence, ING's CPO price assumption of $500 for 2003 is not overly optimistic," ING said.
The CPO price on the international market has been on the rise during the past couple of months.
As of last Friday, the CPO price stood at about $315 per ton, still lower than a three-year high of around $415 per ton in June.
In 1997, a year before the crisis hit the country, the CPO price was at the $600 level.
Derom said the current increase in the CPO price was due to rising demand in the market from the largest CPO buyers, including India and China.
India and China buy CPO from Indonesia and Malaysia. The production by the two countries accounts for some 90 percent of the world's supply.
Derom said edible oil producers such as Brazil, Argentina, China, the U.S., Russia and the European Union were expected to have smaller crops this season, with a drop in the production of sunflower oil.
In addition, said Derom, prior to the Idul Fitri and Christmas holidays, the demand for CPO would increase, while production usually declined.
The increasing CPO price in the international market, however, could prompt local producers to concentrate on the overseas market, which, in turn, could cause a shortage at home and push up the price of cooking oil.
CPO is a raw material for the production of cooking oil.
Indonesia is the world's second-largest palm oil producer after Malaysia, and aims to produce some nine million tons of palm oil this year, up from 8.3 million tons last year.
The country's exports are also expected to rise to 5.5 million tons this year, from 4.9 million tons in 2001. Indonesia hopes to export some 1.6 million tons of CPO to India this year, up from 1.5 million tons last year.