CPO to Stablilise Between RM3,000 – RM3,500 by December

Should CPO prices remain at this level throughout the

year, Malaysia’s export earnings for 2011 are also expected to exceed

the record high of RM65 billion in 2008.

KUALA LUMPUR: Crude palm oil (CPO) prices, which have softened to

RM3,300 a tonne currently, are expected to stabilise between RM3,000

and RM3,500 a tonne by year-end due to strong crude oil price and steady

global demand.

Malaysian Palm Oil Association vice chairman Boon Weng Siew said CPO prices will be linked to the price movements of crude oil.

“When crude oil price goes up, the industy will look at vegetable-based oil such as CPO as an alternative.

“When that happens, the market will worry whether there will be enough

CPO supply for food usage causing CPO prices to be strong,” Boon told

reporters after its 12th annual general meeting yesterday.

Boon, who is also Malaysian Estate Owners’ Association president, said

although the direct use of palm oil for biofuel has not been very

encouraging, it is increasingly replacing other oilseeds such as

rapeseed oil, which has been diverted for biofuel production.

Boon said should CPO prices remain at this level throughout the year,

Malaysia’s export earnings for 2011 are also expected to exceed the

all-time high of RM65 billion in 2008.

Malaysia sold almost RM50 billion in palm oil export receipts last year.

On another note, Boon said the 125-member association, which represents

50 per cent of the industry spanning 4.6 million ha, will ask the

government to review the cooking oil subsidy scheme which has not

reached its target market.

“The government has to review the

scheme upwards because since May 2007 until April this year, out of the

RM2.6 billion subsidy, half goes to the non-households including hotels,

hawkers, restaurants, small industries and smugglers and not the

targeted household users,” said Boon.

Introduced in 1995, the scheme was meant to alleviate the cost of food items to help the low income group and rural population.

As a result, cooking oil in the domestic market is sold at a relatively

low price, resulting in most consumers taking the present price for

granted and abused by the non-target groups especially by the high

income group and industries.

The government paid RM26 million in

subsidies in 1995, which grew to over RM1.3 billion in 2009 following

the strengthening of CPO prices.

Those in the low socio-economic

group consumed cooking oil sold in sachets at RM2.50 a kg, while the

middle and high-income consumers would buy in plastic bottles at RM3.60 a

kg from supermarkets.

The cooking oil price is capped at RM1,700 a tonne or RM1.70 a kg through subsidies.

At the current CPO price of about RM3,300 a tonne, the government has

to fork out RM1,600 a tonne in subsidy to maintain the RM1,700

subsidised cooking oil price.

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