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Indonesian rubber, palm oil output at fire risk

Reuters - September 26, 1997

Lewa Pardomuan, Jakarta – Forest fires in Indonesia have spread to rubber and palm oil plantations and are likely to hit output, officials and traders said on Friday.

Agriculture Minister Syarifuddin Baharsyah said 173 plantation areas were reported to be on fire, 73 of which had actually made reports to the ministry.

"Most of them are palm oil and rubber plantations. I think it will affect palm oil and rubber output," Baharsyah said, adding that the fire had hit palm oil plantations which were almost mature.

He gave no further details, but said the fires had hit a total of 79,169 hectares (around 195,600 acres) of plantation land on Sumatra and Sulawesi islands and in Kalimantan, the Indonesian part of Borneo island.

The fires have caused a smoggy haze blanketing much of Southeast Asia affecting Malaysia, Brunei, Singapore, the Philippines and Thailand. Palm oil traders said the haze would also have an impact on the ripening of fruit on the palm trees.

"The haze which is caused by the fires has blocked the sun, which hampers the development of the fruit," said one trader in Medan, the capital of the key growing area of North Sumatra province.

"We expect to feel the decline in production next month. However, it is hard to make calculations on the percentage of the fall yet," he said.

Some traders have attributed a recent rise in palm oil prices to tight supply in the wake of an ongoing drought.

Traders have said the drought sweeping the archipelago and linked to the El Nino weather pattern forming in the Pacific had jeopardised crops such as palm oil, cocoa, rubber and coffee.

Indonesia has said crude palm oil production was projected to rise to 5.2 million to 5.3 million tonnes in 1997, compared with 4.5 million tonnes last year.

Nafis Daulay, chairman of the Association of Edible Oil Industries, told Reuters the impact of the El Nino phenomenon would be felt on the production of palm oil in early 1998.

"This kind of situation will lead to a tight supply of palm oil, especially in early 1998," he said. Daulay said the impact of El Nino on palm oil plantations in Indonesia and Malaysia, which are the world's largest producers of palm oil, started to be felt in early July.

"In Indonesia, especially in Sumatra and Kalimantan, high temperatures were felt since the first three weeks of July and in August. This kind of situation will worsen in the months to come," he said.

Daulay said farmers in most plantations in the Rantau Prapat area in North Sumatra had to collect water from nearby rivers to irrigate trees due to a lack of rains.

"The southern part of Sumatra has not received sufficient rains for the (palm) plantations, which has led to a decline of production of between 25 percent and 30 percent," he said without elaborating.

But Daulay said local demand still could be met if there was no rise in export, adding that a policy on export tax would be useful to curb the flow of oils outside Indonesia.

Most traders were still concentrating on export because of the weaker rupiah and a bullish overseas trend.

Palm oil was quoted at 1,800 rupiah/kg in Jakarta on Friday against 1,770-75 on the previous day. Crude palm oil was quoted at 1,525 rupiah/kg in Medan.