IOI thinks palm oil price can hit RM3,000 soon

IOI Corp Bhd (1961)anticipates palm oil prices to hit RM2,800 to RM3,000 a tonne in the next few months as it braces for lower output.
As one of the most efficient planters and biggest palm oil producers in the country, IOI's price forecast is highly awaited by vegetable oil traders and analysts around the world.

IOI executive chairman Tan Sri Lee Shin Cheng said that he expected the group's current-year palm oil output to fall as much as 8 per cent to around 715,000 tonnes.

In the last financial year ended June 30 2009, IOI managed to squeeze 777,310 tonnes of palm oil from its 80-odd estates.

"I still hold the forecast at between RM2,800 and RM3,000 per tonne because of localised weather phenomenon like El Nino that affects output. There's also the labour shortage issue - workers come and go," Lee told reporters on the sidelines of the official opening of Hong Leong Bank's branch in Bandar Puteri Puchong, Selangor, yesterday.
At an economic conference two months ago, when palm oil was trading at around RM2,400 a tonne, Lee said he was optimistic of prices trending upward to between RM2,800 and RM3,000 a tonne.

The price did rise to a high of RM2,700 a tonne, but has fallen rapidly in the last four weeks.

When asked why, Lee replied: "The US dollar has weakened against a stronger ringgit and that has dragged palm oil prices (lower) to a certain extent."

According to Bank Negara Malaysia's website, US$1 is at RM3.21 currently, from RM3.45 a month ago.

Lee does not expect the palm oil price to continue falling.

"Demand for palm oil is very strong all around the world, especially traditional markets. Palm oil is the best vegetable oil in the world. It is nutritious and far more flexible in its applications," he said.

Yesterday, third-month benchmark crude palm oil on the Bursa Malaysia Derivatives market traded RM39 lower to close at RM2,500 a tonne.

- BUSINESS TIMES