Crude palm will now be traded as an energy crop
Rising global awareness of biofuel has propelled crude palm oil prices
to nine-year highs, said industry experts.
Crude palm oil prices would no longer follow the agricultural product
price index because it is now considered an energy crop, said Suriya
Ayachanun, an adviser to Chumporn Palm Oil Plc, the country's largest
palm oil producer.
Recent crude palm oil price trends have moved in the same direction as
Rising palm oil demand for biofuel forced Indonesia, the world's
second-largest crude palm oil producer after Malaysia, to increase
export duties to 6.5% from 1.5% to promote the domestic biodiesel industry.
According to Malaysia's Ministry of Plantation Industries and
Commodities, Malaysia and Indonesia are allocating about 40% of their
combined crude palm oil output for biodiesel production. Malaysia
produced 44% of the world's palm oil, around 15 million out of a total
34.28 million tonnes last year, and Indonesia produced 41.4%, around
14.2 million tonnes.
"The circumstances will benefit local palm oil farmers. I think it would
be difficult for them to lose money because palm fruit would not cost
less than two baht per kilogramme from now on," said Mr Suriya.
Rising palm oil demand has increased palm fruit prices or four to five
baht per kg compared to production costs of two to 2.30 baht per kg.
"Like sugarcane and rapeseed oil, prices of palm fruit and palm oil will
change according to petroleum values as they could be used for biofuel
production as well," said Mr Suriya.
Favourable weather in the US Midwest soybean belt is expected to lead to
higher-than-expected harvests, which could depress prices of soybeans
and derivative products. This could have a negative impact on crude palm
oil futures prices, said Thanarak Phongphatar, managing director of
Southern Palm (2521) Co.
He said that if Malaysia released large amounts of crude palm oil into
global markets in August and soybean supply increased in September,
crude palm oil prices may drop to between 20 and 22 baht per kg from
27-28 baht currently.
While palm oil farmers benefit from price rises, palm cooking oil
producers are seeing sales drop by 12-20%, said Chumporn Palm Oil _ a
leading palm cooking oil maker under the brands Leela, Rio, Waree,
Parichart and Lobster.
Mr Suriya attributed declining sales revenue to low consumer spending.
Domestic crude palm oil consumption is expected at one million tonnes,
with production of 1.2 million tonnes. The result would be excess supply
of 200,000 tonnes for biodiesel production.
Mr Suriya added that the government should concentrate on increasing
palm oil plantation yields to avoid having to import in the future.
Thai palm oil yields are behind Malaysia, whose average average yield is
512 kilogrammes per rai per year.
Check for earlier Pacific Biofuel posts: http://pacbiofuel.blogspot.com/