POINTERS: Global Oils and Fats Outlook and CPO Price Trend Amidst Current Uncertainties

Review of the global oils and fats and economic performance of 2021 reveals that this year has been challenging both for the producers and consumers around the world. The Covid-19 pandemic has led to a shift in consumption patterns of oils and fats but there are signs of optimism amidst the challenge. With most of the countries coming out of strict lockdowns, the prices of major commodities staged a comeback and it was also reflected in the rise in palm oil prices which started the year at RM3,700/MT and rose to above RM4,500 in May and the price has remained stable since.

Throughout the first three quarters of 2021, the global economy has staged a slow recovery despite the ongoing Covid-19 pandemic. The oils and fats industry reacted positively as the economic activities resumed in major consuming countries as seen in the heightened export activities of many countries. This continuous recovery both in the global economy and oils and fats prices will likely hold firm at least until the end of 2021. Demand for all types of oils & fats demand is set to resume especially for palm oil which is seen as the most competitively priced vegetable oil in the market.

Production growth is expected to be modest and will again be led by palm oil. Malaysia and Indonesia who contribute to 85% of the global palm oil production will be the focus of the international oils and fats trade. With 30% of the global oils and fats production coming from Malaysia and Indonesia, the role played by both countries is vital in forecasting palm oil price.

Based on the above factors, we will analyse issues impacting palm oil price so far in 2021 and take into account the influence of the other competing oils. Demand for palm oil is expected to remain upbeat and combined with our regional analysis on the demand and supply scenarios we will aggregate the global level to forecast the price in 2021.

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Questions & Answers (10) :

Auwal saleh

1 year ago

My name is Auwal CEO Aji Multi Business Company Ltd, I want to know how to start a business with MPOC ?

POINTERS Secretariat:
MPOC is an agency that operates under the purview of MPIC. The role of MPOC is to promote the market development of Malaysian palm oil and its products by enhancing the image of palm oil and creating better palm oil acceptance. MPOC strives to raise awareness on various palm oil technological and economic advantages (techno-economic advantages) as well as environmental sustainability.
1 year ago

HCLeow

1 year ago

Dear Dato, Is there any update from the government on the progress of getting the 32,000 workers? Apparently Indonesia plantation companies also very aggressive in recruiting and the pay offer on par with Malaysia now. Any other initiatives or G-to-G arrangement to expedite this recruitment? Thank you.

POINTERS Secretariat:
The government together with the palm oil companies are continuously working on this issue. Thus far, MPIC has announced that the government has given the approval for oil palm plantation to bring in 32,000 foreign workers. There are also initiatives undertaken by MPOB to encourage the oil palm sector to adopt mechanization as a long term solution to ease the labour shortage problem. Malaysians are also encouraged to work in the plantation sector through the various initiatives and campaigns undertaken by the government and private sector.
1 year ago

Anthony Yap

1 year ago

Dear Dato; As Indonesia President plan to ban CPO export from Indonesia? How it affected (or benefited ) Malaysia palm oil Industry?

POINTERS Secretariat:
Indonesia’s ban on CPO exports will create shortage in the market. This would assist Malaysian palm oil producers since it will allow them to diversify their export base by exporting more CPO. Also, the decrease in Indonesia's CPO availability will aid in the strengthening of CPO price.
1 year ago

Anthony Yap

1 year ago

Dear Dato; What are the differences of RED II vs RED I? Why some countries opt to implement it earlier?

POINTERS Secretariat:
RED I is a Directive 2009/28/EC which requires each Member State to adopt a national renewable energy action plan. These plans are to set out Member States' national targets for the share of energy from renewable sources consumed in transport, electricity and heating and cooling in 2020 and adequate measures to achieve these targets. RED II proposes a set of policy measures to achieve a 27% renewable energy share from energy consumed by the electricity, heating and cooling, and transportation sectors by 2030. The 27% target was endorsed by the EU Council in October 2014 and is binding at the EU level. For more details, please visit the website below: https://ec.europa.eu/energy/topics/renewable-energy/directive-targets-and-rules_en
1 year ago

MOHD RAFIZAN BIN SAMIAN

1 year ago

Dear Dato, I think palm oil boycott campaign is one of the contributing factors for the declined in palm oil import to EU. Do you agree with me?

