Summary
Record global palm oil output expected in 2017
Palm oil output in top two producers Indonesia and Malaysia will rise next year and likely surpass the 2015 record, as trees recover from a crop-damaging El Nino weather pattern, said leading industry analyst Dorab Mistry.
The recovery in palm oil output will lead to a “massive rebuilding of stocks” in the oil year ending Sept. 30, 2017, he said at an industry conference in Kuala Lumpur.
“It is too early to forecast Malaysian and Indonesia production for calendar year 2017 but it is more than likely to exceed the record production of 2015.”
The expectations of rising stockpiles could weigh on benchmark palm oil prices, which are up nearly 7% this year on tight supplies after yields were impacted by the lingering effects of last year’s El Nino.
Mistry maintained his global outlook for a strong output recovery of nearly 6.5 million tonnes for the oil year 2016-17 and calendar year 2017.
However, he adjusted his crude palm oil price target, saying it would drop to RM2,200 by end December – Instead of in November as earlier expected – because of recovering production and rising stocks.
“Most of the additional supply will simply replenish stocks,” said Mistry, the director of Indian consumer goods company Godrej International. “Currently I do not expect stocks to become burdensome.”
Crude palm kernel oil prices are also expected to decline from current levels around US$700 per tonne higher than crude palm oil values, to premiums of US$200-250 on slower demand, he said.
Palm kernel oil prices reached a five-year top of RM6,200 per tonne in late August, highest since March 2011, on tight supplies, according to assessment prices by Thomson Reuters.
Price recovery seen
At the same conference, another leading analyst, Thomas Mielke, said global palm oil output will grow by 5.5 million tonnes in the new oil year beginning October,
Global supplies of palm oil will still be tight until March, but production will rebound by 5.7-6.3 million tonnes in calendar year 2017, said Mielke, editor of Hamburg-based newsletter Oil World.
Global output in calendar year 2016 is expected to drop by 3.3 million tonnes to 59.2 million tonnes, he said.
He lowered his 2016 output forecast for top producer Indonesia by 100,000 tonnes to 32.2 million tonnes, and for second-largest producer Malaysia by 300,000 tonnes to 17.8 million tonnes.
He cut his Malaysian output forecast for 2017 by 100,000 tonnes to 20.5 million tonnes, and maintained expectations for Indonesian production next year at 35 million tonnes.
Mielke also said benchmark Malaysian crude palm oil prices are expected to climb to RM2,900-3,000 per tonne in the fourth quarter or in early 2017.
“Palm oil prices are undervalued at the moment,” Mielke said, adding that prices will recover as importing countries start to make more purchases.
Palm oil output, though, will continue to be under pressure due to the lingering effects of El Nino.
“I don’t expect that yields will come back next year … The real increase in yields is going to be in 2018,” Mielke said.
Lauric oils are set to decline in the next 12 months on account of weak demand and recovering production, he noted.
“Once production starts increasing next year, for palm kernel oil in particular and also coconut oil, stocks will increase because demand is poor. Premiums of lauric oil prices versus palm oil is set to narrow in 2017,” he added.
Source: Reuters, Oct 13, 2016
Indonesia imposes mandatory biodiesel blend for non-subsidised diesel
According to The Jakarta Post, a new regulation issued last week by Indonesia’s Energy and Mineral Resources Ministry makes it mandatory for non-subsidised diesel fuel to also contain a 20% mix of biodiesel. A penalty of Rp 6,000 per litre will be imposed on those who violate the regulation.
The Biofuels Producers Association said the government still needs to clear up some details in the policy to ensure business certainty.
If implemented and enforced, the move is positive for palm oil prices as the biodiesel demand is then expected to more than double year-on-year from the 2016 demand of 2.6-2.7 million kilolitres to 5.6-6 million kilolitres in 2017 (this is after doubling in 2016 from 2015).
However, execution is key; and Indonesia’s track record, especially on the biodiesel front, has been patchy.
Are the subsidies enough? Yes, says the Indonesia Estate Crop Fund which manages the collection of the US$50 per tonne export levy on palm oil (imposed since July 2015) to subsidise biodiesel.
It forecasts that the levy fund will increase 14% year-on-year in 2017 to US$830 million, as exports should recover in 2017 alongside production.
