The crude palm oil (CPO) price continues to rise supported by the impact of the El Nino weather phenomenon. El Nino causes a dry spell in Southeast Asia, home to the world's largest palm oil plantations. As a result, CPO inventories in Malaysia may have declined to 2.11 million tons, an 11-month low in February 2016. Meanwhile, Singapore-based agribusiness trader Olam International Ltd said CPO stocks will decline to the range of 1.5 - 2.0 million tons in the second quarter of 2016. Obstacles to higher CPO prices are Malaysia's strengthening ringgit (which curtails demand for Malaysian palm oil) and attractive prices of soybean oil.

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Again, crude palm oil (CPO) shipments from Indonesia - the world's largest CPO producer and exporter - declined. Based on the latest data from the Indonesian Palm Oil Producers Association (Gapki), palm oil exports from Indonesia fell 16 percent on a month-on-month (m/m) basis to 2.1 million tons in January 2016. This decline was mainly caused by falling palm oil demand from the key export countries China and India.

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The value of Indonesia's exports of crude palm oil (CPO) and its derivatives plunged 11.8 percent year-on-year (y/y) to USD $18.6 billion in 2015 from USD $21.1 billion in the preceding year. However, in terms of volume, Indonesian exports of CPO and its derivatives actually rose 21.7 percent to 26.4 million tons. The higher volume but lower earnings are explained by the palm oil price. Palm oil traded at an average of USD $614.20 per ton in 2015, down 24.9 percent (y/y) from an average price of USD $818.20 per ton in 2014.

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Dewan Minyak Sawit Indonesia (DMSI) memperkirakan ekspor minyak sawit mentah Indonesia (crude palm oil/CPO) turun 8,7% pada basis year-on-year (y/y) menjadi 21 juta ton tahun depan dari estimasi 23 juta ton pada 2015. Penurunan ekspor disebabkan adanya peningkatan konsumsi CPO dalam negeri di tengah implementasi penuh program B15 biodiesel. Konsumsi dalam negeri CPO diperkirakan tumbuh 37% (y/y) dari 8,4 juta ton pada 2015 menjadi 11,5 juta ton pada 2016. Jika program biodiesel B20 akan dilaksanakan, maka ekspor CPO Indonesia bisa semakin menurun.

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Gabungan Pengusaha Kelapa Sawit Indonesia (Gapki) mengatakan ekspor minyak sawit mentah (crude palm oil/CPO) Indonesia berada pada 2,38 juta pada bulan November 2015, turun 8,6% dari ekspor CPO di bulan sebelumnya. Penurunan ini disebabkan karena permintaan yang lebih lemah dari pasar-pasar ekspor utama Indonesia dan harga kacang kedelai yang murah (minyak kedelai bisa menggantikan minyak sawit sebagai bahan dasar untuk pembuatan makanan dan biodiesel). Kendati begitu, pada basis year-on-year (y/y), ekspor CPO Indonesia naik 21% (y/y) menjadi 23,9 juta di periode Januari-November 2015.

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Global crude palm oil (CPO) prices may climb up to USD $800 per metric ton in 2016, from USD $575 per ton (FOB) currently, due to the looming implementation of the B20 biodiesel program in Indonesia and curbed CPO output in 2016. Moreover, global oil prices are expected to rise to around USD $60 per barrel in 2016. Higher petroleum prices should boost demand for biodiesel (diesel blended with palm methyl ester, which is subsidized through the Indonesian government's CPO fund program).

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The El Nino-inflicted dry weather in Indonesia and Malaysia, possibly the worst in nearly two decades, is expected to curtail crude palm oil (CPO) output in both countries, implying that palm oil prices can extend their rally into next year. Moreover, Indonesia will consume more CPO as the government will raise the mandatory amount of palm oil blended with diesel from 15 to 20 percent (part of its B20 biofuel program) in early 2016. Since August - when prices were at a six-year low - palm oil futures have surged 26 percent.

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Production of crude palm oil (CPO) in Indonesia is estimated to rise to 33 million tons in 2016, roughly 500,000 tons lower than the initial forecast as the El Nino weather phenomenon is expected to impact on agricultural output by causing an extended dry season in Southeast Asia (that will perhaps last beyond December). This year, Indonesia, the global leading CPO producer and exporter, is expected to produce 31.5 million tons. Reduced output in Indonesia may support palm oil prices.

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The Indonesian government will (temporarily) stop using sustainability standards designed by the European Union regarding crude palm oil (CPO). Indonesian Minister of Maritime Affairs Rizal Ramli said the current strict standards of the European Union hurt the domestic palm oil industry, especially smallholders. Moreover, Indonesia and Malaysia, the world's two largest CPO producers and exporters, are to set up a new intergovernmental palm oil council that will design new rules and standards regarding sustainable palm oil production.

