RI's palm oil output seen down 5-10%
RI's palm oil output seen down 5-10%
Denny Kurien, Dow Jones, Kuala Lumpur
Indonesia's palm oil output in December could fall by 5 percent to 10 percent following the increase in the number of holidays granted by government for Eid and Christmas, a leading industry official said late Tuesday.
In an interview with Dow Jones Newswires, Derom Bangun, chairman of the Indonesian Palm Oil Producers' Association, or Gapki, said much of the December harvest could get delayed until early January.
Earlier this week, the Indonesian government announced the country will be closed Dec. 5 through Dec. 10 for Eid, the day that marks the end of the Muslim holy month of Ramadan, and Dec. 25 and 26 for Christmas.
"Harvesting will be delayed and there will be a drop in supply compared to (the peak production months of) September and October," Derom said. Derom, however, didn't furnish the December production figure.
The increased number of holidays, along with normal weekends, leaves only about 18 working days in the whole of December.
Similar concerns were expressed by others as well. "The mills will be running (during the holidays) but only with a minimum number of workers," said Nonop Surachmad, an analyst with PT Perkebunan Nusantara in Jakarta, which sells palm oil produced by state-run plantations.
Nonop said there will be a sharp reduction in crude palm oil output during this period.
According to private forecasts, Indonesia is expected to produce about 9 million tons of crude palm oil in 2002, but unlike in the case of Malaysia, the world's largest producer, estimates of monthly production in Indonesia aren't available.
Derom said the drop in production is unlikely to put any pressure on domestic supply and prices, but exports could slow down. Domestic prices are likely to be firm because of the strong festival demand season.
Faced with a lower supply from Indonesia, international palm oil prices could move up a bit more from current levels, before the end of the year, Derom said.
"I just came back from Europe and they are experiencing very strong demand for palm oil. So the price outlook is particularly bullish for the next two to three weeks," he said.
According to Derom palm oil prices could go up by about 2 percent to 3 percent from current levels by the end of the year.
Crude palm oil in Indonesia was traded at Rp 3,830 (42 U.S. cents) a kilogram, delivered basis in Medan late Tuesday. Wednesday's prices aren't yet available. Refined, bleached and deodorized palm olein in Jakarta was traded at Rp 4,250 per kg for local delivery. The local delivery price of olein includes a 10 percent government tax which exporters don't have to pay.
In Malaysia, however, palm oil prices have come off recent highs amid slowing exports, weak technical charts and India's decision to raise the base import prices for palm oil and its derivatives.
India has been fixing base prices from time to time to curb revenue loss resulting from under-invoicing by importers. With import taxes calculated from these base prices regardless of the actual import value, the change essentially means an increase in import duties.
The base import price of crude palm oil now stands at US$432 a metric ton, up from $392 per ton earlier; refined, bleached and deodorized palm oil is at $460 per ton versus $414 per ton; RBD palm olein is at $470 per ton, up from $426 per ton; and crude palm olein is at $454 per ton compared with $411 per ton, according to a notification on the Finance Ministry web site.
On the other hand, the base import price for crude soyoil imports has been kept unchanged at $542 per ton, giving a price advantage to the competing soyoil.
The benchmark February CPO futures contract on the Malaysia Derivatives Exchange, or MDEX closed lower at 1,537 ringgit a metric ton Tuesday, down 16 ringgit from Monday's close after coming off an early high of 1,560 ringgit per ton.
Despite talk of strong demand in the international market, exports have been showing signs of a slowdown in recent weeks.
Indonesia's vegetable oil exports in the Nov. 1-20 period fell 3 percent to 420,761 metric tons, from 433,830 tons in the same period of October, Indonesian cargo surveyor PT Sucofindo said Tuesday.
Crude palm oil exports for Nov. 1-20 totaled 162,697 tons, down 16.3 percent from 194,337 tons in the same period last month, Sucofindo said.
There has been a similar decline in Malaysian exports as well.
Malaysia's palm oil exports Nov. 1-25 totaled 725,254 metric tons, down 16.8 percent from 871,779 tons during the same period in October, cargo surveyor SGS (Malaysia) Bhd. said Monday.
The number was lower than another estimate by Intertek Testing Services, which said Nov. 1-25 exports totaled 746,355 tons. According to traders, the market was expecting Nov. 1-25 exports to be between 800,00 tons and 820,000 tons.