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Increases in Soybean Oil and Crude Oil Also Supported CPO Prices
Increases in Soybean Oil and Crude Oil Also Supported CPO Prices
Thursday, 22 June 2023

Price Indicator

Product 

Price

% change

CPOTR

Rp11300

10.68%

FCPO

MY3743

11.76%

Soybean Oil

$59.69

10.58%

COFU

$71.41

6.38%

USD/MYR

MY4.610

-0.22%

USD/IDR

Rp14,945

0.48%

CPOTR focus:

  • CPOTR ICDX contract price 12/6 – 16/6 increased by 10.68%
  • CPO price pressure in the future

Market Review

CPOTR price movement increased by 10.68% in a week to a level of IDR 11,300/kg due to rising prices of soybean oil and crude oil, which also strengthened CPO prices.

CPO extended gains last week lifted by firmer soybean and crude oil prices. Chicago soybean futures saw gains hit their highest in nearly six weeks, as signs of a worsening drought in the Midwest US raised fears of the prospect of a crop failure. Increased hot weather will result in lower CPO production as drier conditions will significantly affect palm oil productivity.On the other hand, US Brent and West Texas Intermediate (WTI) crude futures have strengthened, making palm oil a more attractive option for biodiesel feedstock.The price of palm oil is affected by the price movements of related oils, as they compete for a share in the global vegetable oil market.

Domestically, Indonesia plans to set a reference price of crude palm oil (CPO) at US$ 723.45 per metric ton for the period June 16-30, down from the current US$ 811.68, said economy ministry official Musdhalifah Machmud on Wednesday (14/6). The planned reference price would place the export tax at US$ 3 per tonne and the export levy at US$ 65 per tonne, down from US$ 33 and US$ 85 per tonne respectively.


Market View

Policies from the US and the EU Put pressure on CPO in the future

Palm oil is under pressure going forward from US plans to implement a smaller biofuel mandate than initially proposed. The Biden administration plans to increase the amount of biofuels that oil refineries must mix into the national fuel mix over the next three years, but the plan includes a lower mandate for corn-based ethanol than originally proposed.

From the other side,The European Union (EU) has officially enacted the Deforestation Law (UU) or the EU Deforestation Regulation (EUDR) as of 16 May 2023. As a result, Indonesian agricultural products such as palm oil will be affected by this law.This policy is like undermining all of Indonesia's efforts which are committed to solving problems related to climate change issues to biodiversity protection in accordance with multilateral agreements, agreements and conventions, such as the Paris Agreement. "CPOPC member countries have strictly implemented various policies in the field of forest conservation. In fact, the level of deforestation in Indonesia fell by 75% in the 2019-2020 period. Indonesia has also succeeded in reducing the area affected by forest fires to 91.84%, "said Airlangga as a Coordinating Minister for The Economic Affairs Indonesia.

Indonesia is committed to producing palm oil that meets sustainability requirements. Indonesia always resolves various issues related to deforestation and climate change and has been recognized and used as an example by various international and multilateral organizations, including World Bank publications.Climate Development Report the most recent ones have stated and acknowledged Indonesia's commitment to realizing climate and development targets.

Weekly Economic Data & Event Calendar

Date

Data/Events

Actual

Ekspektasi

Sebelumnya

20-June

US -   Fed Chair Powell Testimony

-

-

-

20-June

MY - Balance of Trade 

 MYR15.4B

MYR15.0B

MYR12.6B

20-June

MY -  Exports YoY

-0.7%

-11.9%

-17.4%

20-June

MY -  Imports YoY

 -3.3%

-11.1%

-12.1%

Source: ICDX Research

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© Indonesia Commodity & Derivatives Exchange (ICDX)
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