IOI chairman sees palm oil averaging RM2,000

21/03/2009 (Business Times) - IOI Corp Bhd (1961), the world's third largest listed palm oil producer, said the price of crude palm oil (CPO) could rise 20 per cent due to falling domestic stockpiles.

"We see prices trading within a range of RM2,000 to RM2,300, averaging about RM2,000 a tonne. This should be the fair value of palm oil for the time being," said IOI group executive chairman Tan Sri Lee Shin Cheng, without providing a time frame for the forecast.

"Demand for palm oil is sustaining, as can be seen from the drawdown of stocks in Malaysia. Palm oil stock in Malaysia is now at a 16-month low," Lee said in an e-mail when asked to comment on the price outlook for the tropical oil.

Lee's view on palm oil is closely followed by traders and industry analysts.

Malaysia's CPO inventories fell 15 per cent to a 16-month low last month, a bigger-than-expected drop, as production of the vegetable oil declined faster than the drop in exports, industry data showed last week.

Malaysia is the world's second largest palm oil producer, after Indonesia.

The benchmark palm oil futures contract on the Bursa Malaysia derivatives market is currently hovering slightly above RM1,900 a tonne.

CPO prices have gained nearly 13 per cent this year as stocks in Indonesia and Malaysia dropped to an average of four million tonnes from a record five million in December on good Asian demand.

But industry analysts last week predicted that palm oil prices would suffer from selling pressure in the second half of 2009 due to weaker commodity markets, slowing demand and an uptick in output.

Lee is maintaining his relatively bullish view, which he has held since the fourth quarter of last year, even as the global economic outlook has significantly worsened over the past few months.

"The severity of the current global economic crisis has surprised everyone, including the experts," said Lee.

"This crisis has affected almost all commodities adversely as economic activities slumped. However, vegetable oils, being a staple food item, is more resilient," he said. - Reuters

UK firms struggle to sell 'green' palm oil - AAK

14/05/2009 (Forbes), Kuala Lumpur - The British unit of Swedish oils and fats manufacturer AarhusKarlshamn (AAK) may have to offer discounts on a consignment of eco-friendly palm oil that is too expensive for consumers, an official said on Thursday.

The slow uptake of palm oil sourced from estates in top producers Malaysia and Indonesia that do not clear rainforests and destroy wildlife reflects the difficulty in persuading price conscious shoppers to think green in the global economic crisis.

And manufacturers who want to use palm oil certified by the Roundtable for Sustainable Palm Oil (RSPO) have to additionally invest in building separate storage tanks and processors, said Judith Murdoch, marketing controller for AAK UK.

'We imported the first consignment of certified sustainable palm oil last year and, due to sluggish take up, we are now considering downgrading that oil in order to be able to sell it on the open market,' Murdoch told Reuters in a statement but did not specify the amount or which planter sold the palm oil.

'This is clearly disappointing.'

Murdoch was responding to environmental group WWF's plans to assess and grade major palm oil buyers like Unilever, Colgate-Palmolive ( CL - news - people ), L'Oreal, Nestle ( NSRGY.PK - news - people ) and Cadbury ( CBY - news - people ) over the next six months and welcomed the move.

The group will publish 'a buyers' scorecard' that would show companies that support sustainable palm oil and those that have not fulfilled commitments to buy it, in a bid to encourage more buying.

But the economics are not very promising. Palm oil undergoing the RSPO-driven ethical certification process trades at a $50 premium to wholesale prices, currently at $802 a tonne, which in turn have reduced their discount to rival soyoil.

Analysts have said less than 100,000 tonnes of certifiable palm had traded so far although 100,000 tonnes is available each month and 1.5 million tonnes of palm oil processing capacity is regarded as environmentally friendly.

Murdoch said the premium will reduce over time as supply of 'green' palm oil increases but segregation costs will remain and curb demand for RSPO certified palm oil for some time.

'The sums will add up and RSPO-certified material will be the right answer,' she said. 'But for the 60 or 70 percent of palm oil users here in the UK who use palm oil derivatives rather than refined palm oil, it's unlikely to be for some time.

Buyers in Britain, who use palm oil in products ranging from biscuits and chocolates to lipstick, take up 1.1 percent of the global annual supplies of 45 million tonnes, Murdoch said.