IOI Corp Bhd expects crude palm oil (CPO) prices to remain at the current RM1,700 per tonne level until the first quarter next year.
Its executive chairman Tan Sri Lee Shin Cheng said demand (for oil) had gone up and harvest of soybean had been affected by bad weather in the United States, Brazil, Argentina and India.
“Yield of CPO has not increased as expected,” he told reporters after the AGMs of IOI Corp and IOI Properties Bhd in Putrajaya yesterday.
Lee said Malaysian companies should try to increase yield, which based on the national average, including yield from Felda and Felcra, currently stood at 3.8 tonnes per hectare per annum.
Bigger plantation companies are producing on average 5.5 tonnes per hectare per annum.
“We should strive to get 8 tonnes per hectare per annum, which is possible using the present planting material of dura X pasifera,” he said.
Lee said the company had managed to achieve yield of 7 tonnes per hectare per annum from two of its estates and 6.5 tonnes each from another 13 estates.
IOI Corp has a total of 45 estates and Lee said it would take time to achieve the targeted yield from the remaining estates.
Lee said Indonesia, with its rich and abundant soil, good weather condition and plenty of labour, should be able to overtake Malaysia as the number 1 CPO producer in a couple of years.
“But if we could bring the yield up to 8 tonnes, they would take another 10 years to catch up with us. And, if we can increase the yield and bring down the cost, we can sell our products cheaper and at the same time earn a lot of foreign exchange for the country,” he added.
IOI Corp's cost per tonne of CPO is below RM650 while in Indonesia the cost is RM550 per tonne.
Going forward, Lee said IOI Corp would further explore opportunities in downstream activities.
Its group executive director Datuk Lee Yeow Chor said the company had set a target for its downstream activities of manufacturing, refining and specialty fats and oleochemicals to contribute 20% to 25% of earnings.