Crude Palm Oil Futures Hit All Time High

Crude palm oil (CPO) futures have hit an all time high of M$3,000 ($898) a tonne on the benchmark Malaysia Derivatives Exchange, as crude oil prices reached a record $98 a barrel, but the industry needs to take stock and gauge how soaring prices will affect demand, according to a leading analyst.

Dorab Mistry, director of Godrej International, told news agency Reuters that the current price could be set for a dramatic correction. "You can take the prices up to any level, but it may not be sustainable," he said. "It may kill demand and then there will be a collapse. That will be wrong. We reached this target to quickly it's better to allow a period of stability to prevail in the market to see how strong demand is at this level."

Speaking at an Indonesian palm oil conference in Bali, Mr. Mistry said high prices of palm oil had yet to effect demand from India, the world's second biggest buyer of vegetable oils, because the government had lowered import duties for all edible oils to make them more affordable domestically.

Mr. Mistry expected palm oil demand from India to remain strong because it is still competitively priced but said China's demand for edible oils is growing even faster. "palm oil (in India) is still the most competitive, so definitely demand from India will keep on increasing," he said. "China is at a stage where consumption is rising faster because prosperity is spreading."

Malaysian crude palm oil (CPO) prices have also been buoyed by Indonesian raising export taxes, which has resulted in less shipments coming from the world's leading producer. Mr. Mistry urged the Indonesian government to revise that tax because although these help contain price jumps, they also hurt the consumer. "I think the Indonesian government has made a very bad mistake, domestic palm oil prices have not fallen while global prices have gone up," he said. "You can't help your consumers by penalizing consumers in other courtries - that's bad economic and bad social policy."

However, Anton Apriyantono, Indonesia's agriculture minister, insisted the policy would remain in place for the foreseeable future. "The policy is on the right track," he said. "We can see that local cooking oil prices have been stable." *** source: The Public Ledger by Adam Sharpe

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