POINTERS: 2018 Global Oils and Fats Landscape - Market Trends & CPO Price Forecast

By: Mr. Oscar Tjakra

Oscar Tjakra is the Executive Director, RaboResearch Food & Agribusiness. He is located in Singapore, and focuses on palm oil and grains and oilseeds sector.

Oscar was previously a RaboResearch Food & Agribusiness Analyst with Singapore branch from July 2008 to October 2010 covering various sectors including grains and oilseeds, sugar, cocoa and animal protein.

In his most recent role, he was Senior Vice President of Freight Research with Oldendorff Carriers Singapore, where he led global supply and demand research of the grains & oilseeds sector.

Oscar holds a Master of Science in Applied Finance from Singapore Management University and Bachelor of Engineering (Hons) from Nanyang Technological University.

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The world oilseeds supplies have grown steadily in the past decades due to increasing oilseeds planting areas and increasing oilseeds yield. The increase of these oilseeds supplies, excluding oil palm, are driven mainly by increasing global demand for oilseeds meals for the production of animal feeds. As a consequence of this, more oilseeds are crushed for their meals, instead of for their oils in recent years, which adds into increasing availability of global vegetable oils supply.

Assuming normal weather, palm oil production in Indonesia and Malaysia is expected to increase year-on-year in 2018/2019 due to increase in mature palm oil plantation areas in both countries. This will result in rising global palm oil production, providing downward pressure to prices. In addition, global soft oil supplies in 2018/2019 are still expected to increase year-on-year. Availability of these soft oils will provide competition for palm oil demand and curb palm oil price rallies.

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Questions & Answers (5) :

BIT KUN

5 years ago

Dear Oscar, in your opinion what factors will pull CPO price up from current low within the next 6 months? DO you think Indonesia is likely to implement the B20 mandate across all sector?

Oscar Tjakra:
We need to see larger palm oil inventories drawdown, both in Indonesia and Malaysia, to pull CPO price up from current low level. This can be achieved either by having lower than expected palm oil production and/or higher than expected palm oil demand. From production point of view, there is risk that dry weather could affect palm oil production in Indonesia and Malaysia in Q4 2018. From demand point of view, successful implantation of B20 mandate in Indonesia and stronger than expected palm oil imports demand could still drive price higher. There is high possibility that Indonesia will be able to implement B20 across non PSO sectors. However, this will happen in gradual process. There is higher chance for successful implementation for non PSO sectors in 2019 as compared to 2018.
5 years ago

Dr. Ahmad Mustafa

5 years ago

Thank you for the interesting presentation. Appreciate if you can provide a forecast of how palm oil prices would be affected by petroleum prices in the future. because there is much fluctuation in gas oil prices from Jan. 2013 to Jan 2018.

Oscar Tjakra:
I don't have forecast for crude oil prices. However, the movement of gasoil prices will affect the attractiveness of discretionary biodiesel blending. Typically, a POGO spread of minus USD 120/tonne or lower is attractive for producers and buyers of biodiesel. The spread between MDE-Bursa palm oil #1 contract price and #1 gasoil contract price has narrowed to minus USD 94/tonne from minus USD 127/tonne in late July 2018, on the back of increasing palm oil prices. This narrow premium could reduce the attractiveness of discretionary biodiesel. This will result in lower demand for palm oil as feedstock for PME biodiesel, which will reduce palm oil inventories drawdown and provide pressure to palm oil prices.
5 years ago

POINTERS SECRETARIAT

5 years ago

In your presentation, you mentioned that EU-28’s anti-dumping duty on Indonesia’s biodiesel import has been removed. Appreciate if you can provide the tariff before and after the anti-dumping duty is removed.

POINTERS SECRETARIAT:
Posted on behalf of the speaker : On 20 March 2018, the EU removed duties on biodiesel imports for 13 Argentine and Indonesian producers following the end of legal proceedings at the European Court of Justice (ECJ). These 13 Companies, which had challenged the measures at the ECJ, now no longer face duties. For companies that did not lodge a legal challenge at the ECJ, EU duties would still apply - of 166.95-178.85 euros ($205.08-219.70) per ton for Indonesia and of 62.52-79.56 euros per ton for Argentina. The EU does still apply a general customs duty of 10.9 percent to third countries.
5 years ago

Amy

5 years ago

TQ for your presentation. I am particularly interested in the outlook of the market in China and India. I would also like to know how do you think the dynamics of the global edible oil market will change when EU-28 start phasing out the use of edible oil use in their production for biodiesel starting 2023. Could you provide a brief on the outlook in these 3 regions.

POINTERS SECRETARIAT:
Posted on behalf of the speaker : EU palm oil imports demand is expected to be stable/flat at current level from now till 2030. Demand from the food and industrial sector in the EU including biofuels stagnates while an increasing amount of used oils and waste oils continues to replace palm oil as feedstock for biodiesel. India to remain as the world’s largest palm oil importer, but the country’s palm oil import growth potential will be limited by an increasing availability of competing global soft oils. Palm oil imports into China will continue to depend on the government’s domestic vegetable oil reserve policy and soybean crush industry.
5 years ago

FAIZUL RIZAL BIN ANUAR

5 years ago

Dear Sir, What is the next year forecast for cpo price consists of 12 months period ?

POINTERS SECRETARIAT:
Posted on behalf of the speaker : Our quarterly palm oil price forecasts are as below: Q4 2018: RM 2,300 Q1 2019: RM 2,300 Q2 2019: RM 2,250 Q3 2019: RM 2,250 Q4 2019: RM 2,200
5 years ago