Price Performance Indicators

CPOTR Focus:

• CPOTR ICDX contract price 20/3 – 24/3 decreased by 1.19%
• Riots in the banking sector in the US silenced CPO prices
  

Market Review

CPOTR price movement decreased by 1.19% in a week to the IDR 12850/Kg level due to the impact of concerns about the banking industry which also affected CPO prices so that this turmoil is still a concern of the market and is feared to trigger a global banking crisis. In addition, CPO prices were dragged down by the decline in other vegetable oils such as soybean oil and sunflower seeds because CPO prices tended to follow the movements of other vegetable oils.

On the other hand, the Fed is also still inclined hawkish continue to put pressure on the movement of palm oil prices. The Fed again raised its benchmark interest rate by 25 basis points to a range of 4.75% - 5.00%. Previously, the Chair of the Fed, Jerome Powell, said that the Federal Open Market Committee (FOMC) meeting considered holding interest rate increases due to the banking crisis, but the FOMC continued to raise interest rates due to inflation and the US workforce, which was considered to be still heating up.

From Malaysia, Representatives from a Malaysian smallholder organization traveled to Brussels to personally submit a petition to the European Commission demanding changes to the European Union's Deforestation Regulations (EUDR). Malaysian Palm Oil Council (22/3) said “EUDR threatens smallholder livelihoods and future prosperity with demands for unilateral and unrealistic regulations on traceability and geolocation will prevent smallholders from accessing European markets.” The EUDR was initially introduced in November 2021 to limit deforestation and forest degradation through the expansion of agricultural land caused by the consumption of commodities, one of which is palm oil. The council's CEO, Belvinder Sron, called on the EU to grant exemptions for smallholders under the EUDR and offered guarantees that Malaysia would not be designated as a high-risk jurisdiction for deforestation.

From the domestic side, the Trade Minister revealed that palm oil producers in Indonesia sold 360,150 tons of cheap cooking oil to the domestic market in February, below the government's target designed to ensure supply to local consumers. Where at the previous meeting the Minister of Trade Zulkifli Hasan imposed a policy of increasing DMO volume by 50% to reach 450,000 tons per month for the February-April period, where this policy requires exporters to sell a portion of their palm oil products domestically at prices that are limited under the market obligation scheme domestic (DMO).

Market View

Banking Crisis still become a market concern

The banking crisis in the United States began to subside after authorities from the government to the FDIC Deposit Insurance Corporation intervened. As is known, the FDIC announced that First Citizens BancShare Inc. will buy deposits and loans from Silicon Valley Bank (SVB). This announcement, two weeks after the SVB crash that started the US banking crisis, calmed market jitters about the risk of contagion and helped reverse negative sentiment in the market.

Within the country, the Indonesian Palm Oil Producers Association (GAPKI) (27/3) highlighted the stagnant production of the crude palm oil or CPO industry in January 2023. Executive Director of the Indonesian Palm Oil Producers Association (GAPKI) Mukti Sardjono said, January 2023 CPO production was 3,892 thousand tons Compared to CPO production in December 2022 of 4300 thousand tons, production in January 2023 was around 9.5% lower due to seasonal factors. Meanwhile, domestic consumption of CPO + PKO in January 2023 was 1,786 thousand tonnes, higher than consumption in January 2022 of 1,497 thousand tonnes.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research