Global
The World Market for Vegetable Oil on January 4, 2023
Futures for Malaysian palm oil declined from a near five-week high, although concerns over a shortage in supply in the world's biggest producer Indonesia slowed the drop. The opening price of the March 2023 delivery of palm oil on the Bursa Malaysia exchange was 1.18% lower at USD 954.36/MT. Malaysia, the second-largest producer of palm oil in the world, exported 1.51MMT of palm oil products in December 2022, a decrease of 0.5% MoM from 1.52MMT. After the most recent decision aimed at protecting domestic supply limited the quantity of approved exports, it is anticipated that Indonesia, the world's largest producer of palm oil, will see a decline in exports this year. India's imports of palm oil soared 94% YoY to a record high in December 2022 as refiners upped their purchases due to a greater decline in palm oil prices compared to competing vegetable oils.
Indonesia
Indonesian Palm Oil Sector Expresses Concerns Over EU Deforestation Legislation
The EU deforestation laws based on due diligence principles being proposed under the European parliament have reportedly alarmed the Indonesian government and the nation's palm oil trade associations. According to regional industry organisations, concerns over the possible effects of any new legislation are believed to have arisen with supplier partners in South East Asia. According to proposed legislation in the EU parliament, there would be increased responsibility placed on individual businesses to ensure that products coming into the EU from countries around the globe, including important sources of cocoa in West Africa and other key ingredients like palm oil coming from all over South East Asia are not associated with deforestation.
The EU will continue to get sustainable goods from Indonesia, such as palm oil. Therefor, The EU institutions must reinforce their commitment to pursuing collaboration and partnership with Indonesia and our ASEAN neighbours and acknowledge Indonesia as a valuable, dependable trading partner.
Minister of Trade Zulkifli Hasan Explains Why Indonesia Tightens CPO Exports
Indonesia's crude palm oil (CPO) export regulations were tightened in order to meet the demands of the next Ramadan and Idul Fitri, which will start in March 2023. The volume of domestic market obligations (DMO) that businesses performed decreased to the percentage of export volume. At the previous DMO volume of 1:8, participants in the palm oil industry were granted CPO export licences for eight times the domestic DMO volume. However, as a result of the implementation of this new legislation, commercial actors are now only allowed to export six times as much DMO as is being used domestically, or one to six. The strategy of restricting CPO exports won't significantly affect export performance because the quota allotted is still relatively high.
Malaysia
Malaysian Palm Oil Slides From a Near 5-Week High, Likely Tight Supply Limits Losses
Malaysian palm oil futures declined on Wednesday, January 4, after reaching a near five-week high the previous day, but gains were restrained by predictions of tighter supplies. The benchmark Bursa Malaysia Derivatives Exchange contract for March delivery of palm oil decreased 1.93% to USD 948.39/MT. The contract is mirroring an overnight decline in the American market, but losses have likely been restrained by lower supply and fewer shipments from Indonesia.
Palm Oil Scales Near 5-Week Closing High on Tighter Supply Outlook
In the first trading session of 2022, Malaysian palm oil futures surged to a close-to-five-week closing high, supported by a slowdown in output and a constrained supply from Indonesia. On Tuesday, January 3, the benchmark FCPOc3 palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange increased 1.94%, to USD 966.61/MT. The contract experienced its first yearly fall in four years in 2022, averaging USD 952.27/MT. Market gains on expectations of reduced first-quarter output and a drop in stock prices.
Slight Recovery for Palm Oil in 2023
In 2023, it's anticipated that the Malaysian palm oil market will continue to be unpredictable and improve just slightly. This is as a result of worries about the recession in the world economy, erratic weather patterns, the effects of the war in Ukraine, as well as inflation risk. As a result, crude palm oil (CPO) prices are expected to fall in 2023 due to increased supply availability of oils and fats on the global market, as well as the strengthening of the ringgit versus the US dollar. Due to the low yielding cycle and the current heavy rainfall that is affecting operations in some regions, CPO pricing is projected to start off well in Q1 2023 at about USD 908.37/MT. The CPO cost will probably stay supported until South Africa’s soybean harvests enter the market in March and April 2023.
Malaysia’s End-Dec Palm Oil Stocks Seen Falling to Four-Month Low
As production and exports stalled, Malaysia's palm oil inventories at the end of December likely fell to their lowest level in four months. To 2.17MMT, the lowest level since August, stockpiles decreased 5.3% MoM. Production decreased for a second month in a row as tropical storms and severe flooding hampered harvesting and supply lines throughout the second-largest producer in the globe. Additionally, exports decreased 1% to 1.5MMT, with cargo surveyors reporting a decline in shipments to China, a crucial market. Due to severe Covid-19 control efforts, demand from China has decreased in recent years. However, consumption is anticipated to progressively increase this year as Beijing relaxes its strict rules.
CPO Price to Average at USD 1158.17/MT in 2022 in Malaysia
The Malaysian Palm Oil Board (MPOB) sees that the Malaysian oil palm industry performs better in 2022 and that this improvement may last into 2023. Variables that could affect the performance of palm oil include the growing prices of Brent crude oil and soybean oil on the global market. Therefore, the price of crude palm oil (CPO) is predicted to average USD 1158.17/MT in 2022, a 15.7% YoY increase from USD 1000.80/MT in 2021. Between January and November 2022, the average CPO price increased 18.4% YoY to USD 1173.39/MT. Beginning in the third quarter of this year, CPO prices decreased as a result of the high production season, rising palm oil stocks, and declining soybean oil prices. Hence, MPOB foresees the CPO price to stabilise and average at RM3,800 a tonne in 2023.
India
The effect of the lower rate of duty on the import of sunflower, soybean, and palm oil as well as lentils has been extended by India for an additional 12 months, through March 2024. In India, the import tax on crude palm oil is currently 5.5%, down from 35.75% at the start of 2021. As their prices on international markets reached record highs in the middle of 2021, India lowered the rate of levy on imported vegetable oils.
In India, Rice Prices up 15% And Palm Oil Seen Rising Too
In India in the first week of 2023, the price of rice and palm oil are becoming more expensive. Within the last one month, rice price increased by up to 15%, while palm oil price has been increasing by USD 0.061-0.085/litre in the recent weeks.
Ghana
January Producer Prices for Palm Oil and Rubber Set by Ghanaian Authorities
In Ghana, the Tree Crops Development Authority (TCDA) with the mandate to regulate the tree crop sector has set the maiden price for palm oil fresh fruit bunch (FFB) at USD 104.41/MT and rubber at USD0.41/kg. Previously, prices were set informally by traders and farmers. All off-takers are expected to use these minimum prices from January 2023.
Uganda
Uganda to Open Up 100,000ha Palm Oil Plantation to Address Increasing Demand
The Ministry of Agriculture in Uganda is focusing on increasing palm oil production in Uganda to address the rising demand. The focus is on seven intervention areas and five policy areas targeting at least 100,000ha of new palm oil plantations. Uganda heavily relies on the importation of crude oil, and in 2020/21, the country imported crude palm oil worth USD 319M from Indonesia, Kenya, Malaysia, Thailand, and Colombia.
