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Various Positive Catalysts Drive CPO Price Strengthening
Various Positive Catalysts Drive CPO Price Strengthening
Wednesday, 31 January 2024

Price Performance Indicators

Product 

Price

% change

CPOTR

Rp13055

3.65%

FCPO

MYR4.017

2.89%

Soybean Oil

$46.93

-2.55%

COFU

$78.11

4.62%

USD/MYR

MYR4.725

0.02%

USD/IDR

Rp15,829

1.29%

CPOTR Focus:

  • The ICDX CPOTR contract price 22/1 – 26/1 experienced an increase of 3.65%.
  • Signal of extended time from India for CPO products.

Market Review

CPOTR price movements increased within a week to IDR 13,055/Kg, triggered by increasing demand for biodiesel and India's move to extend import duties on vegetable oils at low rates until 2025.

From within the country, in 2023, the government began implementing a program to mix palm oil-based biodiesel (BBN) into diesel oil at 35% (B35). Starting in early 2023, the government increased the biodiesel content from B30 to B35. This means that the share of palm oil (CPO) for export will decrease because domestic use will increase, which is expected to limit the global supply of palm oil. Indonesia's palm oil exports are expected to fall by around 4 percent to around 29 million metric tons this year because domestic consumption increases with the mandatory blending of palm oil-based biodiesel at 35 percent, said the Indonesian Palm Oil Entrepreneurs Association (GAPKI).

The Palm Oil Plantation Fund Management Agency (BPDPKS) said Indonesia, the world's largest palm oil producer, has set a target to replant 180,000 hectares of oil palm trees on smallholder land every year to increase production without having to clear more forest. In 2023 the government approved the replanting of 53,012 hectares of oil palm trees on land owned by small farmers under a subsidized program, this number has increased compared to 2022 of 30,759 hectares although it is still below Indonesia's annual target.

From India, the India Government reported that it would extend incentives for imports of vegetable oils, including CPO, through low tariffs/import duties until March 2025. Previously, the India Government determined that the import duty incentives were only valid until March 2024. This provides a breath of fresh air for market players because crude palm oil (CPO) products and their derivatives receive an extension of time to enjoy import duty incentives for exports to India. India buys palm oil mainly from Indonesia, Malaysia and Thailand, while it imports soybean oil and sunflower oil from Argentina, Brazil, Russia and Ukraine.

Market View

Threat of Bad Weather on CPO

The previous El Nino weather pattern has caused hot and dry weather in Asia and heavier than usual rain in parts of the Americas. After a strong El Nino, global weather is poised to transition to La Nina in the second half of 2024, a pattern that typically brings heavier rainfall to Australia, Southeast Asia and India as well as drier weather to grain and oilseed producing regions, namely the American region. In areas with increased rainfall, CPO production may be affected as wetter conditions can hinder agricultural activities, such as plantation maintenance and harvesting, raising concerns about damage to palm oil plants and plantation infrastructure, resulting in disruptions in the CPO supply chain.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date

Data/Events

Actual

Ekspektasi

Sebelumnya

30-Jan

US - JOLTs Job Openings 

-

8.75M

8.925M

1-Feb

US - Fed Interest Rate Decision

-

5.5%

5.5%

2-Feb

US -  Non Farm Payrolls

-

333K

180K

Source: ICDX Research

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