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Latest Reports Palm Oil Price
This report discusses Indonesia's palm oil sector. First, we give an overview of the role palm oil plays on the global stage, before zooming in on Indonesia. We discuss oil palm plantations across Indonesia, crude palm oil (CPO) productivity, CPO and palm kernel oil production, sustainability and environmental concerns, domestic consumption of palm oil (specifically the biodiesel program), and exports.
The crude palm oil (CPO) price weakened 3.85 percent to 2,425 Malaysian ringgit per metric ton in the first quarter of 2018. Key reason behind this decline is increased CPO output in Indonesia and Malaysia, the world's two top palm oil producers that - together - account for around 85 percent of total global CPO production.
The crude palm oil (CPO) price continues to decline, falling more than 1 percent on Monday morning (24/07). The CPO futures contract (October 2017 delivery), the most active contract on the Bursa Malaysia, had shed 1.05 percent or 27 points to 2,546 ringgit per ton by 11:20 am local Jakarta time.
The strengthening of the crude palm oil (CPO) price continued for the third consecutive trading day on Friday morning (21/07), supported by strong exports and bad weather. CPO futures (October 2017 contract), the most-active contract at Bursa Malaysia, had risen 0.16 percent to 2,580 ringgit per ton by 10:17 am local Jakarta time zone. Earlier in the morning the CPO price opened with a gain after rising 2.02 percent to 2,576 ringgit per ton on Thursday (19/07).
The crude palm oil (CPO) price touched its lowest level since 4 May 2017 due to expectations of rising CPO production in Malaysia, the world's second-biggest palm oil producer. At the end of trading on Tuesday (06/06) the palm oil price had fallen 0.08 percent to 2,497 ringgit (approx. USD $585.07) per ton on the Malaysian bourse (August 2017 contracts).
Despite expectations of rising demand ahead of - and amid - the Ramadan and Idul Fitri celebrations, the price of crude palm oil (CPO) is expected to decline up to the end of June 2017. At the end of the trading day on Tuesday (30/05) the CPO price had fallen 0.56 percent to 2,502 ringgit (approx. USD $584.46) per ton (August 2017 contract) on the Malaysia bourse. So far this year, the CPO price has tumbled 14.48 percent.
The Indonesian Palm Oil Producers Association (Gapki) expects Indonesian crude palm oil (CPO) exports to reach 27 million tons in 2017 (up 1.6 percent from realization in the preceding year), or USD $18.90 billion in terms of export value (up 1.7 percent from the preceding year). In other words, Gapki sees very limited growth for Indonesia's CPO exports in 2017. This bleak outlook is caused by sluggish global demand (China may in fact curtail CPO imports), while the recovery of the CPO price is not expected to be significant.
Indonesia kept its export tax for crude palm oil (CPO) shipments at USD $18 per metric ton for March 2017 as the government's March reference CPO price was determined at USD $825.8 per ton, up 1.27 percent (m/m) from the reference price in the preceding month. When this reference CPO price of Indonesia is set below USD $750 per ton, the export tax is scrapped. When the price reaches the range of USD $750 - $800, then Indonesian authorities introduce a USD $3 per ton export tax, followed by a USD $18 per metric ton export tax if the reference price rises to the range of USD $800 - $850 per ton.
Indonesia's Ministry of Trade re-introduces a USD $3 per ton export tax for crude palm oil (CPO) shipments in January 2017 as the government's reference palm oil price exceeded the USD $750 per ton threshold that separates the existence of export duties from zero rates. The government's reference price was set at USD $788.26 per ton for January 2017, said Dody Edward, Director General for Foreign Trade at the Trade Ministry.
In 2015 the crude oil supply glut stemming from OPEC countries and the US shale gas revolution put severe downward pressure on commodity prices, including crude palm oil (CPO). Thanks to the El Nino and La Nina weather phenomenons (and a moratorium on new palm oil concessions) CPO output was curtailed in 2015 and 2016, implying some upward pressure for CPO prices, hence rebounding from a multi-year low of USD $526 per ton in November 2015. In 2016 the CPO price is expected to average USD $670 per ton.
Latest Columns Palm Oil Price
Palm oil ranks among the most important agricultural commodities of Indonesia as this country is the world’s biggest producer of palm oil. This implies that Indonesia generates important foreign exchange earnings from palm oil exports and is a source of income for millions of workers on the plantations.
Over the past couple of months we have informed on the shortage of cooking oil on the Indonesian market, the subsequent inflationary pressures this shortage caused, and the policies that were imposed by the government to tackle this shortage. But, we did not devote an entire article to this topic.
Although there is plenty of opposition to – and criticism on – Indonesia for allowing crude palm oil (or CPO) to play a big role in the domestic economy (Indonesia being the world’s largest producer and exporter of CPO), the country is currently feeling the windfall from soaring CPO prices. And, it is contributing to Indonesia’s recovery from the severe – and still ongoing – novel coronavirus (COVID-19) crisis.
Several negative sentiments are putting pressure on the crude palm oil (CPO) price in the first week of March 2018. These sentiments are expected to continue pushing downward pressure on the CPO price in the remainder of this week. On Monday (05/03) the CPO price on the Malaysia Derivatives Exchange (May 2018 shipments) fell 0.28 percent to 2,467 ringgit per metric ton. Compared to one week earlier, the price has now declined 2.91 percent.
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).
Indonesia's largest supplier of crude palm oil (CPO), Astra Agro Lestari, is expected to see improving corporate earnings in the years ahead on the back of the rising CPO price and expectation of the company's climbing CPO production volume. The year 2016 was a good year for Astra Agro Lestari as it reported a 224.2 percent year-on-year (y/y) jump in net profit and a 7.6 percent (y/y) increase in sales, led by sales of CPO and derivative products. This was a great recovery from the preceding year. CPO and derivative products account for more than 86 percent of the company's total sales.
The higher crude palm oil (CPO) price will have a positive impact on the corporate earnings of Indonesian CPO producers, including Sampoerna Agro. Benchmark palm oil futures for March 2017 delivery on the Bursa Malaysia Derivatives Exchange were at 3,161 ringgit (approx. USD $706) per ton at the end of last week, near a four and a half year high. However, not all analysts advise investors to purchase shares of Sampoerna Agro, a company that is listed on the Indonesia Stock Exchange.
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.
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.
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.
