Indonesia & Malaysia to focus on expanding demand as palm oil prices fell to 10 per cent this year on weak demand

Indonesia, palm oil export in July climbed to the highest level in six months as lower prices encourage imports, specially from India. Indonesia exports rose almost 10 percent from a month earlier to 2.51 million metric tons according to surveyors.

Indonesia production seems unchanged at 3.95 million tons, while inventories advanced about 1.2 per cent to 4.91 million tons, according to the survey.  Gapki may release July data later this month.

Palm oil prices fell to 10 per cent this year on weak demand, high production concern from Indonesia & Malaysia and increasing inventories prompted Indonesia & Malaysia to focus on expanding demand, including measures to boost its biodiesel mandate from September. Moreover, also, Indonesia has asked for its companies to be allowed to build palm oil jet fuel plants in the United States and France.

On the demand side, India has taken advantage of a discount of $30-$40 a ton of Indonesian palm oil compared to Malaysia prices. Mostly buying crude palm oil from Indonesia and palm olein from Malaysia. While also Indonesia kept its duty on crude palm oil exports at zero in July. However, Indian buyers may hold off imports from Malaysia in August as Malaysia has reduced its export tax on crude palm oil for September to zero from 4.5 per cent this month.

In front of Malaysia exports, AmSpec pegged Malaysia palm oil export for Aug 1-20 down by 10.6% 609,098 compared to 681,178. At production front, SPPOMA reported palm oil production for 1-15th Aug’18 rose by 6.72% while FFBs yield has pegged by 2.98% M-o-M. Additionally, Oil Extraction Rate shown positive improvement by 0.71% at same time.