Price Performance Indicators

CPOTR Focus:

• The CPOTR ICDX contract price 10/7 – 14/7 increased by 0.17%.
• Malaysia's CPO production fell 4.60%.
  

Market Review

The CPOTR price movement increased in a week to the level of IDR 11,900/Kg driven by the 35% biodiesel (B35) blending program policy for diesel/diesel fuel which will apply nationally, Malaysia's declining CPO production and the bullish trend in Soybean oil market that makes CPO prices rise.

In the latest industry performance report for June 2023, the Malaysian Palm Oil Board (MPOB) said (10/7), Malaysia's total palm oil stocks in June 2023 rose 1.9% to 1.72 million tons from the previous month's 1.69 million tons , much smaller than expected. Crude palm oil (CPO) inventories fell 0.43% to 917,846 tonnes last month from 921,800 tonnes in May. While stocks of refined palm oil rose 4.75% to 802,721 tons from the previous 766,346 tons. CPO production fell 4.60% to 1.45 million tonnes in June from 1.52 million tonnes in the previous month, while palm kernel production fell 4.67% to 350,516 tonnes from 367,689 tonnes. Furthermore, MPOB said palm oil exports increased by 8.59%, or 92,721 tons, to 1.17 million tons in June from 1.08 million tons previously.

From within the country, Interim Secretary General of the Ministry of Energy and Mineral Resources Dadan Kusdiana (12/7) said the Ministry of Energy and Mineral Resources (ESDM) confirmed that the 35% palm oil and 65% diesel (B35) blend program would take effect nationally on August 1, 2023. As It is known that the government has started implementing a 35% biodiesel blending program (B35) for diesel/diesel fuel (BBM) starting Wednesday, 1 February 2023 with an allocation of up to 13.15 million Kilo Liters (KL). Biodiesel B35 is a mixture of biodiesel between palm oil-based vegetable fuel (BBN) and diesel fuel. With the implementation of the B35, Indonesia is considered to be the most consistent country in implementing green energy or new and renewable energy (EBT) in the world.

On the other hand, the US Department of Agriculture said that US farmers will harvest large quantities of corn and soybeans this year, boosting the supply base even though drought conditions stressed crops during the early stages of development. The bullish trend on the soybean oil market has also increased CPO prices. Palm oil is affected by price movements of related oils as they compete for a share in the global vegetable oil market.

Market View

India and China Demand Sentiment

A year-long deal allowing Ukraine's grain exports to the safe Black Sea expired on Monday (17/7) after Russia quit and warned it could not guarantee the safety of ships. The Black Sea region accounts for 60% of world sunflower oil production and 76% of exports. India normally imports around 250,000 metric tons of sunflower oil per month, mainly from Russia, Ukraine, Argentina and Turkey. In news reports earlier this year, Black Sea exporters were aggressively selling sunflower oil at competitive prices, which helped lower inventories. India was able to import around 275,000 tons of sunflower oil in July, but August imports could drop to around 200,000 tons. Market participants believe that ending this deal will force Ukraine to ship sun oil from Romania, Bulgaria and other European countries, but changing routes is seen as reducing volumes, so India's sunflower oil imports are likely to fall in the coming months due to rising prices after Russia pulled out of the Black Sea grains deal.

From China, China's economic data shows that the Gross Domestic Product (GDP) in the second quarter grew by 0.8% compared to the first quarter, but compared to the same period last year it decreased by 6.3% or less than the previous projection which estimated growth of 7.3%. The economic data raises concerns about disrupting demand and dampening the rapid economic recovery. It should be remembered that China is one of the world's largest CPO consumers.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research