Palm Oil promising..

March 26, 2008

Palm oil promising for Asia but Africa may win edge
By Chia Yan Min

ASIA, especially Indonesia, could benefit greatly from rising palm oil prices in the next few years, but the region may eventually lose its edge to Africa, say agricultural business experts.

Mr David Jackson, director of oils and cereals research at British-based LMC International, said major Asian palm oil exporters such as Indonesia and Malaysia currently have an abundance of land for plantations.

However, labour markets in these countries are starting to see a squeeze, which is predicted to worsen within the next five to 10 years, he said.

This could drive up costs and move palm oil production out of Asia and into west and central Africa, where labour costs are lower and there is a vast land supply, Mr Jackson added. This is despite the political turmoil that investors will inevitably run up against in that region.

He was speaking on a panel at the Plantation Investment Asia 2008 conference held at the Grand Hyatt Singapore yesterday, as part of the four-day Agribusiness Asia 2008 conference.
Conference participants discussed the potential for investment in commodities such as timber and jatropha, said by some to be the next major development in the biofuels industry.

The future for agricultural commodities, including palm oil, looks rosy, they said.

'Palm oil prices have seen significant volatility in recent months, but they are likely to stay at healthy, high levels for quite some time due to strong demand. This is because of palm oil's significance as a component in cooking oil as well as its role in the biofuels industry,' said Mr Chris de Lavigne, vice-president of growth consulting at Frost and Sullivan. He was also on the panel.

However, Mr Jackson noted that suppliers across all commodity sectors have been responding to high prices and adjusting supplies accordingly, which could lead to an easing in the prices of oils, including palm and rapeseed.