Dwindling Indonesia palm oil stocks may lift prices

Kuala Lumpur (Antara News) - Palm oil reserves in Indonesia, the world's top producer, are at their lowest in years on surging overseas sales, raising concerns prices will rise further, a senior government official said on Thursday.

Private traders in Indonesia normally hold stocks between 1 million tonnes and 1.5 million tonnes, but current levels are around 500,000 tonnes, Rosediana Suharto, executive director of the state-run Indonesian Palm Oil Board, said.

"Palm oil stocks in the country are very low," she told Reuters in an interview ahead of an industry meeting next week on sustainable palm oil in Kuala Lumpur.

The Roundtable on Sustainable Palm oil begins in the Malaysian capital on Tuesday.

It brings together producers, buyers and environmentalists to discuss expansion of oil palm estates across Southeast Asia and their impact on the environment and rainforests.

Suharto said lower Indonesian stocks could put renewed upward pressure on prices, which are hovering close to a record high of 3,013 ringgit ($895) a tonne hit last week on the Bursa Malaysia Derivatives Exchange.

"Demand is really high and the global palm oil price scenario is going to be strong," she said.

She forecast that crude palm oil could trade in the range of $800 to $900 a tonne in coming months.

On Thursday, the most active January crude palm oil contract on the Bursa Malaysia Derivatives Exchange settled 8 ringgit higher at 2,942 ringgit ($873) a tonne, after going as high as 2,982 ringgit.

Palm oil, used in products ranging from chocolates and cosmetics to biofuel, is up almost 50 this year.

Indonesia is likely to produce around 17 million tonnes of crude palm oil in 2007, lower than the earlier estimate of 17.3 million tonnes, and compared with last year's output of 15.9 million tonnes, Suharto said.

"Production is not as much as what was projected earlier because the weather is not good and rains have been very late," she said.

Suharto said it was too early to forecast Indonesia's 2008 crude palm oil production but it could be in the range of 17.6 million tonnes and 18 million.

Indonesian biodiesel manufacturers were hurting because of high feedstock costs and non-availability of raw materials, Suharto said, adding that producers were scrambling for other raw material sources such as cassava and molasses.

"Many producers are holding back their plans because the price is so high and they do not have the raw material. Those who have set up the plants are unable to put their capacity into use," she added. (*)
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