Producers expect CPO prices to stay at $360

Producers expect CPO prices to stay at $360

Zakki P. Hakim, The Jakarta Post, Jakarta

The average price of Crude Palm Oil (CPO) next year is expected
to stay at US$360 per ton due to higher global demand. CPO is
seen to be healthier than other edible oils and is needed for
biodiesel as an alternative to fossil fuel, local association
said.

"Based on the 10-year cycle, CPO prices should have reached
their decade-long peak last year and should fall drastically this
year and next year. Apparently, this will not be the case for
now," Indonesian Palm Oil Producers Association (Gapki) chairman
Derom Bangun said on Tuesday.

CPO prices reached their decade-long peak to average $430 per
ton last year, while the average price over the first six months
of this year was $360 per ton, Derom told reporters on the
sidelines of a workshop titled "Preventing and tackling forest
and cultivated land fires".

Derom said increasing global demand would enable Indonesia's
CPO exports to rise to 9.6 million tons this year from last
year's 8.7 million tons.

He was optimistic that demand for CPO would increase as
consumers would turn to palm oil-based food products as other
hydrogenated edible oils, such as soybean, sunflower and canolla
oils, contained Trans Fatty Acid (TFA), believed to be bad for
the heart.

"Starting Jan. 1, 2006, the U.S. will require every food
manufacturer to state TFA level in each of their products," Derom
said, adding that once the U.S. applied such a policy, other
countries would eventually follow suit.

Moreover, global oil prices, which are hovering near $70 per
barrel, have prompted higher demand for edible oils as biofuel
and biodiesel to serve as alternatives to pricey fossil fuels, he
said.

"Several European countries have started to provide tax
incentives for industries importing edible oil, which is cleaner
and help conserves the environment," he said.

He added a number of firms had shown an interest in importing
more palm oil.

Commenting on India's latest move to cut the benchmark import
price for CPO and palmolein, Derom said he expected Indonesia's
exports to increase by 10 percent from an average of 200,000 tons
per month.

Indonesia last year exported 2.7 million tons of CPO and
palmolein, of which 1.9 million tons was CPO.

India, Asia's second largest vegetable oil importer, cut its
benchmark CPO import price by $26 a ton to $397 and crude
palmolein import price by $18 a ton to $414, the Solvent
Extractors' Association of India said earlier.

The cut will effectively lower import duties on the product
making shipments cheaper from Indonesia and Malaysia, the world's
biggest producers of the cooking oil.

Output from the two countries is expected to make up about 85
percent of this year's global palm oil production.