Business

Friday April 10, 2009

Saudi Arabia holds the key to CPO price

By HANIM ADNAN


It hinges on whether the country can support crude oil prices

BANGI: Crude palm oil (CPO) will likely trade at the RM2,400 per tonne level by the end of the year if the world’s top crude oil producer Saudi Arabia can support prices at US$55 per barrel, a top industry expert said.

However, CPO price could also fall to the critical level of RM1,500 per tonne if Saudi Arabia failed to stop crude oil prices from falling to US$35 per barrel, said James Fry, a London-based international oils and fats expert and the managing director of LMC International Ltd.

He added that Malaysia’s palm oil stocks could fall below 1.7 million tonnes by October if the Government’s B5 biodiesel programme succeeded in reducing palm oil stockpiles.

“I expect a 100,000-tonne drop in palm oil stocks to translate into a 5% increase in CPO prices,” Fry said at the 29th Programme Advisory Committee Seminar organised by the Malaysian Palm Oil Board (MPOB) here yesterday.

James Fry

The B5 blend programme, which has been effective since Feb 1, involves the blending of 5% biodiesel with 95% fossil fuel and will be carried out in stages, starting with government vehicles and followed by diesel vehicles in the industrial and transportation sectors.

Under the programme, all diesel vehicles in the country must use the B5 blend by 2010.

Fry also suggested that the MPOB and the local palm oil fratenity look at investing in projects developing quality oil palm seeds.

“I believe a fundamental problem besetting the oil palm sector is the poor financial returns from developing improved seeds,” he said, adding that Malaysia, despite being the world leader in R&D for oil palm, had done poorly in boosting overall national palm oil yields.

Meanwhile, US-based Milk Specialties Global chief executive officer Dr Trevor Tomkins in his paper on “Utilisation of Palm Oil in Animal Feed - New Horizon,” said local oil palm players should venture into the hugely untapped international animal nutrition industry.

Professor Denis J. Murphy of Britain’s University of Glamorgan in his paper entitled “Is Genetic Modification (GM) the Way Forward?” said it was crucial for the oil palm sector to maintain an efficient R&D programme to ensure the commodity’s continued demand.

“Increasingly uncertain periods with economic dislocation and climatic changes translate into unperdictable shifts, for example, in biofuel policy and rapid shifts in global demand for agriculture-based commodities,” he said.


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