Crude Palm Oil hitting RM4652 per tonne as at 6 May 2021 (MPOB website). Record high and good to visit plantation stocks again. By the way, CPO price usually goes together with Crude Oil price. Malaysia is second largest CPO producer (approx 19 million tonnes per year) after Indonesia (approx. 44 million tonnes per year). Sime Darby is the largest CPO producer in Malaysia.
https://www.theedgemarkets.com/article/malaysia-cpo-production-expected-top-20-million-tonnes-2020
- Malaysia’s
CPO production is expected to go above 20 million tonnes, while Indonesia
should add one to two million tonnes to its 2019 production levels, as
yield stress from 2019’s dryness is over.
- India’s
total import of vegetable oils should come in at between 13 million to
13.5 million tonnes in 2020 (from the 15.5 million tonnes in 2019), and
rise back to 15 million to 15.5 million tonnes in 2021.
- Meanwhile,
palm oil demand is still viable in Europe due to tight rapeseed oil
supplies and palm oil gaining market share given its status as the
cheapest vegetable oil. This is particularly the case in biodiesel, which
makes up 50% of total European demand for palm oil.
What is palm oil mill?
Palm oil mills process fresh fruit bunches from oil
palm trees. It is a strategy for plantation company to own palm oil mills to
process the FFB immediately after harvesting. However, palm oil mills are
additional cost and need to operate at optimum capacity. Refer to the process
below.
Products from FFB are as follows:
Leading
importers for CPO are India and China
https://www.theedgemarkets.com/article/indian-and-chinese-demand-palm-oil-likely-rise-2021
- In 2019, India accounted for 19% of global palm oil imports, while China accounted for 13%. As of September 2020, China and India were also the two biggest importers of Malaysian palm oil.
https://www.nst.com.my/business/2021/03/676703/china-import-71mil-tonnes-palm-oil-2021
- KUALA LUMPUR: China is expected to import between 6.7
million tonnes and 7.1 mil tonnes of palm oil in 2021, owing to the
tightness in the country's vegetable oil.
Quick fact: Forecast India import 13 mil tonnes and
China import 6 mil tonnes from Malaysia. If these countries increase imports,
Malaysia will not have enough to supply then Indonesia will supply the
shortfall.
CPO price factors
Forecast of CPO price till 2025 is US$777 per tonne. See link below but I think this site is too optimistic.https://www.statista.com/statistics/675813/average-prices-palm-oil-worldwide/
Please note this is only forecast, nobody will know
the actual price will be. There many factors determining the CPO price such as
weather, soybean oil, biodiesel B30 mandate in Indonesia)
Weather Impact on Palm Oil production
El Nino – Hot weather (less rainfall) – bring down
yields of FFB.
La Nina – High rainfall & flooding – disruption to harvest – lower FFB. Conversely high rainfall will result better FFB yield.
Soybean
Soybean producers are China, US, Brazil, Argentina. See
link below: La Nina will have impact on Soybean as well. Soybean price will
affect CPO price as both are major vegetable oils.
https://www.indexmundi.com/agriculture/?commodity=soybean-oil&graph=production
Major Vegetable Oil consumption is as follows:
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