By Hanim Adnan (31 Dec 2011, StarBiz)
Analysts and industry players, however, are generally bullish on commodities despite global uncertainties
For CPO, its price should remain within a comfortable zone if the strong 2012 price projections by LMC International Ltd chairman Dr James Fry (at RM2,900 per tonne) and Godrej Industries Ltd director Dorab Mistry (RM3,300-RM4,000) materialise.Expecting support via continued demand from India and China, as well as the biofuel usage in Europe, market analysts have projected an average CPO price of RM3,500 per tonne in 2012. The 2011 average was RM3,280.
Market players are expecting next year's opening palm oil stocks to be lower at below two million tonnes from 2.2 million, while production is targeted at 19.5 million tonnes from 18.8 million.The export earnings from palm products in 2012 are also expected to hit a record of over RM80bil, given the growing optimism that palm oil will be replacing other major oilseeds like rapeseed and sunflower, which are currently being used for biofuels in the Western countries.
Malaysian Palm Oil Association chief executive officer Datuk Mamat Salleh says issues such as foreign labour, tax and subsidy, Indonesia's CPO export tax regime, palm oil sustainability, and sustainability certification scheme as well as greenhouse gas (GHG) emissions will be major considerations for the local players.
He says the main challenge for the local palm oil industry is Indonesia's CPO export duty structure, which gives the republic's processing sector lucrative returns via the competitive export price of its palm products.
It will be interesting to see whether the Malaysia Sustainable Palm Oil (MSPO) certification standard will be launched next year, adds Mamat.
On foreign labour, the plantation sector is thinking of an alternative source to reduce dependency on workers from Indonesia, which also wants labour to develop its own palm oil industry.
“Many plantation players feel that the recruitment of foreign workers should be done fresh and direct from the source country and not those who are floating' in the urban sectors,” says Mamat.
The National Wage Council will also be discussing the minimum wage for plantation workers in 2012.
A source says the industry is also worried the Government may come up with a new tax on plantation profits, in an effort to subsidise other palm oil subsectors. He adds: “If oil palm producers keep on paying high taxes, how are they going to fork out the capital to invest in the palm oil NKEA projects, which rely 95% on private sector investments.”