palm oil

Futures contracts of crude palm oil on the Bursa Malaysia Derivatives ended lower due to expectations of higher output in Indonesia this year. Indonesia Palm Oil Association expects the country’s crude palm oil production to rise 12.3% to 36.5 million metric tonne this year. The most-active January contract of crude palm oil on the Malaysian bourse closed at 2,804 ringgits (42,796.84 rupees) per metric tonne, down 0.6% from the previous close.

Indonesia Palm Oil Association, or GAPKI, expects the country’s crude palm oil production to increase 12.3% to 36.5 million metric tonne in 2017. With the estimated significant increase in palm oil production this year, Indonesia’s exports (of crude palm oil and its derivatives) is expected to reach 30 million metric tonne, up around 20% from last year.

The Indonesian government has issued a fresh threat to European Union countries that it would stop importing milk powder, wine and Airbus aircraft if the bloc continues discriminating against palm oil in its market. European parliament started a trade war by passing a resolution earlier this year that accused oil palm plantations of causing deforestation. EU discriminatory policy on palm oil is actually a matter of competition in the global market between palm oil and vegetable oils produced in the EU. The Indonesian government does not subsidise palm oil, there is no dumping practice either.

Palm oil imports to Russia totaled 79.2 KMT in September 2017, or almost 24.3% more than in the previous month (63.7 KMT). However, the purchases are down 11.7% from the same time last year (89.7 KMT).

The futures contracts of crude palm oil on MCX fell 1% tracking losses on the Bursa Malaysia Derivatives, where futures fell due to weakness in soyoil prices on CBOT. The prices of soyoil and palm oil tend to move in tandem as they are used as alternatives in manufacturing bio-fuel. The most active November contract of crude palm oil on MCX traded at 541 rupees per 10 kg, down 1% from the previous close. A firm ringgit also dragged down the prices of the palm oil on the Malaysian bourse. However, prices are expected to recover in the near term in anticipation of lower crude palm oil production in Malaysia in coming months.

Malaysia palm oil production is seen at 21 million metric tonne in 2017-18 marketing year, up 7.7% on year. Malaysia, the world’s second largest grower of the edible oil, produced 19.5 million metric tonne palm oil in 2016-17 (Oct-Sep). Area under oil palm trees is seen rising to 5.2 million ha in 2017-18 from 4.9 million ha a year ago. Palm oil exports from Malaysia are projected at 18 million metric tonne this year, up from 17 million metric tonne in 2016-17. Total supply of the tropical oil for 2017-18 is seen at 22.73 million metric tonne, higher than 21.85 million metric tonne the previous year. Malaysian Palm Oil Board, however, has estimated 18.9 million metric tonne productions of the tropical oil against the USDA arm’s estimate of 19.5 million metric tonne for the year ended September.

Futures contracts of crude palm oil ended marginally higher on the Bursa Malaysia Derivatives today due to a weak ringgit against the dollar. A weak Malaysian currency makes crude palm oil attractive for overseas buyers. The most-active January contract of crude palm oil on the Malaysian bourse ended at 2,817 ringgits (43,173.49 rupees) per tn, up 0.1% from the previous close.

Palm oil imports to Ukraine totaled 33.9 KMT in September 2016/17. This is 14.2% less than in the previous month (39.5 KMT), but a record high for September. So, imports almost doubled against September 2016 (17.9 KMT).

The Indonesian government is unlikely to impose an export duty on crude palm oil in November as the price of the vegetable oil in the global market remains low. The average price of crude palm oil over the last one month was relatively low at below the export duty threshold of $750 per metric tonne.

Malaysia’s palm-oil exports during the October 1-25 period are estimated to be up 8.55% on month at 1,177,939 metric tons.

Malaysia, the world’s second-largest palm oil producer after Indonesia, has hiked its export duty on palm oil for November. For November, the tax on the export of palm oil be 6.5%, compared with 6.0% in October. When prices of palm oil exceed 2,250 ringgits (34,671.15 rupees) a metric tonne, exports of the commodity by Malaysia incur a multi-tier tax rate of 4.5-8.5%. The most-active December contract on the Malaysian bourse ended at 2,710 ringgits a metric tonne, up 0.5% from the previous close.

