The Star. Malaysia and Indonesia—the world’s top palm oil producers—are allocating about 40% of their combined crude palm oil output for biodiesel production, according to a statement from Malaysia’s Ministry of Plantation Industries and Commodities.
Malaysia currently produces 44% of the world’s palm oil (15.1 million tonnes of a total 34.282 million tonnes, and Indonesia produces 41.4% (14.2 million tonnes), according to the US Department of Agriculture’s Foreign Agricultural Service.
Both countries agreed to commit a targeted amount of six million tonnes of crude palm oil each annually as feedstock for the production of biofuels and biodiesel.
The move could further increase the price of edible oil, making it expensive for both food and energy users.
“Palm oil is going to become expensive and out of reach for consumers in developing nations like India, China and Pakistan,” said M.R. Chandran, an independent commodity consultant. “Palm oil will lose its attractiveness as a cheaper form of edible oil.”
Traders said companies setting up biodiesel plants had worked out the cost of palm oil at RM1,500 to RM1,600 a tonne to be viable for making biofuel. “The whole economics of palm as raw material for biofuel will change,” said an official at a leading trading company.
On the Bursa Malaysia Depository on Friday, crude palm oil futures were closing in the RM 1,550 to RM 1,600 (US$421 to US$435) per tonne range.