Palm | Kelapa Sawit

Malaysia's palm oil output, down 4 per cent in the first half from a year ago, is likely to fall further as the government continues to chop down unproductive oil palm trees.

"Replanting is a two-pronged strategy. It will immediately cut off some oil supply into the market, but, in the mid-term, oil yield will improve," Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said.

The minister is optimistic of buoyant palm oil prices in the months ahead.

In an interview in Putrajaya yesterday, Dompok said he had told the Malaysian Palm Oil Board (MPOB) to speed up replanting efforts. "The RM200 million budget has been allocated, MPOB must speed up the implementation," he said.

Asked to comment on conflicting price forecasts by several plantation analysts, Dompok said: "Analysts and traders like Dorab Mistry can forecast from time to time. But you have also seen their predictions were not accurate.

"Palm oil prices are essentially subjected to market forces. You also have to consider the strength of the US dollar against ringgit and the amount of rainfall in oil palm plantations.

"If you ask me, I would not be able to give a specific forecast to palm oil prices. But I can assure you the government is committed to tightening palm oil supply in the immediate term."

Last year, Malaysia produced 17.7 million tonnes of crude palm oil. In the first six months of this year, the output was only 7.92 million tonnes, about 4 per cent less than a year ago.

Dompok estimates this year's palm oil output at 17 million tonnes, 700,000 tonnes less than last year's all-time high. "There is already a supply shortage, compared to last year, because of replanting. Also, since many smallholders cut back on fertiliser usage a year ago, we're seeing smaller and fewer fruit bunches," he said.

Yesterday, the third-month benchmark September contract on Bursa Malaysia’s Derivatives Exchange fell RM20 or 1 per cent to RM1,990 per tonne, the weakest level since March 30.