The government will take measures to protect small-scale oil palm growers who have been hard-hit by the fall in global crude palm oil prices.

Smallholders, who account for 30-35 percent of Malaysia's palm oil output, have said they are being forced to leave oil palm fruits to rot on the trees, as mills refuse to buy their production.

"It will not reach that stage (of bankruptcy) because there are many ways that the government will assist them to remain profitable," said Deputy Plantation Industries and Commodities Minister Kohilan Pillay.

palm oil palm kelapa sawit 201107 He said the government will tighten enforcement of laws that require mills to purchase oil palm fruits from smallholders, educate farmers on agricultural practices and help bolster palm oil prices.

However, the government said it was confident crude palm oil prices will recover from a dramatic slump, thanks to an increase in demand from the world's top consumers, India and China.

Palm oil prices have plummeted 67 percent from a March high of RM4,486 per tonne to less than RM1,500 currently, due to the financial crisis and the falling price of crude oil - which has reduced bio-diesel demand.

Pillay said he expected bigger orders from China, the world's largest consumer of vegetable oil, and India, which he said recently imposed a 20 percent import tax on crude soybean oil.

"This will push up demand for CPO (crude palm oil), and as Chinese New Year celebrations approach, demand from China will also increase," he said.

Rubber also hit by falling prices

China is Malaysia's top palm oil importer, accounting for 3.16 million tonnes out of 7.4 million tonnes of Malaysia's CPO exports in the first 10 months to October, Pillay said.

"Furthermore the price range of RM1,400-1,500 per tonne is an attractive price for consumers to buy and stock," he said.

oil palm under threat 010306 dying Malaysia is the world's second-largest exporter of palm oil after Indonesia, with the two countries accounting for 85 percent of global palm oil production.

Meanwhile, Plantations and Commodities Minister Peter Chin said yesterday that Malaysia will cut rubber production by 10 percent next year from an estimated 1.1-1.2 million tonnes this year to push up prices.

He said Malaysia will control the expansion of new plantings, reduce the frequency of rubber-tapping and encourage the cultivation of alternative cash crops to reduce output, state media reported.

- AFP