KL set to extend scheme to control palm oil output

Reuters, Kuala Lumpur

Malaysia said on Friday it will extend a scheme to control production by cutting down oil palm by six months to June to try to attract more growers to the project.

Primary Industries Minister Lim Keng Yaik said the government was extending the scheme because a rally in palm oil futures prices had deterred growers from taking up a compensation offer to cut back their crop.

Under the scheme, the government offers oil palm growers 1,000 ringgit (US$263) cash for each hectare they chop and replant.

But palm oil prices have risen nearly 400 ringgit a ton, or more than 50 percent, since the plan was launched early this year, negating whatever incentive the scheme offered.

Lim said the government target was to cut down 200,000 hectares but so far it has only managed to clear 44,000 hectares. The government had forecast that land given over to oil palm would total 3.5 million hectares in 2001.

"That's why we need to extend the scheme till June," he told reporters.

The minister said he expected production to touch 11.4 million tons this year and 11.8 million in 2002.

Market researchers said output for this year will be at least 11.7 million tons, while use, including exports, will total around 11.95 million due to measures such as burning of crude palm oil to clear stocks.