Monthly Prices Movement

  • Palm Oil prices witnessed a mixed trend throughout the month in various Indian markets as prices gained on festival demand from India and China whereas it showed a declining trend on forecasts of stronger output in the world's largest producers Indonesia and Malaysia.

Ground Report

  • India's Palm Oil imports fell marginally to 0.77 million tonnes in September this year from 0.78 million tonnes of palm oil in September 2015, but rising shipments of Refined Palm Oils are hurting domestic refiners, industry body Solvent Extractors Association (SEA) said.

  • The import of RBD Palmolein is expected to increase further in coming months. The alarming increase in import of RBD Palmolein is seriously hurting the domestic refining industry.

  • Among Palm Oil products, import of RBD Palmolein rose to 0.21 million tonnes in September 2016, from 0.17 million tonnes in the year-ago period. The import of RBD Palmolein has risen sharply to 2.40 million tonnes in the first 11 months of the current oil year ending October 2016, from 1.43 million tonnes in the year-ago period.

  • Vegetable Oil analysts from around the world who gathered at a Palm Oil forum in mid October gave a mixed price forecast for the months ahead.

  • Thomas Mielke of Oil World stated that Palm Oil prices are likely to resume rally until early next year. It should rise to between RM 2,900 and RM 3,000 per tonne by then. Dorab Mistry, the leading Vegetable Oil analyst, noted that Palm Oil prices need to fall to as low as RM 2,200 per tonne from the current RM2,600 for India’s Palm Oil purchase to pick up.

Policies

  • India has decided to develop its own sustainability framework for Palm Oil production considering the domestic ecology. The move will help India to reduce import bill substantially as the country ships in about nine million tonnes of Palm Oil annually. India now produces just 200,000 tonnes of Palm Oil from 250,000 hectares of plantations.

  • The Malaysian Plantation Industries and Commodities Minister indicated the Palm Oil production of Malaysia is expected to be slightly lower at less than 20 million tonnes due to the El Nino effect.

  • Malaysian government stated that Malaysian output is expected to fall 9.8% to 18 million tonnes in 2016, while yields are estimated to decline 5.3%. Palm Oil prices in 2016 expected to stabilize at around 2,500 Ringgit per tonne as production is expected to improve in tandem with the fading of El Nino effect during the second half of the year.

  • Malaysian government also stated that Palm Oil production in 2017 is forecast to rise by 5.6% from this year on better yields and an expansion in matured areas.

  • Indonesia has set its CPO export tax at zero for November, down from $3 per ton in October as the government's reference price has fall below a certain threshold level whereas Malaysia will keep its CPO export tax at 6.5% in November, unchanged from October.

Global

  • Exports of Malaysian Palm Oil products for October 1-31 fell 6.4 per cent to 1,288,894 tonnes in September, which is also one of the factors pressurizing Palm Oil prices.

  • Malaysian South Peninsula Palm Oil Millers Association (SPPOMA) has projected Palm Oil production is set to rise 7% during month of September.

  • Malaysia's Palm Oil stocks at end- September was up by 5.67% to 1.548 million metric tons, from 1.465 million metric tons at the end of August, Malaysian Palm Oil Board (MPOB) informed.

  • Malaysia produced 1.716 million metric tons of Crude Palm Oil in September, up 0.78% from 1.701 million tons in August. The country exported 1.452 million tons of Palm Oil in September plunged by 20.42% as compared to 1.824 million ton in August.

  • Malaysia's Palm Oil imports plummeted by 77.05% to 1,792 tons in September, as compared to 7,807 tons in August.

  • Malaysian Palm Oil Council (MPOC) stated that Malaysian Palm Oil production is expected to drop by 5-8% this year due to the prolonged El Nino drought.

  • Indonesia’s Palm Oil exports increased by 29% in August, a significant improvement relative to July, according to the data from Indonesian Palm Oil Association (Gapki). Greater demand was sparked by concerns over depletion of Palm Oil stock in Indonesia and Malaysia.

Outlook

  • Palm Oil demand was very steady in the last three months bolstered by India and China. Demand from China had increased quite well in the past quarters, partly due to Moon-cake festival.

  • Palm is generally the cheapest commodity in Vegetable Oil and also the cheapest oil to produce and refine globally and that is the reason its consumption is the highest. Focused Palm Oil cultivation will undoubtedly play a key role in addressing the domestic shortfall in Edible Oil consumption and lowering India’s Edible Oil import bill and saving foreign exchange.

  • India's Cooking Oil imports are all set to touch a record 15 mt in the current, 2015-16 Oil Year, ending October. Out of the 15 mt, Palm Oil imports alone account for 9 mt or 60%.

  • Palm Oil prices are also influenced by Soy Oil's performance, because they compete for a share in the global Vegetable Oils market. The weakness in the Ringgit, Palm's traded currency, also lent support to the market, as it makes the tropical oil cheaper for foreign currency holders.

  • Palm Oil outlook it turning sluggish on rising supply of Edible Oil from local and global markets, whereas demand is as per requirement following volatility in futures market. Palm Oil demand is as per requirement from traders as they have stocked sufficient to meet festival demand.

  • Market participants are not willing to make long-term commitments in Palm Oil as the same solidifies in cold weather and demand shifts to other Vegetable Oil like Soy and Sunflower Oil. Traders are anticipating tight supply may continue till year-end and demand will revive once temperature starts rising from January on-wards.

  • Overall Palm Oil supplies globally are lower compared to previous year. This may prompt refiners and buyers to build their inventories ahead of the lower production cycle anticipating prices to rise during that period.

  • Price gap between Palm and Soy Oil have risen again, which may trigger some demand shift back to Palm Oil for restocking in coming weeks.