Malaysian-RI palm oil producers's axis sought

Malaysian-RI palm oil producers's axis sought

KUALA LUMPUR (AFP): A minister Tuesday urged Malaysian palm oil producers to form partnerships with producers in neighboring Indonesia as prices decline.

"Our producers must engage them (Indonesian producers and exporters) in talks about not undercutting prices as the situation is already bad," Lim Keng Yaik, primary industries minister, was quoted as saying by the official Bernama news agency.

"In fact, we must start talks to formulate a combined marketing strategy," he added.

Lim also urged palm oil producers to cut or at least stabilize the cost of production to ensure profitability and reduce the impact of the steep decline in palm oil prices.

"If prices dipped further, producers will not be able to make any profit because of the high production cost and may not survive," he said.

Lim said production costs now amounts to 850 ringgit (US$224) per ton compared with 450 per ton about a decade ago.

The decline in prices by around 50 percent to about 1,150 per ton in recent months from 2,200 at the beginning of the year was unexpected, he said.

"Although our smallholders and estates can still survive, the profit margin is very much lower and we are worried about this development."

Lim also advised refiners to sell their stocks, even at current low prices.

"If we don't sell, the accumulated stocks in the country will create more downward pressure on the price," he warned.

Lim also said it was timely for local producers to reclaim small but important markets.

"Since most of these markets are poor and in need of credit facilities, we are prepared to extend palm oil credit payment arrangement with a two-year grace period," he said.

"We will use the credit facility to reclaim small but important markets, particularly developing countries which want palm oil but are facing financial difficulties," he said, adding that they include Algeria, Tanzania, Kazakhstan and the European market.

Malaysia is the world's biggest palm oil producer, accounting for 62 percent of total trade production and 22 percent of the international oil and fats trade.