THE price of crude palm oil (CPO) is expected to narrow down by 10% to 15% from its current average price of RM1,300 per tonne later this year, as dampening factors like surplus in the supply of vegetable oils and oils in unprocessed seeds slowly creep in.
London-based LMC International managing director Dr James Fry expects the price of palm oil to ease to RM1,100 by next month and following that, to stabilise around RM1,200 per tonne level.
In his paper on Price Outlook for Vegetable Oils including Palm Oil at the PIPOC 2003 in Putrajaya yesterday, he said that although edible oil consumption was set to grow quite strong, it will not increase as fast as production, especially with the revival in output of rapeseed.
Fry said the turnaround in rapeseed production had been strong enough to offset the small decline in the growth in soybean oil output and a slowdown of nearly a million tonnes in the projected increase in palm oil production.
However, there is no doubt that consumption is expected to pick up significantly, with growth expected to go up from 2 million tonnes in 2002/2003 to 3.4 million tonnes in the 2003/2004 period, he added.
Fry said with the SARS outbreak easing off, Eastern Asian demand would move ahead and regain lost ground this year. In addition, a better monsoon should lead to a recovery in the Indian market consumption.
Consumption will increase impressively, by almost 4.5% in 2003/2004, but this will be overshadowed by growth of close to 5.5% in the total output of the four major vegetable oils, thereby reinforcing the accumulated global supply surplus, he said.
As the largest vegetable oil importer, India was a major factor in determining palm oil prices, he added.
Fry said that soya oil had a tariff advantage against palm oil in India, which would enable buyers to switch according to their needs and price.
Under the World Trade Organisation, India imposes a 45% tariff on soya oil and 65% to 70% on CPO and refined, bleached and deodorised (RBD) respectively. The tariff advantage in favour of soya oil means that Indian refiners can afford to pay close to 20% more for landed soyoil than for imported CPO, he added.
Earlier, Malaysian Palm Oil Board director-general Datuk Dr Yusof Basiron said in his paper on Palm Oil: The Driving Force of World Oils and Fats Economy that the industry's future depended on the commodity's price competitiveness, superior technical performance and nutritional acceptability.
Although in some countries, palm oil is regarded as the poor man's oil, he said it would continue to be competitively priced for the world market. The industry takes pride that it has been able to leverage its cost competitiveness to reach the lower strata of society to meet their basic food need, he said.
Oil palm can be developed into an integrated agriculture industry, with the land jointly used to produce protein and carbohydrate type of food, he said.
Competitiveness of the palm oil industry could be further enhanced by increasing the revenue from oil palm plantations through livestock and crop integration (LCI), added Yusof.
The ability to undertake LCI within the oil palm area as a major crop provided further opportunity for the industry to practise diversification of its investments and enhance its competitiveness.
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