KUALA LUMPUR, Malaysia (Reuters) — Malaysia and Indonesia have formed a group aiming to become a world palm oil association.
Together, the two countries produce 80 percent of the world’s palm oil. They now plan to stop competing against each other to win market share.
If successful, the association will reduce the palm oil surplus and strengthen the commodities, a move that should help global oilseed prices, including canola values.
The priorities of the two countries are to reduce supply and improve access in the two major markets — China and India.
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Last week, Malaysia asked the country’s largest power firm to burn 400,000 tonnes of crude palm oil, or CPO, as fuel this year to ease stocks.
Malaysia, the world’s largest palm oil producer, is struggling to ease domestic stocks, which reached a record high of 1.52 million tonnes last November because of poor exports and stiff competition with Indonesia.
Malaysia will also go ahead with its plan to replant 500,000 acres of palm oil plantations, which yield 600,000 tonnes of oil.
The two measures were expected to take away one million tonnes of palm oil from the market this year, said primary industries minister Lim Keng Yaik March 16.
“We will burn (CPO) at a rate of 50,000 tonnes a month until it reaches a price which is at par with soybean oil.”
Lim said he would travel with Indonesia’s trade and industry minister Luhut Pandjaitan to Beijing, China, and New Delhi, India, from April 8-14 to lobby the giant markets for better access.
Both countries would ask Beijing to raise the import quotas on palm oil to 1.5 million tonnes from about one million.
“We will tell the Chinese that our farmers are suffering as a result of the quota put on palm oil for the Chinese market. Although it is a domestic Chinese policy, it is affecting the livelihood of our farmers,” Lim said.
Malaysia and Indonesia will also ask India to remove the discriminatory import tariffs on crude palm oil and refined products.
“We are not asking for anything extra, just asking that palm oil and soybean oil be treated as equal,” he said.
Higher duties
India, which was Malaysia’s main palm oil buyer in 2000, has increased its import duties to 85 percent for refined edible oils.
The duty on soybean oil is unchanged at 45 percent on account of India’s commitment to the World Trade Organization.
Because of the difference in tariffs, even though South American soybean oil is priced higher on the international market than palm oil, it costs less for Indian buyers to purchase the soy oil.
