Price movements in CPOTR experienced an increasing trend of 4.97% to the level of RP 14360 /Kg at the close of last trade. The price increase was supported by positive sentiment from the Government of Indonesia's policy (8/8) which increased the export duty on CPO from $52 per ton to $74 per tonne which was effective from August 16 to 31, which has the potential to hold back Indonesia's CPO exports to the global market.
Also supporting the price increase in CPO last week was the price of substitute oil, namely Dalian oil, which increased, thus giving further influence, last week's increase in substitute oil prices, in this case soybean oil in Dalian, also affected the increase in Global CPO prices. CPO prices are also affected by related oil price movements as they compete for a share in the global vegetable oil market.
From the Malaysian side, the release for CPO stocks increased by 905,946 tons in July compared to the previous 881,315 tons and this figure became the highest level for 2022. In news circulating the Malaysian Ministry of Human Resources will temporarily suspend the acceptance of new foreign manpower applications to allow a review of procedures following the 2022 labor law (Amendment) which took effect on 1 September, it is planned that the acceptance of foreign worker applications will be temporarily suspended from 15 to 31 August 2022. According to Bestari Selangor Protecting Director Paramaligam Supramaniam that rising stockpiles amid a labor shortage have also raised concerns about quality of processed crude palm oil. Market participants assessed that Malaysian CPO had been rivaled by Indonesian CPO because the Indonesian government had previously cut export levies and increased the volume of exports so that market participants were more interested in CPO from Indonesia and pushed up the price of Indonesian CPO.
Potential Decrease in CPO Demand By India
India is the world's main consumer of CPO, which means that India's demand for CPO will have a direct effect on world CPO prices. In 2020, India's CPO import value reached US$ 4868 million with a volume of 24 million tons, coming from Indonesia and Malaysia. On the production side, the volume of local production is not sufficient to meet the demand for CPO in India and requires India to import from partner countries to meet supply needs in India. This makes India very dependent on CPO importing countries, if this is continued for a long time, then India must always set aside a large budget specifically for the purchase of CPO.
India is in the stage of reducing CPO imports significantly by implementing a policy of clearing land and oil palm plantations in the Telangana area with a target of 2 million hectares in the next 4 years. With an area of 2 million hectares, the projected CPO production in the region can touch the figure of 4 million tons per year. If the policy implemented by India is successful and can produce CPO independently, it will certainly have a large impact on the demand side for Indonesia and will directly impact Indonesia's trade balance and export income.
Data Ekonomi dan Agenda Mingguan
MY - Balance of Trade JUN
MY - Exports YoY JUN
MY - Imports YoY JUN
Source : ICDX Research