25-11-2008:- Burn palm oil for energy, planters urge govt

KUALA LUMPUR: Palm oil makers in Malaysia, the world’s second-largest producer, urged the government to promote burning the edible oil for energy after initial proposals to reduce output failed to stop prices falling.
Malaysian manufacturers, electricity producers and companies with power plants should burn 500,000 tons of palm oil a year to cut stockpiles, Dato' Azhar, head of plantations at Sime Darby Bhd, the world’s largest grower, said on behalf of the Malaysian Palm Oil Association yesterday. That’s 2.8% of Malaysia’s estimated output next year.
The price of palm oil, used mostly in cooking, has continued to fall even after the government last month said it will pay growers to cut down trees to trim production. The price of palm oil and crude oil has tumbled as the worldwide recession curbs trade.
“The current drop is too drastic,” Mohd Bakke Salleh, managing director of Felda Holdings Bhd, a government-owned group representing individual growers, told reporters.
Lee Oi Hian, chief executive officer of Kuala Lumpur Kepong Bhd (KLK) said the industry needs help following the price decline.
The government should help companies cover the cost of burning palm oil to make electricity, said Sabri. The government can use a RM200 million fund allocated for biodiesel for this purpose, he said.
Palm oil futures yesterday rose 3% to RM1,503 a tonne in Kuala Lumpur. They reached a record RM4,486 in March. Palm oil has slumped 60% in the past six months.
Growers also urged the government to cut the price of fertiliser. The product accounts for half of a plantation company’s production costs of about RM1,200 a ton, said IOI Corp chairman Lee Shin Cheng.
Plantation companies are considering various measures including not using fertiliser for the next six months to cut costs unless prices drop further, said Lee. Fertiliser prices have doubled this year, he said.
A group of six Malaysian growers, including IOI, Sime Darby and KLK, earlier backed proposals by the government to reduce output.
The growers will collectively replant 200,000 hectares of old trees, cutting production by 700,000 tonnes annually from January 2009. — Bloomberg