KUALA LUMPUR: The worst may be over for palm oil prices, said the Performance Management and Delivery Unit (Pemandu) in its Economic Transformation Programme (ETP) Annual Report 2014 released yesterday.
It said severe droughts registered in the first half of 2014 in the world’s major palm oil producing countries Malaysia and Indonesia are expected to lower palm oil production in 2015.
“This will lead to a mismatch between palm oil’s availability and rising consumption of palm oil in the year ahead.
“As palm oil supply dips, demand is expected to rise, underpinned by an uptick in vegetable oil demand from China as well as Malaysia’s move to lift biodiesel blends from five per cent to seven per cent at the end of last year to boost consumption and shore up prices.”
Pemandu said Malaysia, which set export taxes on monthly basis for crude palm oil (CPO) shipments, allowed duty-free exports of CPO towards to end of the year, helped to reduce stockpiles of palm oil, which Indonesia followed shortly after. On rubber, Pemandu said demand was expected to be steady this year and will help underpin natural rubber prices over the coming year.
It said from a supply perspective, the replanting efforts undertaken by governments in Malaysia and other rubber producing nations in the region will mean limited availability of supply and cushion prices.
Pemandu said this year, the Entry Point Projects (EPP) 1 has allocated a new budget of RM96.71 million for replanting and RM110.08 million for new planting nationwide.
“The budget is sufficient for target of about 24,000 hectares of replanting and new planting,” it said.
It said more replanting exercises could also be expected following the the government’s RM100 million rubber productivity incentive to aid rubber smallholders suffering from weak commodity prices,” it said. — Bernama