Group sees higher CPO price as global economy picks up

CPO producers expect crude palm oil prices to continue to rise in the first quarter of next year, to help offset the decline this year triggered by previously falling demand and an earlier weakened rupiah, a grouping says.

Steaven Halim, a secretary of the Indonesian Palm Oil Producers (GAPKI), said Wednesday CPO producers were optimistic that CPO prices would go up early next year  pushed by increased demand as part of the positive impacts of the recovering global economy.

“As long as there is no new crisis, we are expecting that CPO prices will hover at least at US$800 per ton in the first quarter of 2010.”

The remarks follow earlier predictions by Oil World, an independent forecasting service for oilseeds, oils and meal, whose analyst Thomas Mielke said prices would be supported by rising demand as production of vegetable oils from other plants such as soybean would decline due to unfriendly weather in several parts of the United States.

“I have also suggested my fellow CPO producers to spend more nowadays, mainly in the production sector on machinery or factory equipment,” Steaven said.

Big production spending plans should be undertaken in present conditions because the rupiah is now in a strong position.

“We can save a lot if we build factories today, because most of the tools or factory components are imported,” Steaven said.

GAPKI’s members include about 370 CPO producer firms with about 2.4 million hectares of oil palm are targeting to produce at least 25 million tons of CPO next year, up by 25 percent from this year’s production target of 20 million tons.

Members of GAPKI, which Steaven said represented about 30 percent of the national CPO industry, produced 19.2 million tons of CPO last  year.

Steaven acknowledged that the bright hope of high CPO prices next year would be the chance for CPO business to gain more income to cover the losses caused by the drop in sales and in the rupiah rate to the dollar earlier this year.

During the first months of this year, the CPO price stood at only about $500 to $550 per ton.

The weakened rupiah earlier in the year also caused companies to receive less income during those hard days, Steaven said.

“In the middle of this year, the price started to recover to about $650 per ton,” he said.

The effects of the recovering global economy on the CPO price has significantly influenced CPO prices in quarter three 2009, he said.

“As of November, the CPO price stood at $770 per ton,” Steaven said.

According to data published by GAPKI, Indonesia exports CPO to over 100 countries, including 15 countries in western Europe including the Netherlands and Germany.

In 2008, a total of 7.3 hectares of oil palm plantations in Indonesia produced about 19.2 million tons of CPO, of which 14.3 million tons were exported.

CPO producers are now exploring to improve sales penetration in eastern European countries like Slovakia.

Source : http://www.thejakartapost.com