CPO prices to drop until October, says GAPKI chief

CPO prices to drop until October, says GAPKI chief

JAKARTA (JP): The price of crude palm oil (CPO) on the
international market is expected to dive further from now until
October, mainly due to lower demand from India, the world's
largest palm oil importer, an executive of the Association of
Indonesian Palm Oil Exporters (GAPKI) said on Tuesday.

GAPKI chairman Derom Bangun said the price of CPO might
plummet by 17 percent to as low as US$290 per ton during
September to October, from $350 in August.

"India will be reducing their CPO imports as it stockpiled
palm oil in July on fears of an anticipated shortage in domestic
supplies. As a result of an import reduction, the prices are
going to be under pressure now," Derom told The Jakarta Post.

India bought 2.03 million tons of palm oil from Malaysia and
1.6 million tons from Indonesia last year.

Traders said India bought 400,000 tons of palm oil in April,
May and June and the amount could fall to 200,000 tons or even
lower this month.

Derom said palm oil prices had dropped to $320 per ton in the
first week of the month and have steadily weakened to $315 per
ton this week.

"The prices will decline before they are expected to rebound
in November or December," he said, adding that it was due to
lower seasonal supplies.

Derom said palm oil prices had been under pressure in the
January-to-June period of this year due to a market glut.

"The price even went as low as $235 during that period," he
said.

The price bounced back significantly to between $370 and $400
per ton in July due to a higher demand from China and India and
Malaysia's move to cut supplies.

Malaysia is the world's biggest exporter and producer of palm
oil, accounting for half of the world's supply. Last year,
Malaysia produced 10.8 million tons, of which nine million tons
were sold abroad.

Derom said prices started sliding in August on the wake of the
peak harvest season in Malaysia and Indonesia.

Derom said plunging demand from India might deal a heavy blow
to Indonesia as the South Asian nation absorbed 40 percent of the
country's CPO exports.

Aside from India, Indonesia sells palm oil to China. About
400,000 tons were sold to China last year.

Derom said earlier that the country's palm oil exports might
fall short of the target of 4.2 million tons this year, partly
due to the country's lower yield.

He projected this year's exports at 3.9 million tons, compared
to 4.15 million tons last year.

"The fall in exports is due to an expected drop in production.
The country's palm oil output may fall short of the target of 7.2
million tons this year because of security concerns and if the
drought causing El Nino phenomenon reoccurs this year," he said.

Indonesia produced about 6.5 million tons of palm oil last
year.

Meanwhile, in Kuala Lumpur, Malaysia's crude palm oil futures
rebounded from early lows on Tuesday but failed to break the
immediate resistance of 1,019, which indicated that the downside
was intact, traders and analysts said.

At the close, the benchmark November futures contract ended up
two ringgit at 1,014 ringgit ($266.84) a ton on a technical
rebound after trading as low as 989 ringgit, according to
Reuters.

Traders said many plantations in Malaysia are entering a cycle
in which their trees are producing more oil, while exports are
expected to be slow later this year due to falling demand by
India, the world's largest edible oil importer.

Talk also circulated in the market that domestic stocks were
rising in Indonesia, the world's second largest palm oil producer
after Malaysia, because of a slowdown in demand and rising
output. (dmr)