ICDX’ CPOTR palm oil contract prices in the past week gradually recovered and recorded an increase of 5.89% from the level of Rp 8,150, to Rp 8,630, - amid mixed sentiment that drove the price movements.
Palm oil seems to ignore the negative sentiment coming from the decline in world crude oil prices, although there was a rebound in the middle of the week following Trump’s intervention in the oil price war triggered by Saudi Arabia and Russia. Although the competitiveness between the two commodities does not occur directly in the same market, palm oil, especially CPO, is the raw material for making biodiesel which is actually a substitute product of oil.
In addition, the decline in Malaysian palm oil exports reported for the March 1-20 period was recorded down by 21.2% over the previous month also received relieving news from reports that the Indian representative to Malaysia, Mridul Kumar, who met the new Prime Minister Muhyiddin Yassin and the minister foreign affairs Hishammuddin Hussein. This is expected to reopen Indian purchases of Malaysian CPO.
Broadly speaking, prices have also been lifted by the approaching celebration of the holy month of Ramadan which will usually increase the level of demand and consumption combined with a market atmosphere that tends to fret and worry about the economic impact of COVID-19, CPO prices are projected to also follow the upward trend in prices of derivative products, OLEINTR (cooking oil).
Malaysia’s Plantation Stopped Operating Temporarily
Plantation Association in Malaysia gave a formal statement that operational of Malaysia CPO plantation and factory will be stopped for the next 2 weeks to minimalize the spreading of COVID-19 across the country. As a result, based on statement from head of CIMB’s research regional agribusiness, Ivy Ng, Malaysia CPO’s stock may fall around 707.500 ton. This outcome may cause the price of CPO hold on its support.
COVID-19 Hit European Country Hard
European countries, in 2017, accounted for around 11% of the portion of Indonesian CPO product absorption. But, since the end of February several European countries have been hit hard by COVID-19 and caused their citizens and several sectors, especially the culinary industry to be "locked up" and disrupted their operations. Will the demand for CPO from European countries still be stagnant amid this global pandemic and can provide negative sentiment on CPO prices?