W5 Palm Oil Update: Indonesia Forecasts 9.08% YoY Surge in Palm Oil Consumption in 2024, India to Bolster Domestic Oilseed Production

Indonesia's Crude Palm Oil Consumption Forecasted to Surge by 9.08% YoY in 2024

Indonesia's domestic consumption of crude palm oil (CPO) in 2024 is projected to increase by 9.08% year-on-year (YoY) to reach 25.40 million metric tons (mmt), driven by rising demand for food, biodiesel, and oleochemicals. This growth follows an upward trend, with national CPO consumption expected to reach 23.28 mmt in 2023, up from 21.14 mmt in 2022.

Indonesia Sets Feb-24 Palm Oil Price at USD 806.40/MT

According to Indonesia's trade ministry decree, the palm oil reference price for February 1 to 29 is set at USD 806.40 per metric ton (mt), up from USD 774.93/mt. The export tax and levy for CPO are established at USD 33 and USD 85/mt, respectively. From Feb-24, Indonesia will set its palm oil reference price monthly, a change from the previous bi-weekly schedule, aiming to provide stability for businesses, especially exporters, and streamline logistics. This decision comes as Indonesia, the world's leading palm oil exporter, adjusts to global market dynamics amid a scarcity of vegetable oil and price volatility.

Ganoderma Threatens Indonesia's Palm Oil Industry

A crucial component of Indonesia's agricultural exports, the palm oil industry faces a significant threat from stem rot disease caused by Ganoderma. The disease affects smallholder plantations across Indonesia, covering 46.76 thousand hectares (ha), especially in Sumatra, where 34 thousand ha are impacted. The affected provinces include Nanggroe Aceh Darussalam (NAD), North Sumatra, Riau, West Sumatra, Jambi, Bangka Belitung, South Sumatra, Lampung, Central Kalimantan, East Kalimantan, West Kalimantan, and West Sulawesi. Despite various government efforts to monitor and control Ganoderma, challenges persist. The palm oil industry, vital for foreign exchange and employment, faces sustainability concerns due to Ganoderma attacks, posing a threat to Indonesian palm oil production amidst the challenges of the COVID-19 pandemic.

UK Advisory Group Recommends Zero-Tariff on Sustainable Malaysian Palm Oil

According to the Trade and Agriculture Commission (TAC), a United Kingdom (UK) government advisory group, Malaysian palm oil is deemed sustainable and would benefit from a zero import tariff rate. The Malaysian Palm Oil Council (MPOC) highlighted that the Malaysian Sustainable Palm Oil Certification Scheme (MSPO)'s environmental requirements surpass UK legal standards, suggesting potential benefits for the UK in importing Malaysian palm oil due to its higher sustainability standards.

Malaysian Palm Oil Futures Experienced Largest Weekly Drop in Nine Months

Malaysian palm oil futures experienced a fourth consecutive session of losses, culminating in their most significant weekly decline in nine months. This downturn was due to India's decision to reduce vegetable oil imports, coupled with sustained weakness in competing edible oils and a strengthened ringgit. The benchmark palm oil contract for Apr-24 delivery on the Bursa Malaysia Derivatives Exchange closed at USD 797.88/mt, marking its lowest close since January 11. With a weekly decline of 6.35%, this represents the contract's most substantial weekly drop since May 2, 2023.

India Plans to Boost Domestic Oilseed Production to Reduce Reliance on Costly Imports

India's finance minister announced plans to enhance domestic oilseed production to curb costly imports of vegetable oils from leading global producers. Despite being the world's largest vegetable oil importer, India spent a record USD 20.8 billion on edible oil purchases in the previous fiscal year. With stagnant oilseed production, over two-thirds of India's annual vegetable oil consumption of approximately 23 mmt is imported, primarily palm oil. To achieve self-reliance in oilseeds like rapeseed, peanuts, sesame, soybean, and sunflower, the government plans to implement strategies including research for high-yielding varieties, modern farming techniques, market linkages, assured purchases, value addition, and crop insurance.