POINTERS: Palm Oil Outlook Post Covid-19 Challenges and Expectations

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Questions & Answers (8) :

Raymond Cheow

3 years ago

Dear Datuk Dr Sundram, In your slide on world production of 17 Oils & Fats, palm oil share has increased to 32% from 18.8% in 1999/00 at the expense of other animal fats while the other competing oils remain more or unless unchanged 20 years ago. To your opinion , health-wise good for human well beings then or the increased share goes mostly towards biofuel production ?

Datuk Dr. Kalyana Sundram:
Thank you. Palm oil is primarily a major food commodity and even today at least 70% or more of global output is targeted for food. An exception to the rule is the EU where it is estimated that almost 60% or more of palm oil imported is destined for biofuel and renewable energy. In this context too, biofuel/renewable energy use of palm oil is exceedingly important and conservatively estimated to consume at least 20 million MT of global palm oil output. In addressing future market growth potential and opportunities, we pay special attention to all the major sectors namely food, non-food (oleochemical) and biodiesel/renewable energy. Definitely specific based market segmentation is very important and a major driver.
3 years ago

George Teh

3 years ago

Dear Dr Sundram, Let me congratulate you and your team for the enhancement made in this edition, especially the video presentation which enhances and supplements the info and data printed on slides. Compared to Feb 2020 forecast, when the 2020 SUR was estimated at 13.19%, you now forecast 2020 SUR at 15.3%, an increase of 2.1%. I note that you had also added a Covid-19 variable in the latest forecast model. As a result, I observed that the Feb 2020 low forecast (RM 2,519 per tonne) is approximately equivalent to the Jun 2020 high forecast (RM 2,594 per tonne). I'd like to inquire if you were to isolate the Covid-19 adjustment factor, what would have been the impact attributable solely to the 2.1% SUR rise? Thank you. George Teh

Datuk Dr. Kalyana Sundram:
Thank you for your question. When our earlier forecast was made in February, the CPO price was trending on a high as it started the year at RM3,053/MT and reached as high as RM3,111/MT in January. Based on the CPO price in early 2020, we forecasted that it would not be lower than RM2,500/MT but the double whammy of low crude oil price and Covid 19 pandemic bucked this trend as demand was severely impacted causing prices of all commodities to tumble. If the Covid 19 variable were to be isolated, there would most likely be higher demand of oils and fats including palm oil. As a result, production might even be lower than demand which could push SUR to lower than currently shown and possibly lead to even higher palm oil prices.
3 years ago

Dr. Mounir Mohamed Eid

3 years ago

Good morning Sir. What about the trade movement and demond and prices for PO to India as the first world consumer after huge demond in holy Ramadan and also, Chin after Covid -19.

Datuk Dr. Kalyana Sundram:
While the trade movement and demand was impacted by the Covid 19 pandemic particularly during Q1 and early Q2 2020, we have seen the situation improving since. Many palm oil consuming countries have started importing palm oil to replenish their stocks especially to cater for demand from the HORECA sector. In addition, the competitive palm oil prices have also triggered demand in major palm oil consuming countries which is evident in higher palm oil imports by major consuming countries such as India and China. As the economic activities improve due to relaxation on movement restrictions, we project more palm oil applications especially in the food manufacture and HORECA sectors.
3 years ago

HCLeow

3 years ago

Any though to share why aren't India and China buying more aggressive given that palm oil inventory is so low at the destination points?

Datuk Dr. Kalyana Sundram:
In our opinion, both countries despite falling inventories of palm oil have adopted a wait and see attitude in making decisions to replenish their palm oil stocks as they monitor price movement of palm oil and other oils & fats. The availability of other oils such as soybean and sunflower oils domestically also curtailed import demand for palm oil. For your information, Malaysian palm oil exports to China from Jan - May 2020 actually increased compared to the same period of 2019. Our data showed that both countries have now started to actively import more palm oil to replenish their stocks.
3 years ago

Vasugi Balaramah

3 years ago

YBhg. Datuk. Would you be able to explain your slide 3 which shows that palm oil price fall faster than soft oil prices during this pandemic period?

Datuk Dr. Kalyana Sundram:
There are a few factors for the faster decline of palm oil during the pandemic period. For example in biodiesel production, palm oil is the most used oil in the blending so the drop in crude oil price during this period severely impacted palm oil use and demand for biodiesel blending. This, combined with the Covid 19 pandemic which also saw less consumption of all oils and fats, particularly in the HORECA sector led to a demand destruction for palm oil during this period. In addition, Malaysian palm oil exports fell by almost 200,000 MT early 2020 while palm oil stocks rose to just above 2 million MT in April. These factors contributed to the decline in palm oil prices during this period but staged an appreciable recovery in May/June 2020.
3 years ago

MOHD RAFIZAN BIN SAMIAN

3 years ago

Is there any particular reasons for the slower recovery rate of CPO price when compared to other edible oils post 14th of May?

Datuk Dr. Kalyana Sundram:
Based on the chart, the rate of recovery for CPO price is comparable to that of other oils. Palm oil is the lowest priced oil among the four major vegetable oils, but in reality prices are inter-related to 17 other competing oils and fats which are in turn coupled to crude oil prices. I guess we have not fully succeeded in decoupling this relationship.
3 years ago

Malav Shah

3 years ago

Good Morning Sir, could you please guide where PKO is heading in future???

Datuk Dr. Kalyana Sundram:
Dear Malav, Thank you for your question. Unfortunately, the prediction model we used for this presentation did not deal with PKO forecast. At this point, we will therefore not immediately offer a response to your query but propose to deal with this separately; a little later after POINTERS.
3 years ago

HCLeow

3 years ago

Good morning Datuk Dr Sundram, May I know what is your expected SUR for RM2,080 and RM2,594. Thanks

Datuk Dr. Kalyana Sundram:
Dear Ms. Leow, Thank you for your question. There is only one SUR for 2020 which is at 15.3%. Based on a regression model used, the SUR will provide a range for CPO prices in 2020 average, low and high prices which can be seen in the presentation.
3 years ago