- Business Times - Palm Oil

Palm oil to cushion slower economic growth
by Ooi Tee Ching [Monday - February 02, 2009]

Robust palm oil exports are expected to help cushion slower economic growth ahead, just like 10 years ago.

At that time, exports of commodities like petroleum, palm oil and rubber helped the country ride out the 1997/98 Asian financial crisis.

As the nation braces for slower economic growth this year, the Malaysian Palm Oil Council (MPOC) remains hopeful that palm oil will continue to be a saviour.

"You can't go wrong with food. As long as there are people to feed, the food sector will always remain the cornerstone of the economy," MPOC chief executive Tan Sri Yusof Basiron said.

Last year, the RM65 billion palm oil shipment made up 15 per cent of the country's overall exports. Compared to 15 years ago, palm oil exports constituted less than 10 per cent of the country's foreign earnings.

"In the years ahead, palm oil will play a bigger role in Malaysia's economy. We will continue to invest in this golden crop," Yusof told Business Times in an interview in Petaling Jaya.

"One cannot go wrong with palm oil, be it a country or a company. The long-term returns are good, or should I say very good, as was seen in the first half of 2008."

Palm oil exports are dependant on palm oil prices. After it reached its peak of RM4,486 a tonne in March last year, it began to decline over the next seven months to a low of RM1,390 a tonne in October.

In November and December, prices traded sideways within a range of RM1,500 to RM1,600 a tonne. At the begining of 2009, palm oil price began rising to RM1,900 a tonne. Of late, it has been trading at around RM1,800 a tonne.

While Yusof acknowledged volatile palm oil prices' negative impact on exports, he noted that palm oil companies had become adept at managing trading risks.

"Our oil palm planters are increasingly investing in downstream products to add value to their exports. When palm oil prices come down, exports of downstream products go up," he said.

The MPOC is headquartered in Petaling Jaya. It also operates regional offices in China, Belgium, South Africa, Pakistan, the US, India, Eygpt and Bangladesh.

On the RM2-a-tonne crude palm oil cess payable by planters to fund MPOC activities, Yusof said the contribution was necessary for continued efforts to expand palm oil exports.

Asked if the MPOC planned to scale down overseas activities in view of slowing global economic growth, Yusof replied: "No, it is actually going to be a busy year ahead. We've lined up palm oil trade fairs and seminars in Bangladesh, Pakistan, India, the US, Russia and Turkey."

There will also be trade seminars in Japan and southern India. In addition, there are plans for a series of nutraceutical conferences in Malaysia, the US and Europe.

Yusof said the MPOC's overseas intelligence units help bring together vegetable oil sellers and buyers.

"While many other businesses slow down, we're expected to work harder to find new markets or new ways to market the many uses of palm oil."