Palm oil producer BW Plantation (BWPT) sees output climbing 10 percent to above 100,000 tonnes this year, while planting will rise at least 10,000 hectares a year, a company official said on Monday. Production in Indonesia, the world's top palm oil producer, will be weak this year however, Sebastian Sharp, head of investor relations at BWPT told Reuters, due to a lack of maturing plantations and heavy rains last year.
"We've become possibly the fastest planter in Indonesia," Sharp said in an interview. "Last year we produced 91,000 tonnes of CPO (crude palm oil) and this year we're expecting around a 10 percent increase. "Most of it now is coming from new maturity." The Jakarta-listed firm, currently has about 55,000 hectares in Kalimantan, and plants around 10,000 additional hectares each year, Sharp said.
"We've planted just over half of our landbank," added Sharp. "If we carried on at the rate that we are, and our landbank didn't change, then it would all be planted by 2014." BWPT has two CPO mills, selling to Indonesian refineries. Indonesia cut its palm oil export tax for April to 22.5 percent from 25 percent in March. The tax aims to ensure domestic requirements are met in Southeast Asia's biggest economy and to reduce volatility in local cooking oil prices.
But it has also caused concern among many producers, who say it complicates trading and curbs investment. "The export tax will of course affect us because it is designed to reduce the domestic price," said Sharp. "If you keep the price lower than the international price, you are just going to create excess demand, and sooner or later, the price will go up."
Malaysian palm oil futures hit a three-week high at 3,454 Malaysian ringgit ($1,142) per tonne on Monday. Many investors expect downward price pressure in the coming months however, as palm oil moves into a higher output cycle. "Broadly we expect this year, prices to average about $1,000, maybe with potential surprise upside," said Sharp.
"We don't agree that there is going to be very high production," he added. "If you want to see what is going to happen now, you have to look back 12 years in terms of growth in production. The planting in Indonesia was almost zero." He also added that heavy rains last year in Southeast Asia, had hit producers' ability to apply fertiliser. Indonesia, which is seen producing 21-23 million tonnes of palm oil this year, outstripped Malaysia as the top palm oil producer in 2007.
The firm, which was established in 1996 and listed in 2009, is also a member of the Roundtable on Sustainable Palm Oil (RSPO), is an industry body of consumers, green groups and plantation companies, and aims to promote growth and use of sustainable oil palm products. Sharp said BWPT, which uses a team of owls as part of its plantation pest-control, is currently in the process of applying for RSPO-certification of its palm oil. "Sometime in 2012, one of our plantations and one of our mills will be certified," he said, adding that this would account for about 30 percent of the total producing area.