So far 85% of the subsidy fund has been used to subsidise biodiesel and the surplus is enough to maintain the biodiesel programme until the first quarter of 2017.
Source: Credit Suisse, Oct 26, 2016
India cuts import taxes on CPO, refined vegetable oils
India has cut import taxes on crude palm oil, refined vegetable oils and wheat, as part of efforts to curb food inflation.
Import duty on crude palm oil and refined edible oils has been reduced by five percentage points to 7.5% and 15% respectively, according to the order on a government website. The wheat import tax has been cut to 10% from 25%.
The cut in taxes is expected to increase demand for palm oil from Malaysia and Indonesia, major suppliers that are already enjoying strong demand from China.
India is the world’s biggest edible oil importer. However, domestic crushers believe the cut to the import duty is mistimed.
“We’re a bit disappointed as we’re on the verge of harvesting a new oilseed crop. The reduction in the duty will put pressure on local oilseed prices,” said Atul Chaturvedi, president of industry body Solvent Extractors Association of India.
“The government should have rather raised the differential between the duties of crude and refined oils to support the domestic refining industry.”
Local vegetable oil prices have surged by 20% since July.
Malaysia allocates RM80 mil to oil palm sector in Budget 2017
Malaysia has proposed a RM50 million allocation for scientific research to raise the quality of palm oil products. Another RM30 million is proposed for replanting, reflecting the position of palm oil as a major export commodity.
The allocations were included in the 2017 Budget Speech delivered on Oct 21, but awaits approval by the two chambers of Parliament.
A day earlier, Plantation Industries and Commodities Minister, the Hon. Datuk Seri Mah Siew Keong, said replanting is crucial in order to boost yields. Much of the area under cultivation has mature oil palm trees that are more than 30 years old.
These are too tall for harvesting, and this has caused a fall in productivity, he noted. A replanting grant would encourage growers, especially smallholders, to replace old trees.
He said this year’s palm oil production is expected to be less than 20 million tonnes due to the impact of El Nino.
Last year, the oil palm industry contributed 5.1% to agriculture in terms of gross domestic product. Export earnings stood at RM63.2 billion and accounted for 8.1% of total exports.
Source: Compiled from media reports, Oct 20 & 21, 2016
Argentina postpones soybean export tax cut to 2018
Argentina will not reduce soybean export taxes this year or in 2017 as previously announced, and will instead reduce the tax by 0.5 percentage points per month from January 2018 to December 2019, President Mauricio Macri said on Oct 3.
Shortly after taking office in December, Macri eliminated corn and wheat export taxes as part of his plan to revitalise the country’s massive farm sector.
He also cut the export tax on soybean, the country’s main cash crop, from 35% to 30%. The government had planned further cuts beginning this year.
In September, cabinet chief Marcos Pena told Reuters the government was considering postponing the reduction planned for the end of this year, as recession in Latin America’s third-largest economy ate into fiscal revenue and the government anticipated difficulties meeting planned budget cuts.
Macri has pledged to rein in public spending after the previous government’s generous social programmes contributed to a ballooning deficit. Last month, the government announced a 2017 budget with a fiscal deficit worth 4.2% of GDP, higher than the 3.3% previously planned.
The new soybean tax plan will include a 5 percentage point rebate to producers in the country’s northern provinces – which do not include the main soybean belt – to account for higher transportation costs, Macri said.
The government decided to reduce the tax gradually month by month, to prevent “speculation” amidst concern that farmers would hold off on planting and harvesting until the tax was reduced, Agriculture Minister Ricardo Buryaile said on Oct 3.
“Surely there would have been a significant holding-back of the crop” if the government announced a larger annual tax cut, Buryaile said.
Argentina is the world’s third-largest producer and exporter of soybean after the US and Brazil, according to the US Department of Agriculture.
It is expected to produce 57 million tonnes of soybean and export 10.7 million tonnes in the 2016-17 crop year, which began in October.
The country is also the world’s top exporter of soybean meal and soybean oil. Macri’s government lowered export taxes on those products by 5 points to 27% last year.
