1.Weekly News

Malaysia

Rising Sunflower Oil Prices Boost Palm Oil Contracts

The benchmark palm oil contract (FCPOc3), for delivery on Aug-24, on the Bursa Malaysia Derivatives Exchange closed at USD 867.13 per metric ton (mt) on May 31, 2024. The contract gained 5% for the week due to boosted exports in May-24 and increasing sunflower oil prices. According to local traders, the recent surge in sunflower oil prices has also led buyers to purchase palm oil as it is comparatively cheaper. Additionally, stronger crude oil futures make palm oil a more attractive option for biodiesel feedstock.

Indonesia

Export Ban and Competition from Vietnam Impacts Indonesian CPO Exports

The Indonesian Ombudsman has identified competition from Vietnam as a critical factor in the recent decline in Indonesian crude palm oil (CPO) exports. A 2022 ban on Indonesian CPO exports to several countries, including the European Union (EU) and India, bolstered this competition. As a result, buyers in these countries sought alternative suppliers, such as Vietnam, which quickly responded with a competitive policy.

Indonesia Lowered Jun-24 CPO Reference Prices

According to a government circular from the Indonesian Trade Ministry dated May 31, 2024, Indonesia has set its Jun-24 reference price for CPO at USD 778.82/mt, a decrease from USD 877.28/mt in May-24.

Indonesia's Palm Oil Industry Grapples with Severe Mismanagement

The Indonesian Ombudsman uncovered severe mismanagement in the country's palm oil industry, which has led to an unregulated environment and widespread confusion. Problems include overlapping regulations, land permit issues, public service disruptions, and welfare concerns for oil palm farmers. In response, the Ombudsman intends to undertake a comprehensive review, empowered to issue enforceable recommendations and corrective measures.

Egypt

Egypt's Growing Palm Oil Consumption and Commitment to Sustainability

The Oils and Fats Department director at the Egyptian Chamber of Food Industries emphasized Egypt's significant role in the palm oil industry during the 2024 Malaysian Palm Oil Forum Egypt. He mentioned that Egypt is the fourth largest palm oil importer after India, China, and the United States (US), but the consumption within Egypt is increasing significantly. As a result, the country needs to provide sustainability solutions. As part of its sustainability efforts and commitment to a greener future, he pointed out that by 2030, Egypt will not use any products based on biofuels. He also noted that the country has taken significant steps towards sustainability, including using wind and solar energy.

Egypt Aims to Enhance Palm Oil Processing and Exports

According to the head of the General Authority of the Suez Canal Economic Zone, Egypt aims to enhance its palm oil processing capabilities to benefit both local and international markets. Leveraging agreements with global partners, Egypt seeks to become a significant exporter of processed oils, prioritizing health standards and renewable energy production. Adabiya Port, which handles 100% of Egypt's palm oil imports, is crucial in this initiative. Egypt is committed to further processing before distribution, aligning with global industry trends to develop and improve its palm oil sector.

2. Weekly Pricing

Weekly Palm Oil Pricing Important Exporters (USD/kg)

Indonesia

In W22, palm oil prices in Indonesia increased by 3.41% week-on-week (WoW), reaching USD 0.91 per kilogram (kg) compared to USD 0.88/kg in Week 21. This price increase can be attributed to solid future prices driven by surging sunflower oil prices, making palm oil prices competitive. Nevertheless, the Indonesian palm oil industry still faces challenges, including severe mismanagement, competition from Vietnam, and export bans. The government must implement sustainable strategies to maintain development.

Malaysia

Malaysian palm oil prices increased by 2.41% WoW to USD 0.85/kg in W22. These prices are supported by increasing sunflower oil prices, stronger crude oil futures, and boosted exports in May-24. The price increase in sunflower oil and the strong futures of crude oil make palm oil a more attractive option for biodiesel feedstock.

Thailand

In W22, Thailand experienced a 2.33% WoW increase in palm oil prices, reaching USD 0.88/kg. Despite this price rise, the country's palm oil production suffered due to the poor quality of fresh palm fruit caused by extremely hot weather. Additionally, fresh palm prices declined in Apr-24 and May-24 due to an oversupply. However, prices are expected to recover soon, as farmers have been advised to delay their harvest and only collect fully ripened nuts.

3.Actionable Recommendations

Enhance Export Strategy

Indonesia must adapt its export strategies in response to changing market conditions and the recent decrease in CPO reference prices. Diversifying export markets and optimizing pricing strategies to align with global demand trends will be crucial. By focusing on expanding into new markets and adjusting prices to remain competitive, Indonesia can sustain export growth and better navigate the complexities of the international palm oil market.

Improve Fresh Palm Quality

Thailand must focus on improving the quality of fresh palm fruit by providing farmers with guidance and resources. Launching training programs on best harvesting practices and introducing incentives for quality improvements can significantly enhance the quality of palm oil. By ensuring that only fully ripened nuts are harvested, Thailand can improve palm oil quality, leading to higher market prices and better competitiveness in the global market.

Expand Processing Capabilities

Egypt must invest in infrastructure to enhance its local palm oil processing capabilities, benefiting local and international markets. Developing processing facilities in strategic locations like Adabiya Port and fostering partnerships with international investors can significantly boost local processing. This initiative will improve product quality and increase value-added exports, positioning Egypt as a significant player in the processed palm oil market.

Source: Hellenic Shipping News, Kontan, Almalnews