POINTERS: Global Oils & Fats Dynamics and Its Impact on CPO Price

By: Marketing And Market Development Division, MPOC

The Marketing & Market Development Division spearheads the promotion and marketing activities of Malaysia Palm Oil in the effort to make it the leading oil in the global oils and fats market. The aim is to create and establish a positive image for Malaysia Palm Oil in order to maximise returns to the Malaysian palm oil industry.

Market Expansion

This Division enhances the growth of the Malaysia Palm Oil market through new developments and the expansion of existing markets. To compete successfully, innovative approaches are developed. Various proactive programmes targeting trade and consumer markets are carried out to extend into new markets. In addition, new opportunities for investment, cooperation abroad and joint marketing are constantly being sought out to obtain a greater market foothold.

Seminars

Trade fairs and seminars such as Palm Oil Trade Fair and Seminars (POTS) showcase the products and services of palm oil producers and sellers, while broadening their business opportunities. At these events, business contacts and participants are updated with information and knowledge about the palm oil industry.

Market Networking

The development of a market intelligence network, market linkages and awareness programmes helps foster closer ties with industry-related bodies. These strategies help to educate and influence those who have a keen interest in Malaysia Palm Oil, i.e. policy makers, the trade community, consumers, scientists, medical professionals and researchers.

VIEW PROFILE

In 2018, the global oils and fats market saw improvements in the production across all types of oils and fats. This was due to the favourable weather across many oilseed producing countries . The weather in Malaysia was by and large fluctuating especially in the second and third quarters of 2018 which affected production of palm oil. However, in the latter half of the third quarter, there was a marked improvement of production of palm oil. The peak production period which was usually between May to September saw the peak production period extended until December. No one could have ever foreseen this development, not even among the most prominent of all analysts.

As for price of palm oil, it started on a high of almost RM2,500/MT in January and price gradually went down hitting a low of RM1,800 in December of 2018. This drop in price was mainly due to the global oversupply of oils and fats and the trade war between China and the USA which saw record high stocks of oilseeds. Furthermore, palm oil production in the two main producing countries, Malaysia and Indonesia was in full activity resulting in record production especially in Indonesia.

For the year 2019, we anticipate that there will be continued production growth among all types of oils and fats but demand will also continue to increase. In this year the oils and fats production globally will again be led by palm oil which we forecast will be close to 75 million MT and will play a crucial role in the global supply of oils and fats.

As the two top palm oil producing countries contributing to 83% of the global palm oil production, Malaysia and Indonesia will be the focus of the international oils and fats trade. With about 28% of the global oils and fats production coming from Malaysia and Indonesia, the role played by both countries is vital in forecasting palm oil price.

We will analyse issues that will affect palm oil price in 2019 such as demand and supply analysis and we will also take into account the influence of the other competing oils especially in the first half of this year. Demand for palm oil from major consuming countries such as India, China, EU and USA is nevertheless, expected to remain upbeat and we will take these factors into account. The regional analysis on the demand and supply scenarios will be aggregated at the global level to forecast the price, demand and supply balance in 2019.

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Questions & Answers (5) :

Azwan Fitri Bin Zainal Abidin

5 years ago

Hi, In the presentation (slide 24) your end did mentioned that usage of the Palm Oil in the Food Sector of industry at EU has shown decreasing trend since 2009 which factors are; increase of the usage of Palm Oil in the Biofuel Industry and the impact of concern towards Palm Oil nutritional and environmental. As we know, Malaysia is foresee new national car under New National Car Project (NNCP) and Indonesia (quote the statement from Pak Jokowi ; they are open up their window to produce Indonesia national car too) Hence, is there any opportunity for the Palm Oil industry to stabilize the price if Malaysia and Indonesia were to co-joint to produce their national car which fuel technology supported by the bio-fuel. If I may know as well, how the approach of MPOC on this and what is the way forward for us to have the first 100% bio-fuel car? Thanks,

Izham Hassan:
On whether the governments of both countries will co-join in producing the national car which runs on 100% biofuel will be up to the leadership of the two countries.
5 years ago

George Teh

5 years ago

To support and consolidate the diversified uses of palm oil as biofuel besides its traditional role as a source of edible oils and fats, is it timely to review the regulatory framework? Would an aligned regulatory management of fossil fuel and biofuel minimize conflicts and boost the palm oil industry?

Izham Hassan:
Thank you for your question. There may be a need to review the regulatory framework but it is up to the relevant authorities. Based on Malaysian government blueprint, Renewable Energy use will increase to 20% by 2030. The launch of the B10 for transport recently will make palm oil a significant contributor of the RE target
5 years ago

Vijaya Bharathi

5 years ago

Hello Sir, you have mentoned Chinese cultivation of soybean to reduce in 2019 prompted by reduction in support. Having a trade war between USA to safegaurd oilseed industry, the country should either create more opportunities locally or to depend on imports. My question is whether cultivating locally and processing soy oil is costlier than importing palm oil or importing bean from Brazil?

Izham Hassan:
Although it could be cheaper to cultivate additional soybeans locally but due to land constraints and farmers preference for corn planting which receives better government incentives, import of soybeans would be a viable option. The void in soybean supply as a result of the trade war cannot be fully supplemented with soybean plantings in China as they produce less than 15 million MT against their crushing of 92 million MT. In addition the growing demand for meals from the hog industry would make import of soybean a necessity
5 years ago

Vijaya Bharathi:
Yes, i understand the situation. However the government have reserve selling of oil seeds and oils. Can you please comment on the oil seed reserves Chinese government have now?
5 years ago

Izham Hassan:
The Chinese government never disclose the amount of strategic reserves for oilseeds or oils and fats. What was announced in the past were the temporary reserves which is meant to be held for a certain period, of which most of it have been fully drawn down.
5 years ago

Dr P Kalidas

5 years ago

Indian irrigated oil palm industry has completed a quarter century. The main motto of oil palm development in India using irrigation water is to plug the gap between demand and supply for vegetable oils. However, the development is not as per expectations. Meanwhile, the plantations are facing many pest problems unlike in Malaysia. Can the big brother, MPOB extend its support in solving these problems?

Izham Hassan:
Thank you for your question. May we suggest that you contact Dr. Nagen at nagen@mpob.gov.my as he would be the best person to provide you with the required information. In addition, you may also contact The Incorporated Society of Planters for further assistance. Their email contact is isphq@isp.org.my
5 years ago

Elsayed Awad Shaban Abdelrasoul

5 years ago

We are a branch of the Food Technology Research Institute at Agricultural Research Station in Sasha-Kafr El-Sheikh of the Agricultural Research Center-Egypt. Is it possible to organize together a symposium on palm oil in Kafr El-Sheikh governorate?

Izham Hassan:
Dear Mr. Abdelrasoul, Thank you for the inquiry. MPOC would be more than happy to consider the possibility of collaborating with you to organize a symposium on palm oil. Please send the details of your proposal via email to our Regional Manager in Cairo, Mr. Mohamad Suhaili at msuhaili@mpoc.org.my or to me at izham@mpoc.org.my Regards Izham
5 years ago