Concerns about Supply Disruptions Due to the El Nino Phenomenon and Expectations of Increased Demand Pushing Up Prices

The ICDX CPOTR contract price 10/30 – 11/3 increased by 0.86%.
Fears of drought due to the El Nino phenomenon. Market expectations regarding increasing Indian demand.

Market Review

CPOTR price movements increased within a week to IDR 11,720/Kg, triggered by concerns about global supply disruptions due to the threat of El Nino in the Southeast Asia region and expectations of increased demand from India.

In the news circulating, cargo surveyor data shows that Malaysia's vegetable oil exports rose 4% - 6% in October. India became the largest buyer and recorded the most fantastic increase last month. It should be remembered that India, as the world's largest importer of palm oil, will celebrate Diwali on November 14. This makes market players expect high demand, because usually before the Diwali celebration, India increases global CPO demand. The increasing demand for CPO exports amidst concerns about shrinking stocks due to the impact of El Nino which has the potential to disrupt CPO production also supports CPO prices.

Domestically, around 200,000 hectares (494,210 hectares) of oil palm plantations found in areas designated as forests in Indonesia are expected to be returned to the state to be converted back into forests. It is worth remembering that Indonesia, the world's largest producer and exporter of palm oil, issued regulations in 2020 to regulate the legality of plantations operating in areas that should be forests, aimed at improving governance in the sector.

Market View

Implementation of the B35 biofuel program

As a mandatory program for implementing biofuel through B35 biodiesel, it has reached 8.9 million kilo liters (68%) as of September 2023. Meanwhile, 121,000 kilo liters of B35 were recorded as being exported abroad. Director General of New and Renewable Energy (EBTKE) of the Ministry of Energy and Mineral Resources Yudo Dwinanda Priaadi said that to achieve the zero emission target, in the future Indonesia will need more palm oil supplies. Apart from that, Indonesia has developed other renewable energy made from palm oil. Recently, the government through airlines has tested aircraft fuel or bioavtur and it is hoped that massive bioavtur production will be implemented in 2026.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date	Data/Events	Actual	Ekspektasi	Sebelumnya
7-Nov	MY - Industrial Production YoY	-0.5%	-0.1%	-0.3%
8-Nov	US - Fed Chair Powell Speech	-	-	-
9-Nov	MY - Retail Sales YoY		4.0%	6.3%

Source: ICDX Research