Firm vegetable oil prices, including palm oil, seen in H1 2011

KUALA LUMPUR: Global vegetable oil prices, including that of crude palm oil (CPO), are expected to remain firm in the first two quarters of 2011 should soybean production from South America stays flat due to stagnating planted a areas, said Malaysian Palm Oil Council (MPOC) chief executive officer Tan Sri Dr Yusof Basiron.

Soybean production in South America next year would be the main factor in determining the price direction of vegetable oils in the first half of next year.

“At this point of time, the projected lower soybean production may further deteriorate as dry spell remain a teething factor for the output,” Yusof said.

He said this in his summary after presenting a paperwork on Glimpse of 2011 – Pointers for 2011 on Global Oils and Fats Trade at the 3rd International Palm Oil Trade and Seminar yesterday.

In addition, an increase in soyoil application for biodiesel production in South America was expected to reduce the availability of soyoil traded globally.

However, CPO production from major producers Malaysia and Indonesia next year may rise substantially due to the delay in potential yield this year as a result of El Nino and La Nina effects, he added.

Palm oil was also expected to continue to be the growth leader in output, with Malaysia and Indonesia as the main supplier for 2011.

For 2010, Yusof said the average CPO price was projected to stay above RM2,600 per tonne, given the firm crude mineral oil price, which had supported the palm oil price so far, “is expected to last for the rest of this year.”

While demand is projected to increase by 4.3 million tonnes this year, the performance of oils and fats production in the last quarter would determine whether there will be any changes in production volume projected in 2010.

He said: “The United States, the European Union (EU) and China are on the radar as their major oil crops are due for harvesting and entering the market at this period.

“The estimated production remains intact and this has been factored into the current CPO price trading at above RM2,700 per tonne.”

Yusof said price would also be supported by the greater role of palm oil in satisfying global demand this year. In addition, the La Nina effect on palm oil production in the second half of this year could likely increase palm fruit moisture content and lower extraction rates, thus reducing harvesting rounds.

Based on OilWorld estimate, La Nina phenomenon would likely reduce Malaysia’s palm oil production by 200,000 tonnes.

US-based Green Earth Fuels LLC executive vice-president (government and regulatory affairs) Jeffrey M. Trucksess said palm biodiesel (palm methyl ester – PME) had made significant inroads in the US biodiesel market in recent years and had tremendous potential.

“However, significant political, regulatory and public relation issues can derail this future,” he said.

PME producers from Malaysia must proactively manage the public perception on palm oil in the United States and Europe by providing more education to policymakers there, actively participate in regulatory bodies and promote sustainability standards.

PERFORMANCE OF THE MALAYSIAN PALM OIL INDUSTRY, JANUARY 2010

	DECEMBER(r)	JANUARY(p)	DIFFERENCE
			QUANTITY Kuantiti	(%)
PRODUCTION (Tonnes) / Pengeluaran
CRUDE PALM OIL / Minyak Sawit Mentah
P. Malaysia	792,444	693,322	(99,122)	(12.51)
Sabah	545,835	470,494	(75,341)	(13.80)
Sarawak	181,784	157,227	(24,557)	(13.51)
Total	1,520,063	1,321,043	(199,020)	(13.09)
PALM KERNEL / Isirong Sawit	391,814	343,123	(48,691)	(12.43)
CRUDE PALM KERNEL OIL / Minyak Isirong Sawit Mentah	193,501	172,758	(20,743)	(10.72)
PALM KERNEL CAKE / Dedak Isirong	213,027	190,587	(22,440)	(10.53)
STOCK (Tonnes) (s) / Stok
CRUDE PALM OIL / Minyak Sawit Mentah
P. Malaysia	558,847	516,018	(42,829)	(7.66)
Sabah	520,031	517,881	(2,150)	(0.41)
Sarawak	118,437	96,692	(21,745)	(18.36)
Total	1,197,315	1,130,591	(66,724)	(5.57)
PROCESSED PALM OIL/ Minyak Sawit Proses
P. Malaysia	603,874	483,771	(120,103)	(19.89)
Sabah	311,723	292,769	(18,954)	(6.08)
Sarawak	126,345	93,525	(32,820)	(25.98)
Total / Jumlah	1,041,942	870,065	(171,877)	(16.50)
TOTAL PALM OIL / Jumlah Minyak Sawit
P. Malaysia	1,162,721	999,789	(162,932)	(14.01)
Sabah	831,754	810,650	(21,104)	(2.54)
Sarawak	244,782	190,217	(54,565)	(22.29)
Total / Jumlah	2,239,257	2,000,656	(238,601)	(10.66)
PALM KERNEL / Isirong Sawit	129,249	98,066	(31,183)	(24.13)
CRUDE PALM KERNEL OIL / Minyak Isirong Sawit Mentah	175,443	166,465	(8,978)	(5.12)
PROCESSED PALM KERNEL OIL / Minyak Isirong Sawit Proses	130,469	116,366	(14,103)	(10.81)
TOTAL PALM KERNEL OIL / Jumlah Minyak Isirong	305,912	282,831	(23,081)	(7.54)
PALM KERNEL CAKE / Dedak Isirong	320,008	288,452	(31,556)	(9.86)
EXPORT
PALM OIL / Minyak Sawit	1,224,353	1,461,731	237,377	19.39
PALM KERNEL OIL / Minyak Isirong Sawit	104,585	103,100	(1,485)	(1.42)
PALM KERNEL CAKE / Dedak ISirong	291,671	249,979	(41,692)	(14.29)
OLEOCHEMICAL / Oleokimia	197,719	185,756	(11,963)	(6.05)
BIODIESEL / Biodiesel	10,126	7,500	(2,626)	(25.94)
IMPORT (TONNES)(q) Import
CRUDE PALM OIL / Minyak Sawit Mentah	153,797	139,378	(14,418)	(9.38)
PROCESSED PALM OIL / Minyak Sawit Proses	11,441	16,425	4,984	43.56
PALM OIL /Minyak Sawit	165,237	155,803	(9,435)	(5.71)
PRICE (1% OER) (Local Ex-Mill) / 1% Kadar Perahan) (Di pintu Kilang)
FFB (AVERAGE RM/TONNE) /BTS (Purata RM/Tan)	25.23	26.11	0.88	3.49

