CPO price shoots to three-year high
The Jakarta Post, Jakarta
The price of crude palm oil (CPO) hit a three-year high of about US$415 per ton on Thursday due to rising demand, chairman of the Indonesian Palm Oil Producers Association? (Gapki) Derom Bangun said.
He added that a reduction in supply of sunflower oil, a substitute for CPO, had increased demand for the latter commodity.
"There has been a high demand in the market," he told The Jakarta Post.
He estimated the price of CPO would continue to increase further for the remainder of this month.
Derom explained that the price of CPO had been on the rise since April when it stood at $350 per ton.
Meanwhile, AFP quoted traders as saying that 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.
Market players have also attributed the rising prices to increasing tension between India and Pakistan.
"The market is very excited now, and palm oil prices are breaking record highs," said a dealer at a Malaysian brokerage.
"The situation has been uphill for the past one week to two weeks, and will probably remain on its upward trend."
The rising CPO price in the international market could push local producers to cater for the overseas market, which, in turn, could cause a shortage at home and push up the price of cooking oil.
Derom said that the tension between India and Pakistan had nothing to do with the rising demand for CPO.
He added, however, that if there was an expectation that the tension would continue for much longer, the two countries might be forced to boost their stocks through increased purchases on the open market.
Indonesia is the world's second-largest palm oil producer after Malaysia, with a targeted output of 9 million tons of palm oil this year, up from 8.3 million tons last year.
The anticipated increase is the result of the harvest from trees planted between 1996 and 1998.
Meanwhile, total exports are also expected to rise to 5.5 million tons this year, from 4.9 million tons in 2001. Indonesia is hoping to export some 1.6 million tons of CPO to India this year, up from 1.5 million tons last year, while exports to Pakistan will be relatively much lower, at about several hundred tons.