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Indonesia's palm oil

prices sharply fall

JAKARTA: Indonesian cooking oil prices have fallen sharply since state commodities regulator BULOG intervened in the market barely a month ago, but rising output could further dampen values, trade sources said on Tuesday.

Since BULOG began intervention-selling on July 19 in a bid to lower cooking oil or palm olein prices, have fallen to 1,435 rupiah (64 US cents) a kg from 1,570 rupiah (70 cents).

Crude palm oil prices had fallen by to around 1,270 rupiah (57 cents) from around 1,370 rupiah (61 cents).

"Crude palm oil production is rising by some 20 percent in some growing areas," a leading exporter said. "The increase began at the end of July and will go on until October."

"With more oil coming into the market, domestic prices are expected to ease further unless there's a price hike overseas, he said by telephone from the north Sumatran city of Medan.

Other trade sources said the rise in production this year was expected to be around 10 to 15 percent compared with the usual 20 percent due to the impact of last year's severe drought which delayed this year's monsoon rains.

Monthly crude palm oil production figures are not readily availabale in Indonesia - the world's top palm oil producer after Malaysia - but 1995 production has been officially forecast at 4.49 million tonnes, up from 3.81 million in 1994.

BULOG chief Beddu Amang said late last month that 1995 consumption was expected to rise to some 2.50 million tonnes crude palm oil equivalent from 2.30 million tonnes last year.

BULOG, which has import monoplies over wheat, sugar, rice and soybean, launched its market operations last month after it felt cooking oil prices were too high.

The agency imported almost 20,000 tonnes of palm olein from Malaysia to use in its intervention-selling even as it was building up a permanent 75,000-tonne crude palm oil buffer stock to dampen prices whenever the need arose.

Amang had said he hoped to bring cooking oil prices to around 1,400 rupiah/kg (63 cents) by February next year during the Muslim Eid ul-Fitr festival.

Senior traders said there was a strong possibility that BULOG would achieve its objective but added that price movements on overseas markets would be a major factor.

Traders said palm olein prices in the international market have also been weak due to lower exports.-Reuter