Malaysia should consider removing all its crude palm oil (CPO) export taxes and quotas to enable local palm oil refiners to compete effectively againsts its Indonesian peers and also run their mills at full capacity, said famed palm oil trader Dorab Mistry of Godrej International.
He opined that Malaysia’s latest measure to slash its CPO export duty from 23% would not be able to reduce the current high palm oil stocks situation.
This is given the bearish fundamentals triggered by high production in major producing nations and the slowdown in the global economy, which led to the reduced demand for CPO.
“Currently, palm oil buyers are not snapping up more cargoes although CPO is trading at a wide discount of US$315 per tonne to soy oil.
“Ships these days also have to wait until there is room to discharge into shore tanks as the turnaround time for vessels has gone up,’’ he pointed out.
For this year, Malaysia’s CPO production was pegged at 18 million to 18.2 million tonnes while Indonesia was likely to exceed 27.5 million tonnes, Dorab said on the last day of the International Palm Oil Trade Fair and Seminar (POTS) organised by the Malaysian Palm Oil Council.
He also suggested that the CPO futures third-month benchmark price should be allowed to trade at RM2,200 per tonne or CIF Rotterdam price at US$749 per tonne within the next four to six weeks.
Dorab warned that if CPO prices continued to be held at artificially high levels, it would be counter productive, thus leading the existing 2.48 million tonnes of local palm oil stocks to be much higher, possibly surpassing three million tonnes by January next year and remaining at three million tonnes mark until March.
“I believe the immediate removal of export taxes and quotas and allowing the CPO price to trade lower at RM2,200 per tonne will be the cures to help restore the high palm oil stocks situation back to normal in three months time,” he added.
Meanwhile, Oil World’s Thomas Mielke, who did not gave a CPO price forecast, had projected Malaysia’s palm oil production this year to be lower by 0.4% year-on-year to 18.5 million tonnes.
He believes that the current CPO price is already undervalued and expects demand to climb back, given reduced supply from other oil seeds such as rapeseed and soybean.
According to Mielke, the production of 10 main seed oils for 2012/2013 will not increase for the first time in 20 years.
Palm oil, therefore, has to fill part of the demand which cannot be satisfied by other seed oils.
Another palm oil expert, LMC International chairman Dr James Fry, also did not gave his CPO price forecast at POTS 2012.
He said the high palm oil stocks could be channelled to support biodiesel programme in Malaysia.