Indonesia With Malaysia to Support Palm Prices by More Biodiesel

Indonesia and Malaysia, the world’s top palm oil producers, will accelerate biodiesel programs to boost consumption after prices tumbled last month to the lowest level in more than three years.

Prices will be stabilized “through more domestic consumption and implementation of biodiesel,” Douglas Uggah Embas, Malaysia’s Plantation Industries and Commodities Minister told reporters in Kuala Lumpur today after a meeting with Suswono, Agriculture Minister for Indonesia.

Futures traded in Kuala Lumpur plunged to the lowest level since October 2009 as supplies of the world’s most-consumed cooking oil exceeded demand. Global stockpiles of the oil that’s used in everything from candy to biofuel will surge 21 percent to a record 9.7 million metric tons by the end of 2013-2014 as demand expands 4.6 percent, the least in 12 years, the U.S. Department of Agriculture says.

The contract for delivery in November fell as much as 1.6 percent to 2,402 ringgit ($729) a metric ton and ended the morning trading session at 2,414 ringgit on the Bursa Malaysia Derivatives. Futures, which dropped 20 percent in the past year, are set to rise 8 percent this month, the biggest monthly gain since December 2010.

Indonesia will increase its biodiesel blend requirements to cut spending on imports, Susilo Siswoutomo, deputy energy minister, said yesterday. The government issued a regulation increasing required biodiesel content to 10 percent from 7.5 percent in diesel oil sold to industrial users and motorists.

Malaysia is gradually increasing the blend of palm oil in biodiesel and in petroleum diesel to 10 percent from 5 percent to reduce stockpiles. Inventories have declined 37 percent to 1.66 million tons in July from a record in December, according to data from the nation’s palm oil board.

Palm oil may average 2,395 ringgit a ton in the third quarter and around 2,438 ringgit in the fourth quarter as improving Chinese and U.S. economies support prices, Embas said.

To contact the reporters on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net; Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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