Jakarta, 23 February 2011

Palm oil output at Bakrie Sumatera will jump by nearly 25 percent this year, while its plantation estates will expand by an additional 5,000 hectares, the company said on Tuesday. The strong production rise is due to some plantations coming into peak yield, Ambono Janurianto, president director at the planter, has told Reuters, while acreage will increase from the company's own landbank. Commodities Now ...

"The ramp up production is going to be quite strong because of the low and immature plantation -- we have a high concentration of immature plantations," said Janurianto. Bakrie Sumatera, the agricultural unit of the politically connected Bakrie Group, produced 220,000/230,000 tonnes of palm oil last year, and sees 280,000 tonnes in 2011.

The firm had about 134,000 hectares of plantations in 2010 this year -- mainly in Sumatra -- versus 119,000 hectares in 2009. About 80 percent is planted with palm oil and the rest with natural rubber. In "2011, we are only going to be planting - - it is not going to be an aggressive one (expansion)," he said. "We are only going to greenfield plantings," he said, referring to a practice of a company only clearing and using its own landbank.

The majority of Bakrie Sumatera's estates are located in the island of Sumatra. Since early 2007, the company has expanded into Central Kalimantan and is currently developing greenfield estates there.

Late last year Bakrie Sumatera bought control of the distressed assets of Domba Mas Group. Dobma Mas specialises in oleochemical and palm oil products and mainly operates in North Sumatera province, with its most prized asset a plant in Kuala Tanjung.

Oleochemicals are derived from biological oils or fats and are largely used to produce bio-diesel and cosmetics. "We are going to concentrate and put all our resources into Dobma Mas," he said. "The first plant (will be running) in April."

Janurianto, who was previously the chief financial officer of the company, said there were no acquisitions planned this year. Jakarta-listed Bakrie Sumatera is one of Indonesia's oldest plantations companies, with a history dating back to 1911.

CPO PRICES SEEN FIRM

Global palm oil production stood at about 45 million tonnes in 2010, with India buying about 8 million tonnes, China 7 million, and Europe 6 million. Bakrie Sumatera sells most of its palm oil to traders for markets in China and India. The benchmark May crude palm oil contract on the Bursa Malaysia Derivatives Exchange hit a near three-year high at 3,967 ringgit ($1,307) this month, on worries that output would fail to keep pace with robust demand.

"It will stay quite high," he said. "(But) It is not going to be at 4,000 (ringgit)" Janurianto sees firm palm oil prices this year, within an average range between 3,500-3,800 ringgit. One area of concern however, is Indonesia's export tax for crude palm oil (CPO), which rose to 25 percent in February from 20 percent in January, as it seeks to ensure that domestic requirements are met.

"Every month there is change in the tax rate," he added. "What if I do a sale last month, delivery this month, eventually I have to come up with an additional 5 percent.

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By Michael Taylor, Reuters - for Commodities Now.