Futures contracts of crude palm oil on Bursa Malaysia Derivatives were slightly up. The most active December crude palm oil contract on the Malaysian bourse was up 1 ringgit from the previous close. However, strength in the Malaysian currency against the dollar and a rise in palm oil inventories in September is seen restricting gains. A firm ringgit makes export of palm oil less attractive for Malaysian sellers. Weaker demand post the festival season is expected to further dampen price outlook.

India palm oil imports from Indonesia rose 24% on month in August to 786,820 metric tonne though the country doubled import duty on the commodity earlier that month. Declining domestic vegetable oil stocks and a fall in soybean production in Canada and Australia at the same time due to unfavourable weather prompted this increased buying. The decline of soybean output in several key producing countries may trigger a drop in vegetable oils stock globally and likely drive up palm oil prices. Indonesia’s palm oil exports to India in Jan-Aug amounted to 5.21 million tn, 49.7% higher than 3.48 million metric tonne last year. In 2016, Indonesia exported 5.78 million metric tonne of palm oil to India.

Malaysia’s crude palm oil inventory in September rose 3.98% on month to 2.02 million metric tonne, while exports increased 1.82% to 1.52 million tn. However, palm oil production declined 1.69% on month in September to 1.78 million tn. Crude palm oil stocks were at 1.07 million metric tonne at the end of September, up 0.96% on month. Processed palm oil stocks were also up, rising 7.58% on month to 952,550 tn. Malaysia is the world’s second-largest producer and exporter of palm oil. Biodiesel exports from Malaysia were at 8,393 metric tonne in September, down from 12,375 metric tonne sold overseas in August.

Futures contracts of crude palm oil extended gains for the second straight day on the MCX due to demand for the tropical oil ahead of Diwali. Gains in soyoil contracts on the CBOT too supported crude palm oil prices on the domestic bourse. The most-active October contract of crude palm oil on MCX was up 0.5% from the previous close.

Global palm oil prices are likely to find short-term support at 2,600 ringgits per tonne, up 8% from August estimates, by Oct-Dec on the Malaysian bourse. Palm oil price forecast is revised higher due to price run up in third quarter. However, the financial services company estimates a bearish view for 2018. The rise in the inventory in Malaysia and Indonesia in the coming months is likely to keep prices weak. Inventory of palm oil in Malaysia in August rose by 8.9% on month to 1.94 million tonne, the highest levels since March 2016. Lower imports from India and China in the coming months are also likely to keep sentiment bearish. However, the view for soybean and its derivatives is unchanged for Oct-Dec. The bank estimates average soyoil contracts on the Cbot to trade at 33.5 cents per pound and soybean contracts to trade at $9.50 per bushel during Oct-Dec.

The Indonesian trade ministry has kept the export duty on crude palm oil at zero for October. In September, too, the Indonesian government had not levied any export duty. The reference price for crude palm oil for October was $740.09 per tonne, up from $697.26 per tonne for September but below the export duty threshold of $750 per tonne.

Indonesia and India discussed issues pertaining to the palm oil and pharmaceutical industries during the second Biennial Trade Ministers. Indonesia took up India’s decision to hike import duty on crude palm oil to 15% from 7.5%, and on palm olein to 25% from 15%.

After declining for two consecutive sessions, futures contracts of crude palm oil on Bursa Malaysia Derivative recovered tracking gains in soy oil contracts on the CBOT. Prices of crude palm oil and soy oil typically move in tandem, as both are used as substitutes for each other. Despite expectations of higher Malaysian palm oil output in September, a rise in exports to China and the Indian subcontinent is likely to cap inventories. Malaysia’s palm oil exports during Sep 1-25 rose over 16% on month to 1.1 mln tn.

India aims to bring around 75,000 ha of additional land under oil palm plantation by 2018-19 (Apr-Mar) to boost production of palm oil in the country. Efforts are being made to increase domestic production in the country. Andhra Pradesh, the largest palm oil producing state, has 156,000 ha under the crop. Karnataka, Tamil Nadu, Mizoram and Odisha are other major states where oil palm is cultivated. The plant is also grown in parts of Chhattisgarh, Gujarat, Assam, Arunachal Pradesh Nagaland, Telangana, Kerala and Goa.