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.