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.