RI sees palm oil output at 7m tons

RI sees palm oil output at 7m tons

SHANGHAI, China (Reuters): Indonesia, the world's second largest palm oil producer, plans to churn out seven million tons of the edible oil in 2001, up from 6.5 million tons last year, its top trade official said on Thursday.

It also expects China's palm oil imports to rise to 1.5-1.6 million tons in 2001, from 1.4 million tons last year, Indonesia's Minister of Industry and Trade Luhut Pandjaitan told Reuters in an interview.

"Our palm oil (output) is (usually) about seven to eight million tons, but that was reduced a little because of the price of palm oil last year, which was so low," Pandjaitan said on the sidelines of a meeting of 21 Asia Pacific Economic Cooperation trade ministers.

"So we reduced production, which might be like seven million tons (this year)," he said.

Pandjaitan is hoping China, a major palm oil buyer, would import more this year to prop up sagging prices.

Palm oil prices have been hovering at 15-year lows, with the benchmark Malaysian August futures closing at 796 ringgit ($209.47) a ton, up two ringgit, on Thursday.

"So far, they (China) imported 1.2 million tons from Malaysia and Indonesia. We do hope that we can increase it to 1.5-1.6 million tons in total," he said.

Industry sources have said China issued 600,000 tons of import quotas for the first half of this year in January and an additional 100,000 tons was added later, some say in May.

The sources said they expected import quotas for the second half would be about the same as the first six months at 700,000 tons, although they might not be issued in one lot.

Officials from Malaysia and Indonesia, the world's largest palm oil producers, headed to China in late April in an apparently fruitless mission to prod Beijing to import more.

Although Beijing kept mum on how much they would import this year, Pandjaitan said there were no immediate plans to visit Beijing again.

"We understand that China gave a very good response towards the request to increase quota," he said. "We'll just wait and see for a while."

Pandjaitan also said Indonesia was looking into whether to increase exports taxes, an issue which had markets speculating.

Indonesia imposes a 3 percent export tax on crude palm oil and a 1 percent tax on refined, bleached and deodorized (RBD) palm oil, RBD palm olein and crude olein.

But Indonesian traders have said a tax increase was unlikely as it would be counterproductive to government efforts to boost its revenue from exports to help offset its huge budget deficit.

"Now we export about 50-60 percent of raw material, and very little from the downstream industry," Pandjaitan said.

"Now, our economy has not yet recovered, but we do hope that in this coming two-three years we will reduce our exports and bring the price of palm oil to a better level," he said.

Meanwhile, the Malaysian Palm Oil Association said Malaysia's palm oil output is expected to hit yet another record high this year.

"We have good crops coming in from all the regions. We may have to revise the production forecast upwards this year," M.R. Chandran, chief executive of the Malaysian Palm Oil Association told Dow Jones Newswires in a recent interview. The MPOB is a growers' association.

Malaysian output, which is seeing a sharp increase in recent months, could easily reach between 11.5 million and 11.7 million metric tons, up from 10.84 million tons in 2000, Chandran said. Malaysia, the world's largest producer of palm oil, produced 10.55 million tons in 1999.

Much of the increase in output this year will come from East Malaysia, particularly Sabah. The area under oil palm cultivation in Sabah and Sarawak has gone up substantially in recent years, leading to a steady increase in production.