Monthly Prices Movement

  • Palm Oil prices traded mostly positive throughout the month in all the major markets across the country as there was improved domestic demand ahead of festival season. However, prices corrected at the end of the month amid expectation of higher production in Malaysia and Indonesia.

  • Low stocks in the major ports in the country, strong global cues and supply concerns have made the buyers active and supported the price surge.

Ground Report

  • India's Palm Oil imports during the month of August surged by almost 133%. The heavy purchase of the country was with an aim of refilling the gap of low stocks at ports ahead of festive season demand.

  • Solvent Extractors Association stated that India's Palm Oil (CPO+RBD) import has dropped 6.1% to 0.57 million tonnes in month of July, but imports during the first eight months of the current oil year doubled to 1.777 million tons.

  • Indian Palm Oil stock piles is down by 33% in the current season which will boost the demand during September due to festival season and open doors for imports.

  • The share of Palm Oil in India's growing Edible Oil imports likely to plunge to a record low this marketing year as a rally in prices slashes its discount over rival Soy Oil.

  • Indonesian Palm Oil Producers Association stated that the country produced 15.3 million tons of Crude Palm Oil and exported 12.5 million tons in the first half of 2016.

  • USDA’s Foreign Agricultural Service stated that Indonesian Palm Oil output during 2016/17 marketing year which starts on October 1 will climb 4.7% to 33.5 million metric ton from a year earlier as La Nina event is expected to bring higher-than-normal rain.

  • Indonesia's Crude Palm Oil output gained by 14% to 2.802 million tons in July from 2.464 million tons in June while exports were seen at 1.875 million tons. Palm Oil stocks showed some recovery by rising 9.5% in July to 1.875 tons, according to Reuters Survey.

  • Malaysia Palm Oil Board data showed that Palm Oil production was up 3.5% in July from a year earlier to 1.59 million tons.

  • Malaysian Palm Oil products exports during the month of August increased by 27.3% percent from a month early to 1.621 million metric tons, independent market surveyor Intertek said.

  • Malaysia's Palm Oil shipments grew 21% in July due to stronger demand from China and Europe. Palm Oil shipments of Malaysia to India rose 12% in July.

  • Malaysian Palm Oil Council (MPOC) stated that CPO prices are seen averaging at 2,678 ringgit per ton this year, up nearly 18% from last year, boosted by demand from top consumer India and replenishment of stocks by China.

Policies

  • Indonesian agriculture ministry stated that Indonesia CPO production this year is expected to fall 5% in 2016 to 29.6 million tonne due to weather pattern of La-Nina.

  • Indonesian government said it will not impose an additional export tax on Crude Palm Oil in September.

  • The government of Malaysia is negotiating with oil companies to start the B10 bio-diesel mandate in the fourth quarter of this year from its earlier plan of July. The programme has already been delayed twice this year.

  • India further raised the import tariff value of Crude Palm Oil from $688 per metric tons to $770 per metric tons for the first half of September and value of RBD Palm Oil from $732 per metric tons to $786 per metric tons, ministry informed.

  • India government launched its bio-diesel programme as part of its efforts to cut energy imports and carbon emissions.

  • Thailand government has targeted Oil Palm acreage at 1.63 million hectares by 2036 to meet the domestic demand and curb imports. The country has planned only to use domestic Palm Oil as feed stock and other feed stock like animal fats and UCO will be used insignificantly, as per USDA report.

Global

  • USDA estimates that global Palm Oil production is estimated to drop to 59.40 million tons in 2015/16 from 61.64 million tons a year ago.

  • According to Oil World estimates, the global Palm Oil production is expected to register a 3.5% decline to 60.4 million tons, about 200,000 tons lower than its June estimate.

  • Indonesia's domestic consumption was expected to be around 1 million tons last month, compared with an estimated range of 600,000 tons to 920,000 tons domestic consumption in June.

  • China's total Palm Oil imports plummeted to 1.87 million metric tons during the first half of this year after El Nino weather conditions squeezed supplies and drove prices to two-year highs.

  • China's Palm Oil imports from Malaysia during August 1-25 period advanced by 3.5 percent at 187,100 metric tons compared to same period last month, cargo surveyor Intertek Testing Services said.

  • Chinese demand for Malaysian Palm Oil has dropped above 50% year-on-year from January to June this year, following the Chinese government’s release of two million tonnes of rapeseed oil from the state reserves.

  • Chinese Palm Oil imports from Malaysia more than doubled to 2.11 million tons during July from 1.01 million tons a month early.

Outlook

  • Palm Oil direction is not clear in near-term following volatile Malaysian Palm Oil futures and range-bound movement in Indian currency. However, near-term tight supply and strong demand from India and China will help Palm Oil prices to rise ahead.

  • Palm Oil's price direction is influenced by Crude Oil, as the Vegetable Oil is used as a blending component for bio-diesel as a substitute for crude.

  • Indian Palm Oil stock piles down by 33% in the current season which will boost the demand during September as festival season is arriving. Diwali demand will give a boost to Palm Oil imports in the country. Reports of an import duty hike may keep prices supported in the domestic market.

  • CPO prices may rise to RM 3,000 per tonne next year on the back of an increase in demand, especially from India. India needed Palm Oil from Malaysia to support its bio-diesel industry.

  • Consumption of Edible Oil expected to rise as India enters three month long festival season up to Diwali, whereas China will be celebrating Moon-cake in September.

  • India and China are rate sensitive buyers in world market, and may continue to buy Palm Oil as it is still the cheapest in oil complex despite low price gap with other rival Veg Oil. India will continue to focus Malaysian as well as US futures prices, as both countries may report high production and may pressure prices.

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