IOI Corp CEO says CPO prices may stay at present levels

Double drought continues to impact supply, says Datuk Lee Yeow Chor

KUALA LUMPUR: IOI Corp Bhd said crude palm oil (CPO) prices could continue to trade at present levels at the RM2,500 to RM2,650 per tonne in the next two months.

Its chief executive officer Datuk Lee Yeow Chor said on Wednesday prices could be sustained despite CPO industry production being slated to increase.

"This is because now CPO is trading at quite a big discount of US$140 per tonne compared to soybean oil. So at this kind of discount levels, CPO is very competitive. So I am quite confident that CPO prices will stay here for the next two months," Lee said.

"We (the industry) is presently at a very low palm oil stock level and even though production is slated to increase in the next few months, it will be well absorbed by the higher demand," he added.

He was speaking to reporters on the sidelines of the Invest Malaysia 2017 conference,

If the ringgit strengthens, Lee said CPO prices could tread lower in ringgit terms.

"Any strengthening of the ringgit is due to the weakening of the US dollar. So the US dollar is weak and CPO is sold internationally in the US dollar. Thus if the dollar is weak, CPO will be more affordable. It is always a trade off," Lee said.

He noted that the company's cost of production has continuously risen but Lee said that IOI had several measures in place or planned to mitigate these cost increases.

"The best way to lower production costs is to increase the yields. We are still not satisfied with our current yields and we would like to increase this further. We are planning to use more labour reducing measures including through the use of mechanisation with the use of technology," Lee said.

IOI's CPO yields are currently at 5.3 tonnes per hectare. 

"Necessity is the mother of invention and there will come a time where plantation owners will be forced to implement labour reducing measures. We have already started to do this, and we are progressing at a slow pace," he said.

Lee also said there was no plans at the moment to expand its oil palm plantation landbank.