KL urges cut in palm oil production

KL urges cut in palm oil production

Agence France-Presse, Kuala Lumpur

Palmoil producers in Malaysia, the world's top supplier, were urged Monday to cut production amid fears rising stocks would lower prices.

Primary Industries Minister Lim Keng Yaik said the Sept. 11 terror attacks on the United States had worsened the situation.

"It (crude palmoil stock) has gone up to 1.2 million tons again. If you don't watch it the stock will go up to two million tons by end of this year," he was quoted as saying by Bernama news agency.

The U.S. military strikes in Afghanistan had affected Malaysia's exports to West Asia and Pakistan as many shippers were reluctant to go to the area unless insurance companies provided war cover.

Pakistan is Malaysia's fourth largest buyer of palmoil, after India, China and the European Union. An average of 100,000 tons of processed palmoil is shipped to Pakistan monthly.

Lim said that to cut stocks, some 2,500 tons would be sent to the power giant Tenaga Nasional's plant in Prai to be burnt as fuel.

The government had previously initiated various measures to reduce crude palmoil stocks in July-August to about 750,000- 800,000 tons.

Lim urged producers to cut production to reduce rising stockpiles and lower operation cost. Another way to address the problem was to embark on replanting, he said.

The government has a target of replanting about 200,000 hectares by year-end and has offered incentives for the industry players. So far, only 136,000 hectares have been replanted.

The efforts helped push prices in July above the 1,000 ringgit (US$263) level for the first time in 10 months but prices have fallen below that since the terrorist attacks.