POINTERS: Global Oils and Fats Outlook 2016

By: Tan Sri Datuk Dr. Yusof Basiron

TAN SRI DATUK DR. YUSOF BIN BASIRON aged 66, a Malaysian. He is presently holding several important positions which include: i. Chief Executive Officer of Malaysian Palm Oil Council (MPOC) ii. Director of Sime Darby Berhad iii. Chairman and Director of CBIP Berhad Apart from holding distinguished corporate positions, he is also involved in other organizations which are: (i) Senior Fellow and Past President of Academy Sciences Malaysia (ASM) (ii) Fellow member of Malaysia Scientific Association (MSA) (iii) Fellow member of Malaysian Oil Scientists' and Technologists' Association (MOSTA) (iv) Fellow member of the Incorporated Society of Planters His notable academic achievements are as follows: i. In 1972, he obtained his Bachelor in Chemical Engineering Degree from the University of Canterbury, New Zealand; ii. In 1974, he obtained his Post-Graduate Degree in Rubber Technology (ANCRT) in the United Kingdom; and iii. In 1976, he obtained his Masters Degree in Engineering specializing in Industrial Management (M.E.) and also in Business Administration (MBA) from the Catholic University of Leuven in Belgium. Before he joined Palm Oil Research Institute of Malaysia (PORIM) in 1979, he held the position of Rubber Technologist/Techno-Economist with the Rubber Research Institute (RRI)/Malaysian Rubber Research Development Board (MRRDB). In 1986, he completed his doctorate with a PhD in Applied Economics and Management Science from the University of Stirling, Scotland. He was later appointed as the Director-General of PORIM in 1992. He held the position for 8 years until April 2000 before assuming the role of the Director-General of Malaysia Palm Oil Board (MPOB), an organization which existed as a result of a PORIM and Palm Oil Registration and Licensing Authority (PORLA) merger, from 1 May 2000 until 18 January 2006.

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In the first half of 2016, palm oil prices moved on an uptrend since January and reaching a high of RM2,756/MT in April. This was the highest price in 18 months as concerns over production on account of the effects of El Nino phenomenon on palm oil pushed price upwards. However, since mid- June 2016, there has been a heavy downward pressure on palm oil prices due to the abundant supply of other competing oils namely soybean oil.
It is anticipated that growth in palm oil supplies and exports would be severely impacted this year as Malaysian palm oil production in the first six months of 2016 was 1.45 million MT or 16% lower than the corresponding period of last year. Overall, we anticipate that there will be growth in overall oils and fats production but the rate of growth is likely to be less than that of last year. Palm oil which is poised to exceed 61 million MT will again be the market leader in the global oils and fats production and will play a crucial role in the global supply of oils and fats.
As the two top palm oil producing countries contributing to 88% of the global palm oil production, Malaysia and Indonesia will be the focus of the international oils and fats trade. Palm oil prices have a very different structure than other vegetable oils as the price tends to set the standards for all other competing oils. As 88% of all the palm oil is produced in Malaysia and Indonesia and with 30% of the global oils and fats production coming from Malaysia and Indonesia, the role played by both countries is vital in forecasting palm oil price.
During the last six months of 2016, palm oil prices have fluctuated between a low of RM2,257/MT and a high of RM2,756 recorded in May. The stagnating price of crude mineral oil price during this period has impacted the price of not only palm oil but also other edible oils such as soybean and sunflower oils.
This paper will analyse issues that will affect palm oil price especially in the second half of 2016 such as demand and supply situations. Other factors such as the influence of the current stagnating crude oil price will also be taken into account. Demand for palm oil from major consuming countries such as India, China, EU and USA is nevertheless, expected to remain upbeat and we will take these factors into account. The regional analysis on the demand and supply scenarios will be aggregated at the global level to forecast the price, demand and supply balance in 2016.

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Questions & Answers (5) :

Yusof Basiron

8 years ago

Forecast of global palm oil production to exceed 61 million tonnes by the end of 2016

Paula De La Rosa

8 years ago

when you say: palm oil is poised to exceed 61 Millon MT, it is by the end of 2016 or in a couple of months ?

Lee Chen Hoay

8 years ago

Thank you

Yusof Basiron

8 years ago

Reduced production of palm oil in Indonesia as forecasted (rather than in Malaysia) is key to palm oil prices rising in the next few months as tendency to undercut prices (induced by their tax structure) is restricted. Prices may cross RM 3000/ mt as forecasted, as many countries (China, Pakistan etc) are again increasing their palm oil imports to replenish stocks and to provide for higher demand during Christmas and New Year festivals.

Lee Chen Hoay

8 years ago

With your projection of production in 2016 to be 19.1m (higher than consensus), what\'s your price outlook for palm over next few months?