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Latest Reports Palm Oil Production
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 Board (DMSI) says higher productivity is the key to boost Indonesia's crude palm oil (CPO) production. Amid international pressure, particularly after the devastating forest fires on Sumatra and Kalimantan in the second half of 2015, Indonesian President Joko Widodo announced to issue a five-year moratorium on new palm oil concessions to limit the expansion of oil palm plantations in Indonesia. Although Indonesian authorities want to see rising CPO output (in order to safeguard foreign exchange earnings and create employment opportunities), further growth should come on the back of rising productivity, not by adding new plantations.
The Indonesian Palm Oil Producers Association (Gapki) announced that Indonesia's palm oil production realization reached 34.5 million tons in 2016, down 3 percent from a production figure of 35.5 million tons in the preceding year. The reason why Indonesia's palm oil output fell in 2016 was the El Nino weather phenomenon that brought dry weather to Southeast Asia. The unconducive weather conditions plagued harvests in the region, although the 3 percent decline was much softer than earlier predictions. Earlier, several analysts predicted a 15-30 percent (y/y) decline of palm oil output in Indonesia in 2016.
Based on the latest data from the Indonesian Oil Palm Estate Fund (BPDP-KS), Indonesia exported 25.7 million tons of crude palm oil (CPO) in full-year 2016, a 1.9 percent year-on-year (y/y) decline from 26.2 million tons of CPO shipments in the preceding year. However, in terms of value Indonesia's CPO exports actually surged 8 percent (y/y) to USD $17.8 billion in 2016. Indonesia is the world's largest exporter and producer of palm oil, followed by Malaysia.
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.
Global demand for vegetable and animal oils is expected to reach 200 million tons in 2016, up 3 percent from demand one year earlier. About 70 million tons of total global vegetable and animal oils demand this year consists of crude palm oil (CPO). Indonesia, the world's largest CPO producer and exporter, is expected to produce about 30.5 million tons of CPO in 2016. Meanwhile, in the first nine months of 2016 Indonesia's CPO export realization stood at 18 million tons.
The Indonesian Palm Oil Association (Gapki) believes that the crude palm oil (CPO) price will stay between USD $750 and USD $790 per metric ton in October 2016. This prediction comes on the back of several positive sentiments. CPO demand from China, Europe, India and the USA has increased and is able to offset declining CPO demand from Africa and the Middle East. Fadhil Hasan, Executive Director at Gapki, informed that as a result of strong global CPO demand CPO reserves in Indonesia and Malaysia, the two biggest producers and exporters of the edible oil, are declining.
Production of crude palm oil (CPO) in Indonesia is expected to decline 5 percent (y/y) to 29.6 million tons from a realization of 31.2 million tons in the preceding year. At the start of the year the Agriculture Ministry of Indonesia targeted CPO output around 31-32 million tons in full-year 2016. However, lower-than-targeted CPO production is the result of a looming strong La Nina weather phenomenon (which brings wetter-than-usual conditions to Southeast Asia) and the strong El Nino earlier this year (bringer droughts to Southeast Asia).
Stakeholders in the crude palm oil (CPO) industry of Indonesia are pleased seeing the CPO price rising considerably over the past couple of weeks to around 2,500 ringgit (approx. USD $623) per metric ton this week after palm oil futures - traded in Kuala Lumpur - had in fact entered a bear market in July 2016. Meanwhile, the World Bank expects palm oil prices to average USD $650 per ton in 2016, better than USD $623 per ton in 2015 but still a long shot away from USD $851 per ton in 2013 or the peak at USD $1,248 per ton in February 2011.
Several days ago we reported that Indonesia plans to issue a five-year moratorium on new palm oil plantation concessions in August 2016 through a presidential regulation. This moratorium aims to safeguard a healthy and sustainable environment and may also aim at reducing global criticism on Indonesia's weak governance after the devastating forest fires on Kalimantan and Sumatra as well as the spread of toxic haze to other parts of Southeast Asia between June and October 2015. A government official now says the moratorium also covers existing concessions.