Source: Reuters, Oct 4, 2016
Indian palm oil sustainability framework in the works
India, the world’s biggest importer of edible oils, will develop its own sustainability framework for palm oil production considering the domestic ecology, a leading trade body said on Oct 4.
The Solvent Extractors’ Association of India (SEA) said it has tied up with Hong Kong-based Solidaridad to develop a sustainability framework for India, since the local environment and farming practices are different from those of Indonesia and Malaysia, the top two palm oil- producing countries.
Palm oil, used in everything from chocolate to cosmetics, has become one of the world’s fastest expanding crops, but the industry has been facing intense pressure over deforestation and methods used to clear land. That has driven many buyers to demand certification of environmentally-sound behaviour.
India’s import dependency in edible oils has risen to 70% and expansion of oil palm plantations will help reduce imports, BV Mehta, executive director of SEA, told reporters.
India produces just 200,000 tonnes of palm oil from 250,000 ha of plantations and imports nearly 9 million tonnes per annum, according to the SEA.
“There is limitation on expansion of oil palm [planting] in Indonesia and Malaysia, but in India it could be expanded in the southern and north-eastern states,” said Shatadru Chattopadhayay, managing director of Solidaridad Network Asia Ltd.
Source: Reuters, Oct 4, 2016
MOU signed on oil palm research in Nigeria
The Nigerian Institute for Oil Palm Research (NIFOR) and PZWilmar have signed a Memorandum of Understanding (MOU) towards the country’s self-sufficiency in oil palm production.
The MOU was signed in Abuja by Chief Audu Ogbe, the Minister of Agriculture and Rural Development, and Chief Kola Jamodu, the chairman of PZ Cussons Nigeria Plc. It covers capacity building and knowledge sharing for the research institute.
The collaboration will devote attention to developing a Nigerian climate-specific high yield variety through joint development of early maturing, high yielding, drought-tolerant and disease-resistant hybrids.
The scope includes study visit by NIFOR on the biotechnology approach to elite oil palm planting material development in Wilmar facilities in Asia.
The exchange of visits will also explore end-uses of palm oil and palm kernel oil through isolation of nutraceuticals from palm oil and bio-energy development from waste products.
Source: www.vanguardngr.com, Sept 26, 2016
French Parliament rejects palm oil tax proposal
France’s National Assembly has rejected the latest move to introduce an additional levy on palm oil, the widely used food and cosmetics ingredient.
On Oct 27, Green party lawmakers in the lower house of Parliament failed to win support from both the government and main opposition parties for an amendment to the 2017 Budget Bill.
This would have applied an extra tax of 300 Euros per tonne in 2017, then rising progressively to 900 euros in 2020; it would have further increased each year from 2021. The current tax is 104 euros a tonne.
Provincial French daily Ouest-France reported that members of the social affairs committee of Parliament followed the recommendation of Budget Minister Christian Eckert in rejecting the move.
Only a few environmentalist deputies present in the chamber voted for the levy, the paper reported.
However, the French government has said it would propose by February a new scheme to harmonise taxes on vegetable oils and include an exemption for those that are sustainably produced.
Top palm oil-producing countries Indonesia and Malaysia have lobbied against such tax increases.
Source: Compiled from Reuters, Oct 27 & www.just-food.com, Oct 28, 2016
Edible oil producer in India gets more land to plant oil palm
Edible oil maker Ruchi Soya Industries has signed an agreement with the Arunachal Pradesh state government in India, for oil palm planting on additional land to boost domestic production.
The agreement gives the company permission for oil palm development on 25,000 ha in the districts of West Siang, East Kamang, Lower Subansri and Papumpare. Last year, it had obtained access to 20,000 ha in the East Siang district.
“We are pleased by the efforts put by Ruchi Soya Industries for oil palm development in East Siang district through the timely set-up of a state-of-the-art nursery […],” said state Agriculture Secretary Talem Tapok.
Ruchi Soya founder and MD Dinesh Shahra said the company has always strived for the betterment of Indian farmers and to help them achieve higher yields by providing the right technology and assistance.
The company is involved in palm oil processing with 0.52 million tonnes capacity per annum. It has a turnover of US$4 billion, with its brands including Nutrela, Mahakosh, Sunrich, Ruchi Star and Ruchi Gold.
