Cooperation among govts on biodiesel mandates can sustain CPO prise rise, says expert

A worker collects palm oil fruit inside a palm oil factory in Sepang. — Reuters file pic
A worker collects palm oil fruit inside a palm oil factory in Sepang. — Reuters file pic

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KUALA LUMPUR, Nov 21 ― Crude palm oil (CPO) prices would be able to sustain its current upward momentum if governments, particularly those from the Council of Palm Oil Producing Countries (CPOPC), could coordinate allocation increases under the biodiesel mandates, says palm oil expert Dr James Fry.

Fry, who is also the chairman of LMC International Ltd, said if there were cooperation among the governments in the biodiesel mandates, particularly amid the decline in palm oil stocks, the move could be the best joint policy for palm oil exporters to ensure the continuation of the uptrend seen in CPO prices currently.

“Indonesia’s mandate has been the driver behind the strong growth in biodiesel demand for the region.

“With the B30 mandate allocations (of 9.59 million kilolitres of unblended biodiesel) announced for 2020, Indonesia’s biodiesel demand will rise to 8.5 million tonnes next year,” he said.

He said this during a talk titled “Global Partnership to Sustain Palm Oil Prices” on the final day of the three-day Malaysian Palm Oil Board International Palm Oil Congress and Exhibition 2019 here today.

Fry said it is a lesser-known fact that Thailand’s biodiesel output has been increasing each year since 2017, supported by the government’s incentives and the country’s tax system.

“(The implementation of the biodiesel mandate in) Thailand is actually slightly ahead of Malaysia each year,” he said.

To-date, the CPOPC members are Malaysia, Indonesia and Colombia, while three palm oil producing countries, namely Nigeria, Papua New Guinea and Honduras, are expected to join the council in the near future.

Meanwhile, Fry said Malaysia's palm oil stocks are expected to fall to 1.6 million tonnes over the next six months from 2.35 million tonnes as of October this year due to the reductions in fertiliser applications, drought, haze and slowdown in production in new areas this year.

“The slow output growth is coinciding with the boost to biodiesel mandates in the Southeast Asian countries,” he said, adding that CPO prices are anticipated to surpass US$750 (RM3,127) per tonne in the second quarter of 2020.

Currently, CPO prices hover between RM2,500 and RM2,600 per tonne, which are deemed as “very good” pricing among the industry players. ― Bernama

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