POINTERS 2014 MPOC
Palm Oil Internet Seminar
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Section 1: Price Direction:
Palm Oil: Challenges, Possibilities and Price Direction 2021
By: Dr. Sathia Varqa

Dr. Sathia Varqa is the owner and co-founder of Palm Oil Analytics (POA), an online publisher of palm oil daily news, price, data and analysis based in Singapore, serving global commodity markets.

POA publishes two daily reports a day covering price assessments analysis of key data and market commentary.

Sathia previously worked for S&P Global Platts, a division of S&P Global (previously McGraw-Hill Finance) based in Singapore.

He holds a BA (Business Studies), Master degree in International Trade (Distinction) and a PhD in political economy from The Robert Gordon University, Aberdeen, Scotland.


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Can the recent rise in CPO futures to 13-year high be sustained? Palm prices rallied at the back of rise in global veg oil complex underpinned by supply shortage mainly caused by lagged impact of adverse weather in major producing countries. Global veg oil prices notched multi-year high levels in the first quarter tracking the boom in general commodity prices spurred by massive fiscal stimulus injection globally to help propel economic growth back to pre-Covid-19 levels. Can demand for palm and laurics rise on this wave of aggregate demand, particularly when stocks are at historic low and prices are at a decade high? This paper looks at some of the key considerations for the palm sector in 2021 and the price outlook for the rest of the year.


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Questions & Answers (7) :
WONG YQ
3 months ago
Indonesia PO production seeing increasing. Will it sustain the PO price at high side after offset the biodiesel B30 program locally ? Or will it be oversupply in the export market ?
Sathia Varqa:
Indonesia production is expected to rise by 2 million ton in 2021 to 48 million tons and the average growth is about 2-3 million tons per-annum. Raising the blend rate will help sustain prices at an elevated level. Any downgrade in the blend rate will removed US$200-300 from the CPO pricing. There is not fear of oversupply in the palm oil market in 2021 and 2022. All global edible oil complex are in tight supply since June of 2020 and is expected to last to Jun 2022. Email sathia.varqa@palmoilanalytics.com or Whatsapp me +6590016176 if you want to know more.
2 months ago
Sathia Varqa:
Edited reply. Indonesia CPO production is expected to rise by 2 million tons in 2021 to 48 million tons and the average growth is about 2-3 million tons per-annum. Raising the biodiesel blend rate will help sustain prices at an elevated level. Any downgrade in the blend rate will reduce US$200-300 from global CPO pricing. There is no fear of oversupply in the palm oil market in 2021 and 2022. All global edible oil complexes been in tight supply since June of 2020 and is expected to last until Jun 2022. Email sathia.varqa@palmoilanalytics.com or Whatsapp me 6590016176 if you want to know more.
2 months ago
WONG YQ
3 months ago
Indonesia PO production seeing increasing. Will it sustain the PO price at high side after offset the biodiesel B30 program locally ? Or will it be oversupply in the export market ?
Sathia Varqa:
See edited reply above.
2 months ago
WONG YQ
3 months ago
Indonesia PO production seeing increasing. Will it sustain the PO price at high side after offset the biodiesel B30 program locally ? Or will it be oversupply in the export market ?
Sathia Varqa:
See edited reply above
2 months ago
VS LEE
3 months ago
Hi Dr., Record high CPO prices were seen in 2008 and 2021. In both years, there were record high amount of money pumped into the financial markets. What are their correlations and are there any quantitative factors we can monitor money supply that give pointers to CPO prices? Thank you.
Sathia Varqa:
But remember when prices reached a record high in Mar 2008, it took just 9 months for prices to plunge from RM4200 to RM1900, even as stocks stayed low. You are right this time we have massive global fiscal spending to the tune of 14 trillion US Dollars according to the IMF and this is fuelling inflation. Food prices are particularly feeling it with 10 successive monthly rises in global food prices. Money supply is a poor indicator for CPO prices. You can instead monitor the FAO Food Price Index published monthly where Vegetable Oil is one of the indices. The other index you can monitors is S&P GSCI Agriculture Index. Both the datasets are free and you can play around with them to understand the connection between CPO prices and the general agriculture price index. Email sathia.varqa@palmoilanalytics.com or WhatsApp me +6590016176 if you want to know more.
2 months ago
MEGAT SYAZWAN SHAH
3 months ago
Hi Dr, I am wondering if the sustainable certification (MSPO, RSPO) is a major factor that help boost up the price or is it just an accessory? Thanks
Sathia Varqa:
There is no clear research to show obtaining sustainability certification leads to higher command of CPO prices but that does not mean certification is a useless exercise. It just means that there is no clear research to show the connection by controlling for other variables. CPO prices are influenced by a variety of speculative, fundamentals, technical, and sentiments. Obtaining the certification may help advance the well-being of a farmer/plantation but this needs to be assessed from which angle or dimension. Email sathia.varqa@palmoilanalytics.com or WhatsApp me +6590016176 if you want to know more.
2 months ago
MOHD RAFIZAN BIN SAMIAN
3 months ago
What are the factors contributing to lower Malaysia domestic consumption and why the trend is not similar for Indonesia?
Sathia Varqa:
Malaysia's domestic market is a lot smaller (population of 33 million) versus Indonesia (270 million) so that is one big difference. Indonesia B30 biodiesel which is 30% palm mixed with regular diesel is a mandated government program and makes up about 40% or 500-600 thousand tons of monthly domestic consumption while in Malaysia the total monthly domestic consumption is around 300,000 tons covering biodiesel, oleo-chems, and edible oils. In Malaysia, the B20 is not at a nationwide level yet and the market is a lot smaller. Imagine the number of vehicles in Greater Jakarta compared to major cities in Malaysia. Malaysia's domestic consumption is downgraded because biodiesel usage is kept at B20 in 2021 and there is no major new investment in the oleo-chemicals sector to boost the uptake of downstream products. Malaysia's nationwide implementation of B20 is expected to take place in January 2022 according to the Malaysian government's latest timetable. Email sathia.varqa@palmoilanalytics.com or WhatsApp me 6590016176 if you want to know more.
2 months ago
Yazid Mustafa
3 months ago
On your discussion of soybean, there is only discussion of US soybean outlook. How about the outlook for Argentina and Brazil? Are they supporting stronger edible oil prices. In China, you mentioned that soyabean oil stocks turn into deficit in Jan and Feb. 2021. Why?
POINTERS SECRETARIAT:
Posted on behalf of Dr Sathia Varqa : Expect a reduction in Argentine soybean crop size from 48.80 million tons in 2019-20 to around 45—44 million in 2020-21 from the ongoing dry weather sapping yields and reducing output. Brazilian crop is raised to 134 million tons for 2020-21 from 128.50 million tons in 2019-20. We expect Brazilian harvest to be delayed but not disrupted. Lower Argentinian crop supported strong rise in soybean oil prices on CBOT reaching 8 year high in March spilling over to support palm price which was already languishing on low stocks. Soybean oil prices retreated from the high but still remain elevated and volatile. China soybean stocks fell on reduced import from Brazil and from crushers slowing crushing operations as cases of ASF rise, delaying sales of soymeal and boosting stocks at crushers.
3 months ago
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