Palm Oil Internet Seminar

Prospects For Second Half Of 2013 - Managing Price Fluctuations:
Malaysian Palm Oil Stocks and Market Sentiment - An Analysis of the Correlative Relationship
By: Mr. Mohd Izham Hassan & Mohd Faiz Abdul Rahman

Mohd Izham Bin Hassan graduated from the Southern New Hampshire University, USA with a Bachelor of Science Degree Majoring in Economics & Finance in May 1990. He started his career in Malaysia’s biggest bank handling international correspondent banking and market research. He subsequently joined one of the biggest plantation companies in Malaysia heading the insurance unit and was responsible for the procurement of the group insurance requirement of which part of his job was to ensure adequacy of cover for company’s risk exposure. Due to his knowledge in this field, he was also assigned to the committee to set up the Enterprise Wide Risk Management (EWRM) system for the company. He has also conducted research on production, compile data on estate land bank and liaise with regulatory bodies on submission of monthly statistics. He has more than 15 years of experience in the plantation industry and prior to joining Malaysian Palm Oil Council, he was the Head of the Statistics Department of a major insurance company in Malaysia. He has presented papers at POTS Philippines and Palm Oil Trade Awareness Program (POTAP) in 2012. He is currently the Manager, Marketing & Market Development Division at Malaysian Palm Oil Council (MPOC) responsible for the Asia Pacific (Excluding China) Region and also is responsible for the market analysis of global oils and fats.
The recent announcement that palm oil stocks in Malaysia reached above 2 million MT from January to March 2013 made the global oils & fats market jittery. Price of palm oil initially fell due to concerns over excess supply and weakening demand. However, as can be seen although prices initially fell, it was not as much as expected but eventually picked up into the later weeks of 2013. The uptrend continued into April as stocks fell below 2 million MT.

This paper will show the historical data and correlative relationship between Malaysian palm oil stocks and market prices. It will also show that palm oil stocks, although an important element in determining prices should not be a main concern as the market will eventually self correct even if Malaysian palm oil stocks were to touch 2 million MT again. This paper will show the factors the factors that makes the self correcting mechanisms.

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Questions & Answers (2) :
Izham Hassan
11 years ago
Dear Peter, Thank you for your question. Population and economic growth are correlated to stocks and prices as when income and population grow, they would invariably drive consumption up and hence also push prices upward. Nevertheless, high stock levels could mitigate any price increase despite increase in population and incomes. As mentioned in my paper, since 2007 when biodiesel mandates were implemented in many countries, price is now not only subject to stock levels but also subject to rise and fall of crude oil prices. On your second question, the only instance when there was growth on population and the economy yet there was a downward trend for prices was in 2000. This was as a result of a combination of the aftermath of the Asian Financial crisis and due to higher overall production of oils and fats and lower exports in that year.
Peter Lavina
11 years ago
Prices of CPO rise and fall in spite of increases in population and economic growth, which would have up demand, and therefore impact on prices on an upward trend. What are the correlations of these two to stocks and prices? Do we have data on instances when there was growth on population and the economy yet there was a downward trend for prices? Thank you!
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