* Demand and price outlook for 2013 to be gauged at Bali
* Import, export tax changes in China and Malaysia high on
* Green lobbying and forest moratorium up for debate
By Michael Taylor
JAKARTA, Nov 26 The world's biggest palm oil
producers, under pressure to come up with ways to perk up demand
from top consumers China and Europe during a meeting this week,
may also have to defend the edible oil from renewed attacks over
its green credentials.
Malaysia and Indonesia account for about 90 percent of the
world's annual palm oil production of about 45 million tonnes.
Europe's financial woes, and China's slowing economy, have
reduced their appetite for palm oil, which has left top producer
Malaysia with record high inventories of 2.51 million tonnes as
of October, and created a major headache for traders.
The rising stocks have shaved a quarter off the value of
palm oil futures this year, and prices - currently at
around 2,400 Malaysian ringgit ($780) a tonne - are likely to
fall further unless consumption picks up significantly.
Overshadowing a possible revival in demand is renewed
concern in the West about the environmental credentials of the
industry behind the world's most popular edible oil, highlighted
by a recent visit by the U.S. Environmental Protection Agency to
Indonesia and a French proposal to steeply increase duties on
foods using palm oil, which has been dubbed the "Nutella tax".
"The focus will be on demand and whether weak demand will
persist," Ben Santoso, a plantations analyst with DBS Bank in
Singapore said, speaking ahead of the 8th Annual Indonesian Palm
Oil Conference due to start on the island of Bali on Wednesday.
Palm oil is used mainly as an ingredient in food such as
biscuits and ice cream, or as a biofuel.
"Demand is the main issue and whether it is strong enough to
absorb good production," said a Singapore-based trader. "All
issues voice down to demand."
CRUDE GRADES, GREEN CREDENTIALS
High on the delegates' agenda will be the impact of a
proposed cut in crude palm oil export taxes by Malaysia, which
comes almost a year after Indonesia took the rug out from under
its rival by reducing export taxes on refined palm oil to boost
its processing industry.
The Malaysian government, in a bid to entice customers, said
it planned to cut export taxes for the crude grade to 8-10
percent from 23 percent early next year. The proposal has
already helped stem losses in crude palm oil prices.
Conference delegates will be seeking a clearer picture of
how the Malaysian tax cut will impact trade flows, especially as
China, the world's second largest importer of the cooking oil,
is set to introduce stricter quality measures next year which
could give greater importance to crude grades over refined palm
"You have issues like import and export taxes which are
going to increase competition in some areas," said Ivy Ng Lee
Fang, senior regional analyst at CIMB. "At the same time you
have a lower price environment."
"There is also a lot of new regulations in some of the key
consuming markets, like China, and a lot of protectionism or
anti-palm oil lobbying like the Nutella tax in France."
In the last few years, top producer Indonesia has seen rapid
growth in production of palm oil, with output this year expected
to be between 23 million and 25 million tonnes, with about 18
million tonnes exported.
This year, palm oil estates sprawl across 8.2 million
hectares of Indonesian land, and that is expected to rise about
200,000 hectares a year for the next decade.
But green groups have been critical of expansion in the palm
sector, which they blame for deforestation, speeding up climate
change, ruining watersheds and destroying wildlife.
To improve its green credentials, Indonesia signed a
two-year forest moratorium in May last year, although critics
say breaches still occur. A possible renewal next year will be
on industry players' radars at the conference.
"The moratorium is a very hot topic," DBS analyst Santoso
said. "The issue is so complex that maybe nobody will have the
($1 = 3.0590 Malaysian ringgits)
(Additional reporting by Chew Yee Kiat in Singpaore; Reporting
by Michael Taylor; Editing by Miral Fahmy)