Price Performance Indicators
Only recorded one daily correction during the past week, the crude palm oil (CPOTR) contract finally closed the week with a weekly increase of 4.80% to the level of Rp 17,045,- per kg. The increase occurred amid a surge in demand for basic commodities such as oil, gas, and coal following expectations of a global economic recovery – which combined with other CPO fundamental factors, to form a strong price foundation.
From the demand side, a number of analysts and industry players believe that demand for CPO will continue to increase, especially in the fourth quarter of 2021 – with the prediction of extreme weather events, as well as a lot of activity in major consumers, such as China and India. Based on searches of a number of CPO research firms, inventories in these two countries are at a low level. China has an inventory of 418,000 tons of CPO, while India recorded an inventory of 1.7 million tons of edible oil. On the other hand, the demand is increasing due to the energy crisis in Europe, especially after the Brexit – which has also pushed up the prices of the main substitute products such as palm oil, soybean oil and other derivative products.
Second, in terms of producing countries, historically, monthly CPO production in major producing countries such as Indonesia and Malaysia will peak in September-October – followed by a downward trend in production thereafter. Moreover, the consumption of CPO in Indonesia will be higher in line with the program of mixing fuel oil with CPO derivative oil to make biodiesel. In addition, based on statment from the Malaysian Palm Oil Council (MPOC), the country's CPO imports to China are also expected to increase to a peak in 2022 due to the possibility of a slowdown in soybean oil production growth.
Going forward, the price of palm oil (CPO) will pay more attention to the movement of world crude oil prices, which are currently dashing to continue to penetrate their highest level in six years.
Following Energy Prices, Will the CPO Keep Up?
In the past few months, most of energy commodities were going up as problems occurred on Chinese water and wind power plant, thus shifted to energy commodities power plant. This shifting of source of power plant had caused the energy commodities climbed up which also effecting the CPO prices as CPO were also one of the main substance to produce biodiesel. How long the rally of energy commodities that will drive up the CPO prices as one of the ingredient of biodiesel?
MY – Retail Sales YoY AUG
CN – Imports YoY SEP
IN – WPI Food YoY SEP
IN – Imports Final SEP
Source: ICDX Research