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CPO Increases Triggered by Positive Sentiments
CPO Increases Triggered by Positive Sentiments
Thursday, 02 March 2023

Price Performance Indicators

Product 

Price

% change

CPOTR

Rp13715

2.54%

FCPO

MY4202

0.84%

Soybean Oil

$61,22

-2.75%

COFU

$76.54

-0.88%

USD/MYR

MY4.433

0.11%

USD/IDR

Rp15,216

0.32%

CPOTR Focus:

  • CPOTR ICDX contract price 20/2 – 24/2 increased by 2.54%
  • Drought Sentiment And DMO Lifted CPO Prices

Market Review

Price movements at CPOTR increased by 2.54% in a week to the level of IDR 13,715/Kg. The strengthening of CPO prices was triggered by positive sentiment both from within the country and abroad which also supported CPO prices.

From the domestic side, positive sentiment came from policies of domestic market obligation (DMO) by the Indonesian government in the midst of potentially limited global CPO supplies. Approaching the Eid season, the government is focusing on meeting domestic cooking oil needs. For this reason, the Government has established a policy to increase DMO by 50% starting from February to the end of April 2023. With an increase of 50%, the mandatory domestic supply, which was originally 300 thousand tons per month, increased to 450 thousand tons per month of cooking oil (Minyak kita). This policy will affect the amount of CPO exports from Indonesia, which will affect the global supply.

Another positive sentiment came from the increase in substitute vegetable oil prices. Vegetable oil production from Argentina is concerned about the possibility of shrinking after the drought that hit Argentina. The impact of the drought related to the La Nina weather pattern forced farmers to cut prospects for harvest and supply as the world's main exporter of soybean oil because, many farmers in the area said that they had lost their crops that were planted earlier.

On (23/2) Deputy for Investment and Mining Coordination at the Coordinating Ministry for Maritime Affairs and Investment (Kemenko Marves) Septian Hario Seto said that the Indonesian government will sue the European Union at the World Trade Organization (WTO) regarding palm oil, there are two lawsuits against the European Union which will soon be submitted to the WTO.

Market View

Planned Meeting of Malaysia to the European Union

From the domestic side, Indonesia government is trying to ensure the oil palm replanting scheme to lift sluggish yields in order to meet this year's target of 180,000 hectares. This move comes as vegetable oil growers face increasing scrutiny over sustainability.From the Malaysian side, Malaysia has invited Thailand to join the Council of Palm Oil Producing Countries (CPOPC) together to Europe for discussions with their leaders and parliamentarians to address discriminatory protectionist actions against palm oil and rubber producers at the Asean level as a result of the EU's no-deforestation law on 6 December 2022. Once adapted and implemented, this law will close the supply chain that enters the area from products that are considered to contribute to deforestation and land degradation. The Malaysian side considers that this law does not only have an impact on business and the economy but also disrupts the source of income for small farmers

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date

Data/Events

Actual

Ekspektasi

Sebelumnya

27-February

MY - PPI y/y

1,3%

3.6%

3.5%

28-February

MY - M3 Money Supply  y/y

4,4%

4,3%

4,3%

1-March

MY - S&P Global Manufacturing PMI 

48.4

48

46.5

Source: ICDX Research

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