Explanatory Notes:
(p)	Preliminary
(q)	The import and export figures are based on information extracted from Customs No. 1 and 2 (Rev. 8/89) received up to 10.00 a.m., 10 February 2010. The export date refers to that as authorised by the Customs Department.
(r)	The figures for the month of December 2009 are revised by taking into account corrections made by the licensees and from late receipt of Customs No. 1 and 2 (Rev. 8/89) after 11 January 2010.
(s)	It refers to the total physical amount of crude and processed palm oil kept at the premises of mills, refineries, bulking installations, and oleochemical plants as at 31 January 2010.

Palm Oil Production To Grow By 5-10 Per Cent In 2010

12/01/2010 (Bernama), Kuala Lumpur - Crude palm oil production is expected to grow by 5-10 per cent in 2010, said ECM Libra Investment Research.

However, the production in the near term is expected to ease amid lower output cycle, it said in its research note Tuesday.

The industry achieved some 17.6 million metric tonne in production last year, down by one per cent from 2008's output of 17.7 million metric tonnes.

"(Hence), there is no shortage of crude palm oil in the industry," it said.

On price, ECM Libra said that the current crude palm oil prices were not reflecting the fundamentals but rather just sentiments on commodities and was also led by the decline in the U.S dollar.

"As such, it may be the case that crude palm oil prices beyond RM2,500 per tonne will not be sustainable into February or March when the typical yearly production down-cycle ends," he added.

CPO price jump spurs complaints about speculation - The Star Online

18/05/2009 (The Star Online) - TOGETHER with a recovery in global commodity prices, crude palm oil (CPO) futures for three-month delivery shot up to above RM2,600 a tonne at Friday’s market closing from RM2,000 on March 31.

The jump in CPO prices has prompted some to complain about speculation in the market, while Bursa Malaysia said speculators played an important role in the market and that prices reflected true supply and demand.

“High prices will hurt consumers, and cakes, detergents and other products will be more expensive. We are not against a high margin for producers but prices have to go up slowly,” a trader told StarBiz.

He pointed out that from March 31 to April 29, the CPO three-month futures jumped more than RM400 a tonne on not very high volume, which he said meant speculation.

Bursa chief market operations officer Devanesan Evanson responded that based on its analysis, the recent price changes were due to sustained interest by the market in ringgit-denominated CPO futures (FCPO) and were in tandem with the movement in prices of other edible oils and crude oil.

There were also fears that the current high price of above RM2,600 was creating risks for smallholders, because if prices were to fall to RM2,100 or RM2,200, large CPO importers like China and India would begin to default.

“We are not in a position to comment on the risk of default by importers like China and India in the underlying physical CPO markets. However, in the futures market, investors are able to hedge the price risk of the underlying physical CPO market,” Devanesan said.

He also explained the importance of speculative buyers in the market.