Latest Columns Palm Oil Production
The world's two largest crude palm oil (CPO) producers and exporters - Indonesia and Malaysia - signed an agreement on Saturday (21/11) for the establishment of an intergovernmental palm oil council, called the Council of Palm Oil Producer Countries (CPOPC), that aims to control the global CPO supply, stabilize prices, promote sustainable practices in the palm oil industry, and enhance the welfare of oil palm smallholders. Both countries will invest USD $5 million each for the set up of this new council. Its headquarters will be located in Jakarta.
Indonesia and Malaysia, the world's leading crude palm oil (CPO) producers and exporters, will cooperate for the development of a special economic zone on Indonesian territory to boost the palm oil industry's downstream industry. Private companies will be given incentives to invest in this zone and develop industries to process CPO into olein, a key ingredient for the production of cosmetics and margarine. Furthermore, both countries plan to establish the Council of Palm Oil Producer Countries.
Crude palm oil (CPO) output in Indonesia, the world’s largest CPO producer and exporter, may decline by 20 percent to 27.5 million tons in 2016 due to the negative impact of the El Nino weather phenomenon. On a positive note, declining CPO output in Indonesia could provide some support for benchmark Malaysian palm prices that fell to a 6.5-year low of 1,836 ringgit last week.
Malaysia, the world’s second-largest crude palm oil (CPO) producer and exporter, will continue its duty-free export tariff for CPO in January 2015 according to information from the Malaysian customs department. Starting from September 2014 Malaysian authorities have implemented a duty-free CPO export policy in an effort to boost global demand and support international CPO prices (which have fallen nearly 20 percent this year). Indonesia, which has seen duty-free CPO shipments since October 2014, is expected to follow suit.
Reserves of crude palm oil (CPO) in Indonesia may have declined for a second straight month in October on the back of drought and an increase in exports from Southeast Asia’s largest economy. The delayed impact of drought (which even managed to dry up several rivers in West Kalimantan in October) limited production of CPO in recent weeks. Meanwhile, exports have increased after Indonesia and Malaysia - the world’s two top palm oil producers - scrapped export taxes to boost demand for this commodity.
Indonesia has the potential to become a global force in the biodiesel industry because of the country’s position as the world’s top producer of crude palm oil (CPO). In 2014, Indonesia’s CPO production is estimated to total 30 million tons. Traditionally, Indonesia exports about 75 percent of its total CPO production, particularly to the giant economies of China and India. As such, this commodity is one of Indonesia's most important foreign exchange earners, apart from coal, in the non-oil and gas sector.
The Indonesian government is considering to stop exports of crude palm oil (CPO) to Europe from 2014 onwards as domestic CPO demand in Southeast Asia's largest economy is rising, brought on by the country's biofuel industry which is expected to grow 70 percent next year to 5 million tons. To curtail oil imports, the government stimulates the production of crude palm oil-based biofuel by raising the mandatory content of fatty acid methyl ester (which is made from palm oil) in biodiesel products from 7.5 percent to 10 percent.
The recovery in global palm oil prices that seemed to have started last spring, has ended. A few months ago, optimism had colored expectations of many analysts as palm oil prices went up about 10 percent between early May and mid-June, after tumbling 30 percent in 2012 (causing that palm oil was one of the worst performing commodities in terms of price growth last year). However, the palm oil price increase earlier this year was merely the result of falling production rates in Indonesia and Malaysia, the world's largest palm oil producers.
The price of crude palm oil (CPO), which has been under downward pressure for a long time as global turmoil lingers on, started to rebound due to falling stockpiles in Indonesia and Malaysia. Reserves of the commodity fell because of weather conditions and because of an increase in demand ahead of the Islamic fasting month (Ramadhan). The price of crude palm oil is expected to hit the USD $900 per ton mark in late 2013, up from USD $828-865 per ton in May and June. This price recovery is expected to continue.
Shareholders of Astra Agro Lestari, Indonesia's largest agribusiness company by value (which is particularly engaged in palm oil and rubber plantations), agreed to distribute IDR 1.08 trillion (USD $111 million) in dividends to its shareholders. The allocated amount is equivalent to about 45 percent of the company's net profit in 2012. Dividend per share is set at IDR 685 (USD $0.071). Last November, the company had already paid interim dividend of IDR 230 per share. Final dividend will be paid on 3 June 2013.
Associated businesses Palm Oil Production