POINTERS Secretariat:
The labour shortage is an ongoing issue that will require continual and long-term efforts. There is no specific time frame to resolve the issue as it is determined by various factors, including workers availability, compliance and other external factors.
1 year ago

Ng Ivy

1 year ago

Hi Dato, In your view when will the workers shortage issue affecting Malaysian palm oil producers be resolved?

POINTERS Secretariat:
The time frame will depend on the progress of the efforts undertaken by the government and industry to resolve the issue. Currently, MPIC has announced that the government has given the approval for oil palm plantation to bring in 32,000 foreign workers. There are also initiatives undertaken by MPOB to encourage the oil palm sector to adopt mechanisation as a long term solution to ease the labour shortage problem. Malaysians are also encouraged to work in the plantation sector through the various initiatives and campaigns undertaken by the government and private sector.
1 year ago

William Yap

1 year ago

Dear Dato, The high and higher CPO price are being influenced by other edible oil prices, hence coming months when the supply distruptions due to lock-downs in other edible oil producing countries starts to ease, how will the demand for CPO be strong ?

POINTERS Secretariat:
Although edible oils supply is expected to increase as lockdown eases, demand for palm oil will also be stronger spurred by the opening of economic activities especially in the HORECA sector and other related industries. Also, higher demand for palm oil is expected in the coming months to cater for upcoming festivities in different parts of the world.
1 year ago

George Teh

1 year ago

Dear Dato' Casting the horizon into medium- and long-term, the Government of India (GOI) recently announced plans to massively expand domestic palm oil plantation and production capacity at the the Andaman and Nicobar Islands. How does MPOC assess the potential impacts of this GOI plan, and in particular the risks this GOI plan poses to Malaysia palm oil industry? Thank you.

POINTERS Secretariat:
India has a major deficit in meeting it’s domestic demand of vegoils and has been relying increasingly on imports. Any steps taken by the GOI(Government of India) to bridge this gap and increase domestic production is in the interests of the country. The extent to which such increases have to be implemented is best determined by the Indian government. It is a known fact that oil palm plantations are long gestation projects and the impact will be seen only in the long term. At the same time Malaysian production is not gaining any significant increases due to several constraints such as availability of land and labor resources. The impact of increase in Indian production will be felt only in the very long term and it is difficult to project the global demand and supply situation so far into the future.
1 year ago

Doris Mongue

1 year ago

Dear Dato , Thank you for the presentation . several drivers ere highlighted for confirming the upward trend for 2H2021. But what about la Nina ? that weather pattern is expected to come back or may be already there . What are your thoughts about it ? IF La Nina materializes, what impacts on supply of global oils should we expect in the short/ mid term on supply ? Then I have told that Oct. prices exceeded several times the resistance level of RM 5000. As far as I see it this is unrealistic . But don't you expect global demand to be destroy by such high prices ? In advance , thank you very much for your reply , Best regards Doris M.

POINTERS Secretariat:
The La Nina phenomenon was first predicted in March 2021 by the US Climate Prediction Center. They forecasted the La Nina to occur in October but so far it has yet to materialise. The Malaysian Meteorological Dept two weeks ago predicted heavy rains in Malaysia but will be confined to the Northern Region of Malaysia only. The months between October and January are usually monsoon season in Malaysia and most producers have taken this into account. For our production forecast in Malaysia we have taken into account the impact of erratic weather and is one of the parameters used to forecast price. Despite the lower production by Malaysia, overall production of palm oil globally is forecast to increase hence price will remain stable. CPO price is exceeding the resistance level mainly driven by higher Brent crude oil price and higher demand from biodiesel sector.
1 year ago

VS LEE

1 year ago

Dear Dato, Besides the usual supply, demand and inventory of palm oil that affect the palm oil price, perhaps there are other elements such as hot money that speculates FCPO. It can work both ways. Is there any parameter the industry can monitor for such fund? For example, Bursa has a daily table to monitor the presence of foreign, local and retailers presence in the equity market. TQ

POINTERS Secretariat:
Dear Mr. Lee. Thank you for your question. Hot money transactions are not specifically monitored by MPOC. If there are monitoring parameters it would most likely handled differently by different companies. Monitoring the use of hot money for speculative investments in BMD would be outside the scope of functions of MPOC.
1 year ago