CPO price seen rising to $500 per ton in 2003

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.