“Speculative buyers and sellers create the vibrancy of a market. For a futures market to succeed, it is imperative that there are both speculators and hedgers.

“Purely long and short hedgers may not be sufficient to create a liquid CPO futures market. The participation of speculators willing to take the risk on the other side of hedgers adds liquidity and thus makes it easier for hedgers to hedge,” he said.

However, with the highest daily volume for the CPO three-month futures of 20,000 lots traded in the past 12 months, some do not consider it high enough.

Should there be higher volume in the futures market to reflect the real price based on supply and demand?

“The FCPO in April 2009 recorded an all-time high of 442,220 contracts with a daily average of 20,101 contracts traded. The year-to-date May 12, 2009 trading volume was 1,420,139 contracts,’’ Devanesan said.

“We believe the prices reflect the existing supply and demand. Nevertheless, market liquidity can always be improved with participation from more investor types in the CPO futures,” he said.

In an effort to boost trading volumes, Bursa has introduced Direct Market Access (DMA) to facilitate trading access by overseas participants. DMA contributed approximately 7% of market trades in the first quarter of 2009.

Bursa’s futures brokers have also started introducing routing of trades from overseas and Internet trading to increase retail participation. “This will increase access to the market and hence improve the profile of our CPO futures among local and foreign investors,” Devanesan said.

Unusual market activity queries are issued when share prices shoot up without market leads, and the trader that spoke to StarBiz said that there should be a similar system for commodity futures.

Devanesan responded that Bursa conducted queries on unusual price movements on futures broker representatives or trading participants if the situation warranted such a need.

“Investors are aware that trading in FCPO is subject to price limits of 10% from the previous day’s settlement price. If this price limit is triggered, either by price falling or rising significantly, then trading will be conducted within the price limit for 10 minutes.

“After which, the market will be halted as a ‘circuit breaker’ for five minutes. Trading will then resume with the price limit increased to 15%,” he explained.

Late last month, the economic crisis prompted the Organisation of Petroleum Exporting Countries (Opec) and 13 Asian countries meeting in Tokyo to urge for greater oversight of oil and other commodity markets to prevent a surge in prices after the global economy recovered.

However, Devanesan said this question was related to crude oil and even though Malaysia is one of the 13 Asian countries, there was no relevance to palm oil.

“The statement is more in reference to crude oil and the ‘calls for greater oversight of oil and other commodity markets to prevent a surge in prices’ by imposing position limits, reviewing over-the-counter trading, etc,” he said.

Safeguards to manage speculation appear to be in place at Bursa.

All traders were subject to position limits for trading in the FCPO to ensure that speculative trading was conducted in a fair and orderly manner, he said.

“The exchange does not attempt to influence prices as that is purely a function of the market, where trading activities are usually affected by economic indicators, changes to government policies (e.g. palm oil import duties imposed by other countries), as well as trading indicators such as prices of other correlated commodities like crude oil and soyoil,” he added.

SUMMARY OF THE MALAYSIAN OIL PALM INDUSTRY 2009

	Dec 08	Jan 09	Feb	Mar (r)	Apr (p)	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
PRODUCTION (TONNES)
Crude Palm Oil	1,482,769	1,330,195	1,187,381	1,275,822	1,286,059
Palm Kernel	385,802	353,352	318,601	345,485	336,866
Palm Kernel Oil	198,789	165,300	160,284	161,305	159,450
Palm Kernel Cake	217,977	183,050	176,073	178,153	175,726
CLOSING STOCK (TONNES)
Palm Oil	1,994,710	1,832,847	1,565,532	1,365,582	1,292,303
Palm Kernel	142,098	138,903	114,566	109,166	103,871
Palm Kernel Oil	349,171	357,555	334,211	309,624	302,251
Palm Kernel Cake	302,278	252,479	223,633	210,747	268,593
EXPORT (TONNES)
Palm Oil	1,614,720	1,355,455	1,258,531	1,260,797	1,187,170
Palm Kernel Oil	121,875	88,417	94,430	105,068	79,047
Palm Kernel Cake	239,327	230,694	203,075	181,031	142,199
Oleochemical	143,455	162,662	174,811	166,452	188,645
Biodiesel	20,186	12,732	16,330	19,888	16,688
IMPORT (TONNES)
Crude Palm Oil	77,589	27,397	18,840	3,671	32,984
Processed Palm Oil	694	2,467	8,584	12,022	9,595
Palm Oil	78,282	29,863	27,423	15,693	42,579
PRICE (1% OER) (Local Ex-Mill)
Fresh Fruit Bunches (1% Equivalent)	14.83	17.90	18.58	19.97	24.28