KUALA LUMPUR: Malaysia’s crude palm oil (CPO) inventories in March are likely to lower to 1.5 million tonnes compared with 1.56 million tonnes in February as planters have embarked on their replanting plan on their plantation estates.
 
Plantation Industries and Commodities Minister Datuk Peter Chin said the government had approved oil palm replanting on some 106,330 hectares. Under the replanting scheme announced late last year, the government has targeted some 200,000ha of land for replanting.
 
Planters who carried out replanting would receive RM1,000 per ha of plantation land cleared for new plantings.
 
Speaking to reporters after the annual dialogue between planters and relevant government agencies, Chin said: “Our replanting programme reduced our stock, which goes to show that this (replanting plan) is working.”

Palm production tends to be lower when planters carry out replanting exercises on their land. Malaysia’s palm inventories in November rose to a record 2.27 million tonnes. Since December, palm oil stocks have been falling steadily, tumbling to 1.99 million tonnes in December, according to published statistics.
 
The downtrend in palm stocks continued, with palm inventories in January and February falling to 1.83 million tonnes and 1.56 million tonnes, respectively.
 
CPO production in Malaysia is also estimated to hit 18.3 million tonnes this year compared with 17.3 million tonnes in 2008 on improved yields, Chin said.
 
Chin also said the ministry had no plans to issue new palm oil export licences. The annual export quota for CPO was raised to three million from two million last year, in a bid to reduce excess palm supplies that had built up over the years.
 
“We have a long list of approved applicants. There are a total of three million tonnes approved for CPO exports,” Chin said, adding that most plantation firms exported CPO to countries where they had refineries.
 
CPO for June contract gained RM35 to close at RM2,180 a tonne on Bursa Malaysia Derivatives on April 7.  Malaysian Palm Oil Association chairman Datuk Azhar Abdul Hamid said the current CPO price was good as global demand for the commodity was fairly stable.
 
“It is likely that prices would remain at current levels and the industry is very happy with current CPO prices,” Azhar said. Azhar is also the managing director of Sime Darby Plantation Sdn Bhd.
 
While some CPO buyers were facing difficulties in securing credit for imports, Azhar said such issues, were eventually being resolved.
 
Chin also announced that it would not be mandatory for palm oil millers to implement methane gas trapping capabilities.

“The ministry does not want to impose a mandate that all palm millers must install methane gas trapping facilities. I do not want to give the impression that we are introducing regulations. Rather, we want to adopt an approach where we would assist millers to upgrade their facilities so that this could be capable of trapping methane gas in the future,” Chin said.
 
Meanwhile, the Indonesian government announced plans to lower the minimum benchmark price of CPO for calculating the payment of export duty. Currently, the government imposes export duties of 1.5% on CPO if the price of the commodity gains more than US$700 (RM2,499) per tonne.
 
RHB Research in a note stated that the move by Indonesia would “seem positive to the palm industry”.

“It should result in fewer exports coming out of Indonesia, translating into weaker crude palm oil supply and therefore higher prices,” RHB Research said.
 
Indonesian government officials were quoted as saying there were two options under the proposed policy.
 
“First, we may lower the minimum benchmark price to US$600 per tonne. The other option is to charge 1.5% of export duty across the board if the price is below US$700 per tonne,” said agriculture and fishery deputy for the Coordinating Minister for the Economy Bayu Krisnamurthi.
 
The Palm Oil Producers’ Association of Indonesia opposed the proposals as this would only create distortion in the CPO market, its marketing head was quoted as saying.
 
“If history repeats itself, this proposal could result in weakening crude palm oil prices if planters smuggle the oil to Malaysia to avoid paying taxes, thus raising stockpiles,” RHB Research said.