Monthly Prices Movement

  • Palm Oil prices traded mostly negative throughout the month amid volatility in Malaysian currency, Ringgit. It also acted on weak exports and expectations of higher output tracking seasonal demand.

  • Palm Oil prices are down 3.5% so far this month and looks set for its second monthly drop in a row as weaker performing Vegetable Oils weigh on market sentiment.

Ground Report

  • India's Palm Oil imports from Malaysia plummeted by 10% to 1.42 million tonnes during the first half of this year. Import has fallen by 7.58% to 0.61 million tonnes in June against 0.66 million tonnes in May, due to low demand.

  • Import of RBD Palmolein during November 2015 to June 2016 rose by 95.60% replacing import of CPO and expected to increase further in the coming months.

  • Currently the landed cost of RBD olein (finished product) is same as that of Crude Palm Oil (raw material).Presently tax on export of CPO from Indonesia/Malaysia is higher by 5% in comparison to Refined Palm Oil/Olein.

  • Duty differential in India has to be made variable to be in line with the differential duty prevailing in Malaysia/Indonesia and justify to increase in duty difference between Crude and Refined Vegetable Oils from 7.5% to 15%.

  • India's Edible Oil import growth likely to hover around 10% during the current oil year (November 2015 - October 2016), as against 24% in previous year, despite a sharp rise in consumption.

  • Dry weather in past 2 years forced India to import higher Vegetable Oil which created huge stock domestically and that may result into slower growth import by 10. Palm Oil made up more than 65% of the India's total Vegetable Oil imports.

  • Palm Oil product exports from Malaysia gained 12.7% in the full month of July versus a month earlier.

  • Palm Oil import has risen nearly 20% in June from China, the major buyer. While India Import dropped 46% in June to 0.20 million tonnes against 0.36 million tonnes in May due to weak demand and volatile global cues.

  • Higher stockpiles in Malaysia should pressure Palm Oil prices lower and output is seen rising for a fourth consecutive month in line with seasonal trend to reach 1.51 million tonnes.

  • Weather is changing from dryness pattern El-Nino to good rainfall La-Nina, which may boost Palm yields and better production in 2017.

  • Malaysian Palm Oil production is estimated to reach 20 million metric tons in 2017 and Indonesian Palm Oil output is seen at 34 MMT factoring in land expansion.

  • Palm Oil investors focusing more on demand factor rather than prices, as world supply for Vegetable Oil likely to rise in coming months.

Policies

  • MPOB stated that Malaysia's Palm Oil exports fell 11.7 percent on month to 1.13 million metric tonnes in June whereas CPO output increased by 12.3% to 1.53 million tonnes. Palm-Oil stocks totaled 1.78 million tons at the end of June, up 7.7 percent on month.

  • As per Malaysian Palm Oil Board, Malaysia will lower its Crude Palm Oil tax from 6% to 5% in August.

  • Malaysian government stated that the country is focused on implementation of B10 Bio-diesel mandate, but in later part of 2016. The news gave confidence among investors as implementation of B10 will help to cut stock of CPO locally.

  • The delay in the implementation, however, could drag on benchmark Palm Oil futures that hit 10-month lows earlier this month.

Global

  • Concern in the market is about China demand for Palm Oil which is not as per the requirement. USDA forecast China Palm Oil imports at 5.6 million tonnes, slightly up from the estimated 5.5 million tonnes.

  • There are reports that China has bought nearly 0.2-0.25 million tons of Palm Oil as stocks at ports have reached to record lows of 0.30 million tons.

  • Chinese Palm Oil imports from Malaysia expected to rise further as domestic Palm stock levels fell to 300,000 million tonnes in July from 500,000 million tonnes in June.

  • Chinese import demand is likely to provide some support to Crude Palm Oil prices on the Bursa Malaysia in the days to come.

Outlook

  • Palm Oil prices may drift lower in coming weeks, as Indian Rupee likely to appreciate further on good monsoon progress. However, Palm Oil prices may attract demand at lower level, as demand from China and India may start soon, as both countries are rate sensitive buyers.

  • India Palm Oil prices may go down by 10-20% from September onwards due to higher production expected in Malaysia and Indonesia following the waning of the El Nino effect.

  • Palm Oil price is expected to continue its downward trend after losing 10.2% and 3-4% in June and July respectively, as production is likely to rise seasonally.

  • Weaker Palm Oil export demand alongside higher output will be negative for prices, which are seen trading between 2,300 Ringgit and 2,600 Ringgit in August.

  • Market participants are not willing to make fresh commitments in Palm Oil on low confidence following weak fundamentals in producing countries.

  • During June and July, Palm Oil prices have decreased from Rs 533 to Rs 500 per 10 kg.

  • Market will also focus on progress on Bio-Diesel mandate, which was postponed from June to August, which may help further to reduce stock.

  • The key driver in plummeting prices is the fact that seasonal uptick in production in Malaysia and Indonesia, which between them supply some 85% of total world output has been faster than expected.

  • Currently, market participants are focusing on buying at lower level ahead of Janmashtmi festival in August, as the country is not covered sufficiently for forward months.

  • Overall outlook for Palm Oil is down as markets have tried to move upside but could not in absence of any fresh bullish news.

  • Apart from volatile global cues, Palm Oil demand at domestic market is as per requirement following uncertainty in oil complex. Price gap within oil complex is narrowing and providing buyers more options in Edible Oil, considering price competitiveness.

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