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Concerns about Disturbances in Palm Oil Supply Support CPOTR
Concerns about Disturbances in Palm Oil Supply Support CPOTR
Wednesday, 13 September 2023

Price Performance Indicators

Product 

Price

% change

CPOTR

Rp13397

2.20%

FCPO

MYR3.717

-3.91%

Soybean Oil

$60.22

-3.68%

COFU

$87.18

1.40%

USD/MYR

MYR4.647

0.11%

USD/IDR

Rp15,319

0.20%

CPOTR Focus:

  • The ICDX CPOTR contract price 4/9 – 8/9 increased by 2.20%.
  • Concerns about drought due to the El Nino phenomenon.

Market Review

CPOTR price movements increased within a week to IDR 13,397/Kg, triggered by concerns about global supply disruption due to the threat of El Nino in the Southeast Asia region.

The unusually dry August has been adversely affected by the intensification of El Nino, and lower rainfall forecast in September. The threat of El Nino could cause drought in palm oil plants in Southeast Asia, thereby potentially producing palm oil in Southeast Asia. The Indonesian Palm Oil Entrepreneurs Association (Gapki) revealed that the current drought could trigger a delay in the maturity of palm fruit. If this continues, palm oil production could decline in the next few years. Gapki assesses that if El Nino really occurs in Indonesia, it is certain that palm oil production will decrease drastically in the following year. It could even be more than 10% like now. Worse yet, not just one year, but even up to two years, production will decline.

On the other hand, Indonesia has set the reference price for crude palm oil for the period 1-15 September 2023 at US$805.20 per metric ton, so that CPO export taxes and levies were US$33 per ton and US$85 per ton respectively for that period. . Apart from that, the sentiment that put pressure on prices this week was the release of Malaysian palm oil exports by the Malaysia Palm Oil Board (MPOB). Malaysia's exports of palm oil products for August fell by around 10% to 1,221,814 tonnes from 1,354,388 tonnes shipped in July.

Market View

Malaysian Palm Oil Stocks Soar

The Malaysian Palm Oil Board (MPOB) stated in a report on 11/9 that palm oil inventories in Malaysia increased by 23% month-on-month to 2.12 million tonnes, the figure being the highest jump in the last two years due to stronger production than expected and weakening exports from the second largest producer. Apart from that, national crude palm oil (CPO) production also rose 8.9% to its highest level in 10 months of 1.75 million tons. Market players estimate that demand for palm oil may be affected in the near future due to reduced demand from China, one of the largest commodity importers in the world, due to the country's weakening economic growth.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date

Data/Events

Actual

Ekspektasi

Sebelumnya

11-Sep

MY -  Industrial Production YoY

0.7%

-2.2%

-2.5%

13-Sep

US - Inflation Rate YoY

-

3.5%

3.2%

13-Sep

US - Core Inflation Rate YoY

-

4.4%

4.7%

14-Sep

US -  PPI MoM

 

-

0.4%

0.4%

Source: ICDX Research

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