Palm oil prices hit record highs as demand continues to soar

Palm oil prices look set to reach stratospheric new heights this year as demand continues to soar and more crops are diverted into biofuel production, manufacturers have predicted.

Stephen Bickmore, UK and Ireland commercial director for margarines and fats at spreads giant Vandemoortele, said: "Prices are at an all-time high. In late 2006 they were 1,900 ringgits/t; now they're 3,300 ringgits/t and rising. I can see them going up even further in the next six months."

As the price of soya continued to rise, manufacturers and consumers in India and China were also switching to palm oil, which was putting significant pressure on supplies, he said. In more mature markets, meanwhile, manufacturers were replacing partially hydrogenated vegetable oils with palm to avoid trans fats.

The problem was being further compounded by the diversion of palm crops into biofuel production and traders looking to make a fast buck out of a volatile commodity market, he said. His comments came as the Malaysian government was forced to release emergency stocks of palm oil to break a wave of panic buying.

The drive towards more sustainable sourcing would also put pressure on prices this year, predicted Walter Link at German spreads manufacturer Walter Rau Lebensmittelwerke: "Full traceability would be prohibitively expensive because in order to have an 'identity preserved' system you'd have to have separate supply chains. At the moment, the oil all goes into the same tanks.

"The best option in the short term is the 'Greenpalm' system whereby you pay a premium for your oil and you know that a certain percentage comes from plantations that have been certified as sustainable."

TV commercials by the Malaysian Palm Oil Council came under fire from ad watchdogs last month for misleading consumers by suggesting that Malaysian palm was all sustainably produced and beneficial to the environment.