(AFP) – Aug 25, 2008

KUALA LUMPUR (AFP) — Malaysia's plantations minister said Monday that the price of palm oil, which has plummeted 42 percent in recent months, was now at a more realistic level.

The government last month said it would implement measures to stabilise the palm oil price, which is now at about 2,600 ringgit (774 dollars) per tonne from a high of 4,486 ringgit in March.

But Plantations Minister Peter Chin said the price of palm oil, which has fallen in line with dropping crude oil prices, should now range between 2,500 and 3,000 ringgit per tonne, barring any external shocks.

"We have to realise that the palm oil price is also dependent on the drop in the mineral oil price," he said on the sidelines of a palm oil seminar.

"So its not surprising that palm oil drops to a level that is more reflective of its intrinsic value," he said.

"I think (prices) will remain around the present level for some time, it will find its right level hopefully at this 2,600 ringgit level."

Chin said Malaysia was planning to increase exports to Western countries where palm oil can be used as biofuel during the upcoming winter, and increasing the use of crude palm oil for biofuel production in Malaysia.

Oil palm cultivation occupies 67 percent of Malaysia's total agricultural land, and some 500,000 people are engaged in the sector. Malaysia hopes palm oil production will hit 20 million tonnes by 2020.

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