20120719 1154 Interview: Dry weather to keep Cargill palm output flat in 2012 by Reuters.

INTERVIEW: Dry weather to keep Cargill palm output flat in 2012 WLIL.SI - RTRS 
18-Jul-2012 20:49
By Michael Taylor
JAKARTA, July 18 (Reuters) - Crude palm oil output at Cargill will be unchanged at 300,000 tonnes this year, the U.S. agribusiness company said on Wednesday, as dry weather in Indonesia hurts production.
Crude palm oil shipments from the world's top producer have been hit by dry weather this year. For most of the archipelago, the rainy season is from October until April, although this can fluctuate. (Full Story) (Full Story)
"Why no improvement? We've gone through dry spells," said John Hartmann, chief operating officer at Cargill Tropical Palm Holdings, which runs the company's palm oil plantations, all of which are in the archipelago.
"The last two months have been very dry, and it's having an impact on our production," Hartmann told Reuters.
Cargill's plantations are in South Sumatra and West Kalimantan.
"Kalimantan was down and is recovering, and now we're seeing the down cycle go through Sumatra," Hartmann said.
Minneapolis-based Cargill, one of the world's largest privately held corporations, has about 70,000 hectares of palm oil plantations, up 6,000 hectares on 2011, said Hartmann.
"I don't know if it is an El Nino type of impact or not but certainly we went through a three-year cycle of above average rainfall, and now for the last 12 months or so it's been below average," he added.
Indonesia is not the only major commodity producer suffering from dry weather. The U.S. grain belt has been scorched by the worst drought since 1956, cutting estimated output and quality of corn and soybean crops, and bumping up benchmark global prices. (Full Story)
Malaysian crude palm oil futures dropped to a near three-week low on Wednesday, as traders booked profits partly on weaker exports and better production outlook in Malaysia after the U.S. weather-fuelled rally. (Full Story)
Weather, softening demand and falling oil prices could all play a role in prices for the second half, said Hartmann, who was unable to give an exact forecast.

SUSTAINABILITY
Cargill's palm plantations in Sumatra are all certified by the Roundtable on Sustainable Palm Oil (RSPO), and Hartmann said he expected the Kalimantan plantations would gain similar certification within one year.
The biggest challenges for the Indonesian palm industry are sustainability, land availability, and yield intensification.
"Cargill has some investments in Africa and interest in what's going on there," Hartmann added.
"(But) the heart of growth in the sector now is Indonesia and will continue to be for the mid-term -- the next decade."
Cargill's crude palm oil is primarily processed in Indonesia's domestic refineries, such as those operated by Singapore's Wilmar International WLIL.SI.
The company itself does not run any palm refineries in Southeast Asia's largest economy.
Indonesia has seen a more than $2.5 billion wave of investment to develop its refining industry since it slashed export duties for processed oil last October. (Full Story)
The move, intended to double its capacity and potentially supply the entire needs of Asia's top food consumers -- India and China -- is expected to increase competition with rivals such as Malaysia.
"We have no set plans at the moment, but it is our sector so we're always interested in monitoring it," Hartmann said on downstream processing in Indonesia.
However, Cargill does run palm refineries in Malaysia, processing Malaysian palm oil, he added.