Palm Spreads its Wings in Brazil, Plantings Rise

Naveen Thukral, PlanetArk 21 Nov 07;

KUALA LUMPUR - Palm plantations in Brazil are likely to expand at least three-fold in the coming years as demand rises and the nation seeks to benefit from soaring prices of the commodity, a top producer said on Tuesday.

Brazil, whose main crop is soybeans, has some 8.5 million hectares in the northern state of Para suitable for growing palm trees, said Marcello Brito, commercial director of Agropalma, Latin America's biggest palm oil producer.

"If you want to expand oil palm production in the world, the place is Brazil because it has plenty of suitable land and the right tropical climatic conditions," he told Reuters in an interview on the sidelines of an industry meeting.

Prices of palm oil have more than doubled since January 2006 and it has led to rapid expansion of palm plantations across the world led by Indonesia.

Crude palm oil, which costs around 600 to 800 ringgit a tonne to produce, is selling around 3,000 ringgit a tonne in the Malaysian market.

Brito said some 75,000 hectares of palm estates in Brazil produce 160,000 tonnes of crude palm oil annually.

"We have companies that have bought new areas for growing palm plantation in northern Brazil," he said. "We expect that we can more than triple the planted area in the next 5 years."

The official said palm oil use in Brazil was increasing because it was considered as a healthy alternative to hydrogenated fats and as a source of biodiesel.

"Potential for palm oil continues to be really big, right new studies for plantations are going on (related to the biodiesel expansion)," he said.

Brito was taking partin in a meeting of producers, buyers and environmentalists to discuss expansion of oil palm estates across Southeast Asia and their impact on the environment and rainforests.

Brazil will need additional one million tonnes of vegetable oils in 2008 because the country has made it mandatory to blend 2 percent edible oil-based biodiesel from January, Brito said.

He said around 50 biodiesel units with a combined capacity of 2 million tonnes a year have come up in Brazil.

"Some of these plants are still under construction and 90 percent are soybean processing."

"It is not just biodiesel, most of the margarine produced in Brazil now is a blend of soyoil and palm oil. You have to replace hydrogenated fats."

Palm oil demand has risen sharply from China to Europe in the past few years and countries like United States are buying more shipments to replace hydrogenated oils to avoid unhealthy fatty acids. (Reporting by Naveen Thukral, Editing by Peter Blackburn)