POINTERS: CPO Market - Will the Current Bearish Trend Reverse?

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, we expect a continuation of the global palm oil oversupply situation, which will result in higher global inventories in 2019. This is mainly the result of an increase in mature palm oil plantation areas in Indonesia and Malaysia, which will continue to provide downward pressure to prices in 2019. In addition, global soft oil supplies in 2019/20 are still expected to be high, on the back of large soybean, rapeseed, and sunflowerseed crops across major producing countries. Availability of these soft oils will provide competition for palm oil demand. The outlook of palm oil prices, however, could be positive in 2020 if B30 mandate is successfully implemented in Indonesia.

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Questions & Answers (6) :

Jacquelyn Yow

4 years ago

Would the CPO fund able to further support the B30 biodiesel implementation? Do you foresee if the the Indonesia government would start collecting the export levy with the B30 biodiesel implementation?

POINTERS SECRETARIAT:
There is high probability that CPO fund will be sufficient to support for B30 mandate implementation in 2020. POGO spread has been favourable throughout 2019 so far, which resulted in minimal incentives required for biodiesel production.(Posted on behalf of the speaker)
4 years ago

Shaheen

4 years ago

Your study shows that Indonesia will be the pillar supporting future global growth in palm oil production. How is Indonesia able to continue generating growth when there is a moratorium on land expansion for oil palm cultivation.

POINTERS SECRETARIAT:
As land availability is limited, old oil palm tree replanting programmes are important in order to increase palm oil production in Indonesia, especially for smallholder plantations. The palm oil yield of smallholder plantations is typically 35% lower than that of private plantations, due to old oil palm trees, poor plantation management, and the usage of sub-par seeds. Hence, replanting is important in order to increase Indonesian palm oil production moving forward. (Posted on behalf of the speakers)
4 years ago

HCLeow

4 years ago

Hi Oscar, any idea how much CPO Fund is available now after stop collecting the exports levy since Dec 2018? Also what is the possibility you reckon that B30 will be partially implemented earlier than Jan 2020? Thank you.

POINTERS SECRETARIAT:
BPDP Sawit collected around 14.5 Trillion rupiah in 2018, with total disbursement (for biodiesel production, replanting, etc) around 6.5 - 7 trillion rupiah (estimate) in 2018. Up to 1H 2019, BPDP Sawit had allocated around ~190 billion rupiah for biodiesel production and ~707 billion rupiah for replanting. I think it is less likely for B30 mandate to be implemented in Indonesia earlier than January 2020. The B30 fuel is still expected to go through more tests until end of October 2019. (Posted on behalf of the speaker)
4 years ago

Anthony Yap

4 years ago

What is your outlook of Spread of Palm Oil and Soybean Oil; will it sustainable at currently level USD112/MT?

POINTERS SECRETARIAT:
I expect the spread of soyoil and palm oil to trade within USD 100 – 130/MT range for rest of 2019. ( Posted on behalf of the speakers)
4 years ago

MOHD RAFIZAN BIN SAMIAN

4 years ago

In your opinion, will MSPO and RSPO certification help the industry to get higher market share or at least retain the existing when compared to other oils? If no, is it still necessary for plantation to get certified?

Oscar Tjakra:
Sustainability will play more important role in the future than it is already now in terms of consumers’ purchase decisions. Hence, sustainable palm oil production is the way forward for palm oil industry.
4 years ago

Nur Fairuz

4 years ago

CPO price has risen. It has already surpass the RM2,150 price. In your powerpoint, the forecast you made for Q3 and Q4 2019 average CPO price is RM2,050 for both quarters. Would you be able to explain the trend of your price forecast. Meaning why Q2 and Q3 2019 average CPO price is not higher than Q2 2019 average of RM2,085. TQ

Oscar Tjakra:
My price forecast is based on assumption of higher palm oil production in Indonesia and Malaysia in 2H 2019 as compared to 1H 2019. On top of that I expect that palm oil exports from Indonesia to peak around September - October 2019, before tapering down until the end of 2019. I believe we have seen the bottom of palm oil prices during late June - early July 2019. However, I still expect palm oil oversupply situation to remain in 2H 2019. Additional note: Average prices for BMD #3 contract in Q3 2019 (up until Aug 17th) is still at RM 2,039/ton so far.
4 years ago