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Pajak ekspor Indonesia untuk pengapalan minyak sawit mentah (crude palm oil/CPO) akan tetap pada 0% di Oktober 2015 karena harga referensi CPO Pemerintah jatuh 13% (month-on-month) menjadi 529,51 dollar Amerika Serikat (AS) per metrik ton. Ketika harga referensi CPO ini berada di bawah batasan 750 dollar AS per ton, maka Pemerintah menghapuskan pajak ekspor dalam rangka untuk membuat pembelian minyak sawit Indonesia menjadi lebih menarik. Kendati begitu, para eksportir masih tetap dikenai beacukai ekspor minyak sawit yang baru-baru ini diberlakukan. Ketika pajak ekspor dipotong menjadi 0%, para eksportir diharuskan untuk membayar beacukai senilai 50 dollar AS per ton untuk pengapalan CPO dan 30 dollar AS per ton untuk pengapalan produk-produk minyak sawit olahan (sebagian dari pendapatan ini disalurkan kepada program subsidi biodiesel Indonesia).

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The crude palm oil (CPO) price is expected to strengthen in the first quarter of 2018 due to the impact of the La Nina weather phenomenon and rising CPO demand in the traditional big CPO importing countries. This is good news for stakeholders in the palm oil industry as the price has been sliding around 16 percent so far this year (toward the 2,700 Malaysian ringgit per ton level).

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The Indonesian government is eager to boost domestic crude palm oil (CPO) production, but not at the expense of tropical forest (by adding new oil palm plantations). Instead, a new government program aims to replant 20,000 hectares of smallholder palm oil plantations in 2017 under the condition that farmers meet the requirements that are stipulated by Indonesian Sustainable Palm Oil (ISPO) certification.

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Indonesia's Industry Ministry selected the industrial estate in Berau (East Kalimantan) as the center for the downstream palm oil industry in Kalimantan. Furthermore, Panggah Susanto, the Industry Ministry's Director General for Agriculture industry, said the government proposes to select Berau as one of the palm oil centers within the Palm Oil Green Economic Zone (POGEZ) scheme. Berau is chosen to replace Bontang because the former has 3,400 hectares of (clear and clean) industrial land available, while land in Bontang still falls under "protected forest" status.

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Non-governmental environmental organization Greenpeace blocked all import and export channels of crude palm oil (CPO) trader IOI on Tuesday morning (27/09) in the harbor of Rotterdam (the Netherlands), the city that acts as palm oil’s gateway into Europe. Greenpeace activists decided to take action after a Greenpeace International report showed that palm oil from companies that are reportedly involved in forest destruction, peatland fires and child labor is still flowing into Europe and the USA through IOI facilities.

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The crude palm oil (CPO) price touched its highest level so far this year. On Tuesday (20/09) palm oil futures (December delivery) - traded on the Kuala Lumpur exchange - ended the day at 2,690 ringgit (approx. USD $651 per metric ton). Palm oil prices are rising as CPO production in Indonesia and Malaysia will remain subdued this year due to droughts that were brought by the El Nino weather phenomenon earlier in 2016, while there is expectation of a rather wet season later this year due to the La Nina weather phenomenon.

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Indonesian President Joko Widodo has ordered the nation's Minister of Environment and Forestry Siti Nurbaya to issue a moratorium on new palm oil concessions in a number of provinces. Although Widodo wants Indonesia - the world's top producer and exporter of crude palm oil (CPO) - to raise CPO output, he believes this increase can be achieved by increasing productivity of existing palm oil plantations, not by adding new plantations. Indonesia is often criticized by environmentalist groups for its forestry policies and poor law enforcement (which led to the severe haze that spread through Southeast Asia last year).

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Indonesia's crude palm oil (CPO) exports rose 9 percent month-on-month (m/m) to 2.29 million tons in February 2016 on the back of growing CPO demand in Africa, Bangladesh, India and the European Union. Indonesia's February CPO export volume was better than estimated previously. Analysts had expected a figure below 2 million tons. Combined, Indonesia's palm oil exports reached 4.39 million tons in the first two months of 2016, up 22 percent (y/y) from the 3.59 million tons of CPO that Indonesia exported in the same period one year earlier.

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Crude palm oil (CPO) production in Indonesia and Malaysia is expected to decline due to the impact of the El Nino weather phenomenon (that brought a prolonged dry season to Southeast Asia). CPO production in Malaysia could fall between 1.5 and 2 million tons this year according to Dorab Mistry, Director at Godrej International. Declining output in the world's two leading palm oil producers and exporters implies that palm oil prices should be able to rise further. At the start of this week palm oil futures traded in Kuala Lumpur (June delivery) rose to 2,779 ringgit (approx. USD $695) per ton, the highest level since March 2014.

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The crude palm oil business received a blow when France announced it plans to impose progressive tax on imports of crude palm oil and its derivatives. French authorities approved a bill on 21 January 2016 that will raise the import tax on palm oil from around 100 euro per ton currently to 300 euro per ton in 2017. This tariff will then be raised to 700 euro per ton in 2019, and to 900 euro per ton in 2020. Through this tax hike France aims to discourage the palm oil industry, hence curtailing global deforestation as well as to protect its citizens from the negative health effects caused by the consumption of palm oil.

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Agribusiness company Astra Agro Lestari, one of Indonesia's leading crude palm oil (CPO) producers, is expected to show a better performance in 2016 on an expected rise in palm oil prices. Although palm oil futures currently feel the negative effects of tumbling global crude oil prices, these futures are estimated to have risen to about 2,700 ringgit per ton by May 2016 from around 2,385 (approx. USD $540)  per ton currently.

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