Palm oil prices in the doldrums even as production costs rise: Report

PALM oil prices have fallen off since last year, even as production costs - including fertiliser and labour costs - continue to rise.

The pressure on profit margins is likely to drive some consolidation in the palm oil industry, said a report released last week by Rabobank.

Expectations of a strong production cycle and demand for palm oil lagging behind output have kept prices down, said Rabobank analyst Pawan Kumar.

The price of crude palm oil fell 35 per cent between January and October last year, from 3,223 ringgit (S$1,294) to 2,115 ringgit per tonne - its lowest levels since the global financial crisis.

Since then, prices have remained subdued - as of Monday, the price per tonne stood at 2,354 ringgit.

While prices have dropped significantly, production costs in Indonesia and Malaysia - the largest producers of palm oil - have increased 6 and 9 per cent per year respectively between 2008 and 2012.