Source: Press Trust of India, Oct 6, 2016
China’s 2016-17 soybean imports to hit record level
China’s soybean imports are forecast to hit a record high of 86 million tonnes in the 2016-17 marketing year that begins Oct 1, up from an estimated 83 million tonnes in 2015-16, according to a GAIN report filed on Aug 30 by the Foreign Agricultural Service of the US Department of Agriculture (USDA).
The forecast was slightly lower than the official USDA data forecast of 87 million tonnes. Increased Chinese demand for industry feed and protein meal as a result of a recovery in swine production and steady growth in the poultry sector was seen as the driver for the increase in soybean imports.
“China’s recent sale of stored oilseed and oilseed product reserves (soybean and rapeseed oil) is expected to absorb the market share for food soybean and vegetable oils,” the GAIN report said.
“However, forecast lower imports of [distillers’ dried grains with solubles] as a result of China’s anti-dumping investigation may increase demand for soybean meal and thus support growth in soybean imports.”
Domestic production of soybean is set to grow during the same period as a result of increases in the planted area, reflecting government efforts to restructure the crop mix and better yields.
The China Agricultural Outlook Committee (affiliated to the Agriculture Ministry) forecast 12.86 million tonnes of soybean in 2016-17 on higher yields and favourable weather, up from the previous projection of 12.76 million tonnes. The China National Grain and Oilseed Information Centre has issued a forecast of 12.6 million tonnes for 2016-17, up 8.6% from the previous year.
In addition, an independent oilseed information source predicted China’s domestic production of soybean in 2016-17 will total 14.1 million tonnes, up 3.67 million tonnes from the 10.43 million tonnes estimated in 2015-16.
Forecast lower rapeseed and cotton seed production in China in 2016-17 was expected to increase soybean imports for protein meal. The GAIN report forecast 2016-17 imports of rapeseed to China at 3.9 tonnes, above the USDA official forecast of 3.8 tonnes.
Peanut imports in 2016-17 were estimated to decline to 400,000 tonnes, down from 550,000 tonnes in 2015-16 as a result of strong domestic production. The expected decline reflected strong gains in domestic acreage coupled with a continuing depreciation in the value of the Chinese currency.
The GAIN report also indicated a decline to 8.3 million tonnes in Chinese cotton seed production in 2016-17, partly as a result of an expected decline of 10% in acreage, and down from the estimated 8.9 million tonnes in the previous marketing year.
China’s imports of vegetable oils are expected to be flat in 2016-17 after declining in 2015-16, as a result of the high crush of oilseeds and sales of domestic oilseed product reserves. The forecast for 2016-17 imports:
“Weaker palm oil imports are due to a combination of factors, resumption of export duty in exporting countries; weak demand for palm oil; an adequate supply of other vegetable oils; and depreciation of the Chinese currency,” the report said.
Source: World-Grain.com, Sept 2, 2016
Better returns for Malaysian oil palm smallholders
Smallholders in Malaysia can sell fresh fruit bunches (FFB) at RM50 per tonne higher (by 13%) to the Oil Palm Planters Cooperatives, compared to selling to oil palm fruit traders.
Plantation Industries and Commodities Minister, the Hon. Datuk Seri Mah Siew Keong, said the involvement of cooperatives in ensuring the production of quality FFB and palm oil direct to mills, has provided better returns for smallholders.
As at September, 33 cooperatives had been established – 13 in the peninsula, 11 in Sarawak and nine in Sabah. Of these, 20 have started direct integrated FFB sales to mills.
“Under the 11th Malaysia Plan, the government allocated RM200,000 to each cooperative to build FFB weighing stations.
“The Malaysian Palm Oil Board (MPOB) is working with Agro Bank for overdraft facilities for cooperatives, for revolving capital to undertake the business of the sales and purchase of FFB.”
He said this in a speech delivered at the opening of the Oil Palm Smallholders National Conference in Ipoh on Oct 11. The text was read by MPOB chairman Datuk Wira Ahmad Hamzah.
The area under oil palm cultivation has reached 5.67 million ha, covering more than 70% of the country’s agricultural land.
Of this area, 40% is managed by individual smallholders and those under the patronage of federal and state government agencies.
Source: Bernama, Oct 12, 2016
