Oct 15: The fall in the price of crude palm oil (CPO), which hit a three-year low last week at RM2,200 per tonne, was due to the government’s own doing.
According to PAS research head Dzulkefly Ahmad (pic), the fall could be blamed on the Plantation Industries and Commodities ministry’s recent decision to raise CPO approved permit (AP) quota by another 2 million metric tonnes.
Dzulkefly said the crisis in CPO processing started last October, but CICM had failed to act and had instead raised the AP quota two months ago.
“This in fact worsened the already dire situation, because most of the quota is given to companies that are not capable of selling CPO. The increase of additional 2 million metric tonnes of CPO to the already dampened market has failed to attract new buyers,” he said.
Dzulkefly said Bernard Dompok, the minister in charge, recently acknowledged that there were 2.5 million metric tonnes of unsold AP CPO.
He said this created a situation where CPO failed to reach buyers because refineries and ports were filled with unsold processed CPO, adding that the problem suffocated the industry’s supply chain.
With many CPO players including Palm Oil Refiners Association of Malaysia (PORAM) complaining their storage was full, Dzulkefly said fresh fruit bunches from palm were sold to factories at discounted prices.
“Many CPO industry watchers believe that the AP CPO quota was raised without the export duty excise, and this led to sudden drop in CPO prices recently,” he added.
Last week, Bernard announced that Malaysia would cut its CPO export taxes and stop the duty free CPO export facility beginning January 1 next year, a move seen to be a year later than neighbour Indonesia which made similar move last year resulting in reduced exports from Malaysia.
Bernard said this would enable refineries in Malaysia to market their products at competitive prices to the global markets.
Dzulkefly said although refineries would be relieved with the announcement, a more holistic approach should be adopted by CICM to resolve the crisis including changing to a lower export duty structure as well as more flexibility for Malaysian refineries to compete with Indonesia.