Cutting CPO supply to raise prices: Will it work?

from THE JAKARTA POST -- THURSDAY, DECEMBER 18, 2008 -- PAGE 14 The crude palm oil price has been through a roller-coaster journey in 2008. The journey started with prices at $995/ton in January, a peak was reached at $1,395/ton in March, then a steep drop to $435/ton in October, and the price is finally settling at around the $510/ton level in December; definitely not for the faint hearted! Looking behind the ups and downs, what are the causes of this daredevil ride? Price speculation, high expectations on biofuel, and a close relationship with oil prices have been discussed as a few of the culprits. In the end though, it all comes back to the basic law of supply and demand.

CPO prices have reverted back to the $500/ton level because demand has declined, while supply keeps rising. Lower demand is expected to persist on the back of slower economic growth, especially in China, the biggest CPO importer in the world. …