Malaysia's palmoil output to rise 9% in 2003

Malaysia's palmoil output to rise 9% in 2003

Agence France-Presse, Kuala Lumpur

Palmoil output in Malaysia, the world's top producer, is expected to increase nine percent this year to 13 million tons, with prices likely to be sustained at current high levels of around 1,900 ringgit (US$500) per tone, a report said on Tuesday.

Malaysian Palm Oil Board director-general Yusof Basiron was quoted as saying by the New Straits Times that production was higher this year to meet rising demand in a growing market.

"This is a result of our aggressive efforts to tap new markets and Malaysia's policy of not putting all (its) eggs in one basket. That is why demand for our palm oil continues to grow," he said.

Malaysia also has its loyal customers in traditional buyers such as India, China, Pakistan and the European Union, he added. Malaysia accounts for about half of global palm oil output.

Yusof said palm oil prices were taking their cue from the strong soyabean market due to a supply shortage and unfavorable weather conditions in the U.S.

"Malaysia is just taking a ride on the bullish soyabean oil. When prices of soyabean oil rise, palm oil prices also rise because our oil is the next best edible oil substitute," he said.

Crude palm oil (CPO) prices, currently hovering between 1,800 and 1,900 ringgit a tone, are likely to be sustained as the poor performance of soyabean is expected to continue in the near term due to land shortage for soya crops as well as cereals like wheat and corn, he added.

Some industry players have said current CPO prices were overdone as its true value was not reflected by supply and demand but rather by the poor harvest of soyabean oil.

Yusof disagreed, noting that palm oil was still more than $100 a tone cheaper compared to rival soya bean oil.

"As long as palm oil prices remain cheaper at more than $100 per tone compared to soyabean oil, there is no cause for alarm," he added.

Malaysia's oldest plantation group Sime Dary said last week, however, that current high CPO prices are unsustainable and predicted it would come down in three to four months, with 1,400 ringgit a tone a more reasonable level.