(AFP) - Palmoil producers are rejoicing over the recent surge in price but realise the sharp rise may not last for long as authorities eye the Latin American market to keep prices firm.

Yang Chien Chu, director of Melaka Tong Bee Sdn Bhd, told AFP that the outlook for palmoil prices over the next six months remains uncertain.

"The industry was caught by suprise. It did not expect the market to come up so fast. Of course everybody is happy.

"But we are still a bit conservative what will happen in the next few months," he said at the sidelines of a conference on the outlook of the palmoil industry.

Malaysia, the world's largest palmoil producer, watched with dismay as the price plunged from a high of RM2,377 a tonne in 1998 to RM 800in mid-July.

But prices have risen sharply in the last two weeks and hit RM1,180 a tonne last Friday, he said.

Deepavali festival

One analyst attributed the price hike to the expectation that India, Malaysia's top market and world's largest consumer of vegetable oil would increase her palmoil uptake in the coming months to stock up for the Deepavali festival in November.

"The question is whether India could sustain the buying after the festival.

That will influence future price direction," the analyst, who requested anonymity, said.

Yang also said producers would be happy for the price to stabilise at around RM1,000 a tonne to enable local exporters to be able to compete with other edible oil producers.

"We feel the market will maintain at about RM1,000 which may be a healthier level so that we will remain competitive in the world oil market," he said.

Yang said his company, which owns 10,000 hectares of palmoil and produces 36,000 tonnes of palmoil per year, would adhere to the government's proposal to sell forward.

"We will try because at RM1,200 per tonne, the price is good.

"There is a very good margin. Good to lock up some of our production just in case it drops back to RM700 or RM800. At RM1,200 we are making RM400 to RM500 a tonne," he added.

'Sell now'

Yesterday, Primary Industries Minister Lim Keng Yaik warned that the sudden sharp rise in palmoil prices is limited and producers should cash in now.

"Sell now. Sell forward .... This is good enough price. Sell whatever you have," Lim told reporters.

Malaysia produced 10.8 million tonnes of palmoil and contributed to 50 percent of palmoil production last year.

Lim told producers at the conference that there was an immediate demand of 300,000 tonnes of palmoil stearin for soap making in Latin America.

Acknowledging that shipping distance was long, he suggested producers to establish a storage facility either in Brazil or Venezuela.

"The facility can meet any small orders from countries in the region since stearin can be stored for a long period and the move will open new markets for Malaysia," he said