Wednesday, May 19, 2010

EU pledges to continue buying CPO from Indonesia

17/05/2010 (The Jakarta Post) - Ignoring environmental concerns that Indonesian producers are clearing protected rainforests, the European Union (EU) administration has pledged not to restrict exports of Indonesian crude palm oil (CPO) to Europe.

“The European Union will not restrict Indonesia’s CPO export and it can continue carrying out the export of the commodity as it is today,”  the EU’s ambassador to Indonesia and Brunei Darussalam Julian Wilson said in Jakarta last week.

Wilson was speaking about a new EU policy on renewable energy that would regulate biofuel trade when it is implemented in December this year.

Currently, Europe uses about 10 percent of the CPO it imports from Indonesian for biodiesel fuel.

The policy would increase export opportunities for developing countries like Indonesia he said as reported by Antara news agency.

However, he said, producers of the commodity needed to understand the sentiment of European consumers, which was an increasing resoluteness for environmentally friendly products.

According to the policy, EU members will offer additional incentives to promote the use of fuels produced under environmentally friendly principles.

Director of the Worldwide Fund for Nature (EEF) Indonesia Fitrian Ardiansyah said that the policy would prove both a challenge and an opportunity for Indonesian CPO producers because many were still a long way off from fulfilling the environmental standards defined by the EU policy on renewable energy.

Indonesian Palm Oil Producers Association (Gapki) secretary-general Joko Supriyono said the policy would disadvantage Indonesia’s ability to export CPO to the EU.

“I am informed that the EU will not accept CPO with certificates issued by the Roundtable on Sustainable Palm Oil [RSPO] as sustainable for biofuel consumption. It is confusing and will surely cause problems in the future,” Joko told The Jakarta Post over the phone Saturday.

He said that EU members would almost certainly continue to buy CPO from Indonesia to fulfill its demand, but the environment issue would limit the export to the EU.

He said he believed environmental concerns had been used to manipulate production costs that would in turn effect the commodity’s price.

“I think inside the EU there is an ongoing debate between the commission that deals with energy and the commission that deals with the environment,” he said, adding that the government needed to negotiate with all parties.

An Agriculture Ministry report earlier this year said that Indonesia’s and Malaysia’s agriculture ministers had discussed the possibility of diverting their CPO exports to other markets besides Europe if European countries continued to accuse Indonesian and Malaysian CPO producers of destroying forests.

Indonesia and Malaysia currently dominate the world’s CPO industry, together accounting for 85 percent of global production.

In December, Unilever suspended all future purchases of palm oil, worth up to US$33 million, from PT Sinar Mas Agro Resources and Technology (SMART) after obtaining photographic evidence that Sinar Mas was clearing protected rainforests, including reserves for Indonesia’s endangered orangutan population.

Unilever was following up a report by environmental NGO Greenpeace that had detailed serious allegations against the environmental practices of Sinar Mas.

Two independent consultants, Control Union Certification of the Netherlands and the British Standards Institute Group, have been tasked with verifying the allegation that SMART has damaged protected rainforests.

Greenpeace has since urged other CPO buyers, including Swiss firm Nestlé and US-based Cargill, to stop buying CPO from producers that disregard sustainable plantation practices, which are a requirement of the RSPO.

Wednesday, May 5, 2010

Palm Oil Declines on Concern Edible Oils Demand May Drop

03/05/2010 (Bloomberg) - Palm oil, little changed, may drop amid concerns that demand for the edible oil may weaken as supply expands.

July-delivery palm oil fell 0.3 percent to 2,551 ringgit ($795) a metric ton at 4:40 p.m. on the Malaysia Derivatives Exchange. The contract rose 0.7 percent last week.

“Generally we have seen a weaker outlook for edible oils” said Scott Briggs, agricultural commodities strategist at Australia & New Zealand Banking Group Ltd., noting high soybean stocks. “My view is that it’s down from here over the medium term.”

Palm oil futures dropped 1.7 percent in March as the South American harvest of soybeans, which produce rival soybean oil, got under way. The premium of soybean oil over palm oil is near the lowest since November 2007, potentially reducing demand for the cheaper product.

Last week, Oilworld, an industry publication, raised its world soybean production estimate for this crop year to 258.2 million tons, up 2.7 million tons from an earlier estimate and 46.5 million tons above last year’s crop.

Good weather conditions aided a record planting in North America, it said. It also raised its South America crop estimate to 132 million tons, 1.7 million tons more than a previous estimate and 36.2 million tons more than last year’s drought- stricken crop, it said.

Soybean oil for July delivery in Chicago dropped as much as 0.3 percent in Asia trading, and was at 38.91 cents a pound at 3:57 p.m. Singapore time. Its premium over palm oil was $63.44 ton, less than half the average over the past year, according to Bloomberg data. On April 30, the premium plunged to $56.47 a ton, the lowest since Nov. 1, 2007.

Declining Exports
A stronger ringgit has helped narrow the spread between the two rival oils. The currency advanced 2.2 percent in April, extending its advance to 7.3 percent this year.

Moreover, stockpiles of palm oil at ports in China, the top user, are about 500,000 tons, which is “ample” to curb prices, the China National Grain & Oils Information Center said last week.

Malaysia’s palm oil exports fell to 1.18 million tons in April, 13 percent lower than in March, with shipments to the Americas and the Indian subcontinent leading the decline, surveyor Intertek said on April 30.

Sales to the Americas plunged 46 percent to 88,074 tons as alternative supplies increased with the South American soybean harvest. Shipments to China fell 12 percent to 324,657 tons and exports to India and the subcontinent plunged 42 percent to 173,760 tons.

In China, the Dalian Commodity Exchange was closed to mark the Labor Day holiday. Trading resumes tomorrow.

China Shipments
China’s soybean imports between April and June may reach a record 14 million tons, the China National Grain & Oils Information Center said last week. Inbound shipments of palm oil may total 318,000 tons in April, it said.

Crude oil lost 0.2 percent to $85.99 a barrel, ending a 4.5 percent, three-day rally. Palm oil has tracked crude’s weekly movements for 12 weeks as confidence in an economic recovery fueled optimism that energy demand will rise, boosting the need for biofuels made from vegetable oils.

Improving weather in the current quarter may contribute to a “lackluster performance” for palm oil prices in the near- term, Margarett Go, a plantation analyst at Citigroup Global Markets Inc. in Jakarta, said in a note to clients.