Palm Oil Price ‘Manageable,’ Malaysian Minister Says

By Ranjeetha Pakiam and Angus Whitley

Feb. 26 (Bloomberg) -- Palm oil has traded at a “manageable” level since Malaysia, the world’s second-biggest producer, introduced measures to cut output last year, the country’s commodities minister said.

Prices in 2009 of between 1,400 ringgit ($381) and 1,900 ringgit a metric ton would be enough to sustain export income from the crop, Peter Chin said in a speech in Kuala Lumpur. That compares to today’s high of 1,930 ringgit.

Palm oil, Malaysia biggest agricultural export, has gained about 19 percent since the country allied with Indonesia in November to reduce production of the edible oil following a price slump. Malaysia needs higher income from overseas sales of palm oil as it attempts to avoid a recession.

“If we are able to continue this sort of range this year, despite whatever global recession there may be, the palm oil industry will be able to provide Malaysia with the export earnings that it needs,” Chin said.

Palm oil for May delivery on the Malaysia Derivatives Exchange traded at 1,906 ringgit a ton at 11:44 a.m., gaining for a second day. The commodity slumped 70 percent between touching a record 4,486 ringgit last March and the year’s low on Oct. 28. The output-cut plan came the next month, on Nov. 6.

Malaysia and Indonesia, the world’s biggest producer of palm oil, agreed in November to replant old estates, cutting annual output by as much as 800,000 metric tons. The two countries account for about 90 percent of global output.

The Indonesian Palm Oil Association expects 2009 output of about 20 million tons, according to a Jan. 21 forecast. Malaysian production this year may be “static or lower” than last year’s 17.5 million tons, Chin said yesterday.

Chin said today he expects Malaysia’s palm oil stockpiles to fall this year. The country’s stockpiles dropped in January to 1.83 million tons, the lowest level in nine months.

To contact the reporters on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net; Angus Whitley in Kuala Lumpur at awhitley1@bloomberg.net