Demand for agriculture products has an inelastic demand and it implies that a reduction in the demand for palm oil means that revenue will fall drastically (percentage decrease in price is larger that percentage decrease in quantity demanded).
In theory producer of agricultural products tend to limit its production as acquire high price in order to gain larger revenue.
MIRI, July 26 (Bernama) -- Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui will meet his Indonesian Agriculture Minister Dr Anton Apriyantono in Jakarta next week to discuss measures to be taken concerning the current downward trend of palm oil prices. Speaking to reporters here Saturday, Chin said the meeting would be significant for both countries as they commanded over 85 percent of the world's palm oil production . Definition of having monopoly power is to have control 1/3 of the market production. Malaysia and Indonesia have 95% of the world supply of the palm oil and it is surprising to see that consumers are controlling over the price of palm oil.
Sabah became the country's main palm oil producer on 1.24 million hectares of the total 4.3 million hectares, Plantation Industries and Commodities Deputy Minister Datuk Anifah Aman said Saturday (DE 17.02.08).
The government must be diligent enough to be able to control its supply of palm oil so as to control the price of palm oil. I recommend at time of fall prices, producers must put more attention on refineries even its means accruing less revenue until world palm oil price become attractive once again.
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