Malaysia Palm Oil Exports to Gain in 2010 on Recovery

By Ranjeetha Pakiam

Jan. 26 (Bloomberg) -- Palm oil exports from Malaysia, the world’s second-largest producer, may gain this year as the global economy recovers and China’s demand rises, according to Plantation Industries and Commodities Minister Bernard Dompok.

Malaysia plans to export more to China in 2010, Dompok said today. The government would be “happy” if prices ranged from 2,400 ringgit ($706) to 2,600 ringgit a metric ton this year, he said. Futures prices ended yesterday at 2,469 ringgit.

Palm oil in Kuala Lumpur surged 57 percent last year as demand recovered, benefiting Malaysian producers including IOI Corp. and Sime Darby Bhd. Dompok’s preferred price range tallies with his comments from last July, when he said that a level of at least 2,500 ringgit would suit the government.

“I don’t think we see a future of palm oil prices that is lower than what you see” at present, Dompok said at a media conference in Kuala Lumpur after a speech. “We’re certainly hopeful that this year, in view of recoveries of other economies around the globe, it has a potential of being a better year.”

Palm oil on the Malaysia Derivatives Exchange -- the benchmark price in Asia -- averaged 2,233 ringgit a ton last year, and traded at 2,426 ringgit at 3:03 p.m. local time today. The commodity, about 90 percent of which is produced in Indonesia and Malaysia, is used in foods and as a fuel additive.

Biodiesel Blend

The government may introduce later this year a 5 percent biodiesel blend that uses palm oil for vehicle owners in four states -- Selangor, Johor, Negeri Sembilan and Pahang, Dompok said. A cabinet paper was being prepared on the extension of the so-called B5 mandate, he said. At present, only military and government vehicles use the mix.

Malaysia’s palm oil production is forecast to gain 4.9 percent this year to a record 17.8 million tons, according to an October forecast from the Finance Ministry.

Between 2,400 and 2,600 ringgit per ton, “the farmers and plantation owners should be happy,” Dompok told reporters after the speech. “If they’re happy, I’m happy. I’ll be happy with that, and everything else is a bonus.”

Exports of palm oil products may be worth more than 100 billion ringgit by 2020 compared with 62.5 billion in 2008, he said in the address. “The focus by 2020 is to generate exports of more value-added products, services and palm-oil-related technologies,” Dompok said in the speech.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net