Traders will watch the discord between palm oil demand and supply in the short term

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Indonesia expects palm oil to stay above $1,000 a tonne this year – Photo: Shutterstock

Traders are monitoring the spread of the coronavirus in India and China, the main importers of palm oil, to determine how prices will develop in the coming weeks, particularly after the biggest producer, Indonesia, announced a cooking oil export ban.

For now, demand in India is robust, supported by the recovery of its hotel, restaurant and catering segment and favorable taxation, according to a report by the Council of Palm Oil Producing Countries. (CPOPC).

But coronavirus infections are rising in the South Asian nation. Prime Minister Narendra Modi will discuss the issue during a virtual meeting with senior ministers from various Indian states on April 27, news agency ANI reported.

Meanwhile, demand for edible oil has plummeted in China following business disruptions triggered by the coronavirus. Beijing authorities have reportedly begun mass testing for Covid-19 on all residents of the city’s most populous district. Elsewhere, the lockdown of Shanghai’s financial hub continues, in a bid to curb the massive spike in infections there.

Golden-Agri Resources

Price to stay above $1,000

“As markets closed last week, market sentiment in the palm oil market was mixed,” according to a Mintec price update published on April 19. Mintec benchmark prices for CIF Rotterdam palm oil hovered at $1,740/mt, up $60.50/mt on the week, he added.

Mintec, which provides data on global commodity prices, attributed the mixed sentiment “to concerns over a lack of demand from China following widespread lockdowns”.

“Despite this, the MPOB (Malaysian Palm Oil Board) statement showed inventories falling 3% month-on-month, contrary to market expectations ahead of the report which forecast inventories rising for the first time in six months. Mixed sentiment has divided market participants on market developments in the coming weeks,” Mintec analysts wrote.

The Indonesian Palm Oil Association (IPOA), known locally as Gabungan Pengusaha Kelapa Sawit Indonesia (GAPKI), expects palm oil to stay above $1,000 a ton in the first half of 2022 and potentially for the rest of 2022, notes the CPOPC report.

Malaysia is the world’s second largest exporter of palm oil. The Southeast Asian nation and Indonesia together produce around 85% of the world’s palm oil needs.

Leading Producers

Golden Agri-Resources (GAR) is Indonesia’s largest private oil palm producer, with a planted area of ​​approximately 536,000 hectares, about three times the size of London. The company, part of the Sinar Mas conglomerate, is also among the largest palm oil refiners in Indonesia with 47 mills.

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GAR competes with Bumitama Agri and First Resources.

Bumitama, part of Harita Group, is an Indonesia-based investment holding company engaged in the production of crude palm oil (CPO) and palm kernel oil (PK).

First Resources is a Singapore-based producer, managing some 213,461 hectares of oil palm plantations in Indonesia’s Riau, East Kalimantan and West Kalimantan provinces.

Control food inflation

Indonesia’s decision to halt palm oil exports will hurt other countries, but there is a need to try to bring down the domestic price of cooking oil, Finance Minister Mulyani says Indrawati to Reuters last week.

Local demand exceeds supply and prices have risen since the war in Ukraine, Indrawati added. The European nation accounts for almost half of all global exports of sunflower oil, another food staple.

Meanwhile, palm oil accounts for nearly 60% of global vegetable oil shipments.

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