W52: Weekly Palm Oil Update
Indonesia
The Price of Cooking Oil Had Set a Record in 2022 in Indonesia
In Indonesia, the price of cooking oil reached a record in 2022. The fact that cooking oil was in short supply had to be faced by Indonesia, the world's largest producer of palm oil. On Wednesday, December 28, 2022, the price of cooking oil increased by USD 0.015 to USD 1.15/litre of basic packaging. For bulk cooking oil, it decreased by USD 0.031 to USD 0.90/litre, though. A rise in the price of crude palm oil (CPO) on the global market caused this domino effect. The rise in global CPO prices was allegedly caused by the Russo-Ukrainian war, which started in February 2022. Since 2021, the prior trend has gotten stronger. In response to this directive, Trade Minister Lutfi set a single price for cooking oil before switching it to the highest retail price (HET) policy with varying amounts depending on the type. This is accompanied by a mandatory policy for exporters of raw materials for cooking oil, crude palm oil (CPO), and their derivatives to satisfy domestic demand (the domestic market obligation, or DMO).
Pockets Drained by the Spike in Food Prices in Indonesia
A variety of food items, including rice, cooking oil, and chilies, have increased in price in 2022 in Indonesia. Even the Minister of Trade, M. Lutfi, was compelled to resign from his position due to the commotion around the price of cooking oil. This year, cooking oil has been the food item that has garnered the most attention. From January to April 2022, this commodity continues to be the main factor responsible for inflation. Due to the spike in the price of crude palm oil (CPO) on the international market, the price of cooking oil has increased significantly since November 2021, rising from roughly USD 1.02/litre to above USD 1.28/litre.
Indonesian Palm Oil Exports to Reach 34.67MMT in 2022
The Indonesian Palm Oil Fund (BPDPKS) estimates that in 2022, Indonesia will export 34.67MMT of palm oil to international markets, which is 2MMT fewer tonnes than in 2021. In order to stabilise domestic prices, the export of crude palm oil and its derivatives was prohibited at the end of April. However, deliveries will increase to 36–38 MMT in 2023 as Indonesian export restrictions gradually loosen.
Malaysia
CPO Futures on Bursa Malaysia Derivatives End Higher on Last Trading Day of 2022
On the final trading day of 2022, crude palm oil (CPO) futures contracts on Bursa Malaysia Derivatives (BMD) closed higher, following gains in the soybean oil market on the Chicago Board of Trade (CBOT). At the close, the prices for January 2023 increased to USD 947.09/MT, for February 2023 to USD 945.05/MT, for March 2023 to USD 947.78/MT, for April 2023 to USD 944.37/MT, and for May 2023 to USD 940.05/MT.
Malaysia’s Crude Palm Oil Price for 2022 Projected to Be 15.7% Higher YoY
The crude palm oil (CPO) average price is expected to increase by 15.7% YoY to USD 1,157/MT in 2022 from USD 1,000/MT in 2021, according to the Malaysian Palm Oil Board. The anticipated better performance may be influenced by a number of factors, namely a rising demand for palm oil. In addition, the ongoing conflict between Russia and Ukraine has hampered the world's supply of sunflower oil, driving rising demand for palm oil as a replacement. The rising soybean oil and Brent crude oil prices on the international market are other factors that could affect how well Malaysian palm oil performs.
Malaysian Palm Oil Posts Annual Loss After Three Years of Gains
On Friday, December 30, Malaysian palm oil futures increased as leading producer Indonesia tightened export regulations, but the benchmark contract experienced its first yearly loss in three years. Due to the constrained supply caused by the Ukraine conflict and a decline in demand brought on by the epidemic in China, a crucial market, palm oil prices have been volatile this year. The benchmark March delivery price of the Bursa Malaysia Derivatives Exchange's benchmark palm oil contract increased by 2.15% toward the end of 2022, to USD 949.55/MT. For the whole of 2022, it lost 11%.
Malaysian Palm Oil Ends Flat on December 29, Demand Concerns Weigh
On Thursday, December 29, Malaysian palm oil futures recovered losses after trading in a tight range, but the contract ended essentially unchanged due to sluggish demand and dealers booking profits. On the Bursa Malaysia Derivatives Exchange, the benchmark palm oil contract for March delivery increased by 0.07% to USD 929.44/MT.
After a prolonged Christmas holiday, palm oil futures in Malaysia increased 7% to a three-week high on December 27 in response to China's plan to relax tourist border regulations. The data on the high rise in the number of cases of COVID and the significant burden on the Chinese medical system are being ignored by the market thus far. China will no longer require travelers arriving in the country to undergo quarantine starting January 8, a major step toward reopening borders that have been blocked since 2020. As a result, February palm oil futures on Malaysia's Bursa rose 7% to USD 927/MT, the biggest daily gain in three months.
Crude Palm Oil Expected to Average USD 850/MT in 2023
In contrast to 2022's average price of USD 1,175/MT, benchmark crude palm oil (CPO) spot prices in Malaysia are expected to average USD 850/MT in 2023. The benchmark prices have increased from the end-September level of roughly USD 700/MT to approximately USD 850/MT in Q4 2022, according to a statement on Tuesday, December 27. Prices are anticipated to rise above USD 900/MT in the first half of 2023.
Palm Oil Jumps Most in Five Months on China’s Move to Relax Curbs
On December 26, palm oil saw its largest gain since July as anticipation that demand in one of the world's top consumers of edible oils would increase boosted by China's decision to lift the quarantine imposed on foreign visitors. Beginning on January 8, 2023, China will no longer quarantine visitors, putting the country on track to end its three-year self-imposed global isolation under the COVID Zero policy, which wrecked the economy and fueled long-standing public unrest. As a result, palm oil futures climbed 7.2% to close at USD 933.41/MT in Kuala Lumpur, the highest close in more than three weeks. Other commodities including crude oil also gained.
Malaysia Slightly Reduced Palm Oil Exports in December
From December 1 to December 25, 2022, Malaysia sold 1.26 MMT of palm oil and its fractions to overseas markets. Exports declined marginally by 0.8% MoM from 1.27MMT compared to the same period in November. Between December 1-25, India imported 411,300 MT of Malaysian palm oil, followed by Europe at 311,400MT and China at 100,200MT.
India
India Extends Policy to Import Refined Palm Oil at Lower Tariffs
Lower tariffs have allowed India to broaden its import policy for refined palm oil. On December 31, the structure of concessional rights for refined palm oil was set to expire, but it has been postponed until further notice. India decreased the basic import tax on refined palm oil in December 2021, bringing the overall import tax down from 19.25% to 13.75%. Due to decreasing taxes, imported refined palm oil has grown in 2022. India is still expected to be importing about 200,000MT of refined palm oil each month in the upcoming months.
Colombia
Colombian Palm Oil Exports to Venezuela Increased in 2022
In 2021, Colombian Palm Oil FOB sales recorded USD 11.5M from January to October. In 2022, thanks to a reprieve of commercial relations between the two countries, palm oil exports grew 108%, reaching USD 24.1M FOB during the same period.
