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Potential for palm oil growth

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A worker selects palm fruit at a palm oil factory in Sepang, outside Kuala Lumpur, on Wednesday. A Malaysian firm is looking to grow oil palms in the Kingdom. Reuters

MALAYSIAN company Golden Land Bhd will apply for two palm oil plantations in Koh Kong province, which would make it the second firm to commercially grow the product in Cambodia.

“Application of the concession right represents a strategic investment by [Golden Land] which will significantly increase the land-banks available,” it said in filings on the Bursa Malaysia.

Golden Land aims to acquire a 10,922-hectare and an 11,827-hectare palm-oil plantation, both in the Sre Ambel district of Koh Kong province.
Palm oil is edible and is mostly used in food production.

Two companies – operated by Golden Land’s subsidiaries - will be created and registered in Cambodia with the Ministry of Commerce to apply for concession rights.

Golden Land has reached an agreement for Virtus Communications Company to represent both firms as agents, meaning Virtus would be responsible for submitting paperwork to achieve the concession leases, it said.

Virtus will collect US$450 per hectare – or up to US$10.2 million - as its fee. Virtus Communications is also publisher of the Cambodian Business Review magazine. Company officials did not return requests for comment yesterday.

Mong Reththy Group vice president Tan Monivann said yesterday that there was strong potential for the product in Cambodia as worldwide prices were generally on the upswing.

He said the group was the only current domestic producer of the commodity, and had begun in 1996.

“We will plant [an additional] 2,000 hectares this year,” he said, adding the firm intends to nearly double its existing plantations to 20,000 hectares in coming years.

Golden Land shares gained 1.8 percent to 1.12 ringgit (US$0.37) yesterday, its highest close since February.

Ministry of Agriculture, Forestry and Fisheries officials could not be reached for comment yesterday.

Meanwhile, palm oil output and stockpiles in Malaysia, the world’s second-largest grower, gained in February from the previous month as adverse weather conditions eased and exports dropped to the lowest in three years.

Inventories climbed 4.2 percent to 1,478,793 metric tonnes, the Malaysian Palm Oil Board said in a statement yesterday.

Production gained 3.5 percent to 1,094,473 tonnes, while shipments fell 8.5 percent to 1,114,202 tonnes, the lowest level since February 2008.

Output in the month of January fell to the lowest level in almost four years as floods in key producing states hampered harvesting and reduced yields amid the annual low-output season.

The La Nina weather event, which brought excess rainfall, is weakening, the Australian Bureau of Meteorology said on March 2.

“The weather has calmed down a bit, so I would think that March numbers would pick up,” said Hoe Lee Leng, an analyst at RHB Research Institute Sdn.

“Exports have not been that strong because you haven’t had those supplies that you require. You’ll probably see a greater replenishment of stocks in a couple of months’ time.”

Palm oil futures dropped after analysts predicted a rebound in production and predicted lower prices at a conference in Kuala Lumpur yesterday.

The May-delivery contract declined by 3.7 percent to reach 3,453 ringgit a tonne and traded at 3,489 ringgit at 3:09 pm Singapore time.  ADDITIONAL REPORTING BY BLOOMBERG

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