Palm and coconut oil end firm on RI smog
Palm and coconut oil end firm on RI smog
LONDON (Reuter): Palm and coconut oil closed firm on the
European vegetable oil market on Thursday on concerns over the
effect of the smog covering large areas of Southeast Asia and El
Nino.
Crude palm oil cif Europe closed $10 to $5 up as bullish
sentiment in Europe on worries over possible tight palm oil
supplies was reinforced by the limit up close on the Malaysian
palm futures owing to the weakness of the ringgit.
The KLCE closed up the 50 ringgit limit and is expected to
have an extended limit of 75 ringgit yesterday.
"I think we will see traders on the KLCE go for the 75 ringgit
limit on Friday, so look out for some fireworks," said one
European trader.
Huge bush fires in Sumatra and Kalimantan have blanketed large
areas of Southeast Asia in dense smog in recent weeks, leading to
worries over palm oil supplies.
Traders said supplies could get tight if crushers are forced
to cut back or stop production in any general government clamp-
down on industrial pollution in Malaysia or if staff were unable
to get to work.
In the longer term the effect on the plantations where the
fruits need sun to ripen, will not be known for many months.
Crude palm oil attracted most business with Nov trading at
$550, Dec at $552.50, Nov/Dec at $555, Jan/Mar at $550 and
$552.50, Apr/Jun at $552.50 and $555 and Oct/Dec 1998 at $550 a
ton cif.
In Jakarta, forest fires in Indonesia have spread to rubber
and palm oil plantations and are likely to hit output, officials
and traders said on Friday.
Agriculture Minister Sjarifuddin Baharsjah said 173 plantation
areas were reported to be on fire, 73 of which had actually made
reports to the ministry.
"Most of them are palm oil and rubber plantations. I think it
will affect palm oil and rubber output," the minister said,
adding that the fire had hit palm oil plantations which were
almost mature.
He gave no further details, but said the fires had hit a total
of 79,169 hectares (around 195,600 acres) of plantation land on
Sumatra and Sulawesi islands and in Kalimantan, the Indonesian
part of Borneo island.
Some traders have attributed a recent rise in palm oil prices
to tight supply in the wake of an ongoing drought.
Traders have said the drought sweeping the archipelago and
linked to the El Nino weather pattern forming in the Pacific had
jeopardized crops such as palm oil, cocoa, rubber and coffee.
Indonesia has said crude palm oil production was projected to
rise to 5.2 million to 5.3 million tons in 1997, compared with
4.5 million tons last year.
Nafis Daulay, chairman of the Association of Edible Oil
Industries, said the impact of the El Nino phenomenon would be
felt on the production of palm oil in early 1998.
Daulay said local demand still could be met if there was no
rise in export, adding that a policy on export tax would be
useful to curb the flow of oils outside Indonesia.
Most traders were still concentrating on export because of the
weaker rupiah and a bullish overseas trend.
Palm oil was quoted at 1,800 rupiah/kg in Jakarta on Friday
against 1,770-75 on the previous day. Crude palm oil was quoted
at 1,525 rupiah/kg in Medan.