POINTERS: Global S&D and Price Outlook of CPO

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.

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Questions & Answers (6) :

Edmund Yong

5 years ago

As you mentioned below the Government through Malaysian Industry-Government Group for High Technology, (MIGHT) has identified palm oil industry to put produce and certifications on Blockchain. Can you share with us; what others initiative been recommended by MIGHT; any web site can us refer to MIGHT?

Izham Hassan:
Dear Mr. Yong, For more information on Blockchain initiatives my MIGHT, please refer to the following link: https://www.might.org.my/blockchain/
5 years ago

George Teh

5 years ago

Mr Hassan, could you please elaborate further on your Global SUR - CPO Price forecasting model? Based on visual inspection of slide 58 (SUR - Price trends, 2006 - 2019f), is it reasonable if one were to deduce that there was a disconnectivity/realignment of SUR - Price correlation post-2011? Thank you.

Izham Hassan:
Dear Mr. Teh, Thank you for your question. Theoretically, SUR should be negatively correlated to CPO price and as such when SUR is high, CPO price is low and when SUR is low CPO price is high. However, there will be situations when SUR and CPO price does not follow the correlation because of other factors in the market which influence the relationship. For example, in 2012, there was a shortage of soybeans from South America due to bad weather which limited supplies and in effect pushed oils and fats prices upwards. A similar movement of SUR occurred in 2016/2017 when SUR and prices moved in tandem and this was due to the higher growth rate of consumption compared to production. During this period, global oils and fats consumption also exceeded production. And it is this positive sentiment which drove CPO price higher in 2017 despite a higher SUR being recorded. In our forecast, we took into account factors apart from than the SUR to forecast the price.
5 years ago

Anthony Yap

5 years ago

i) Can you forecast what is the CPKO prices for 2nd half of 2019? ii) the closing stock for CPKO 2019?

Izham Hassan:
Thank you for your question. CPKO is a lauric oil. Its price tracks both CPO and coconut oil price trends. We are expecting that CPKO price to trend upwards on expectation of rising CPO and CNO prices. We forecast that the price of CPKO for the second half of 2019 will be trending upward between RM2,700/MT to RM3,000/MT. As for CPKO ending stocks, we forecast that it will be between 150,000 MT to 160,000 MT.
5 years ago

Anthony Yap

5 years ago

On Page 33: You mentioned that on fifth item: New Technology(Blockchain) is at the forefront of changing the nature market via smart contracts. Can you explain and give examples (more ) on Smart Contracts and how it can be related to Demand 2019? Thanks

Izham Hassan:
As for palm oil in Malaysia, the Government through Malaysian Industry-Government Group for High Technology, (MIGHT) has identified palm oil industry to put produce and certifications on Blockchain, starting with palm oil. This will allow for a more sustainable supply chain, as sellers and consumers can track the source of palm oil and monitor the transactions. By using Blockchain it would give an added advantage to Malaysian palm oil to prove that it is truly sustainable. In addition, the Government bodies can also use the data to track the sources and regulate the industry for a more sustainable approach. We do not have any data on its adoption in Malaysian business but in USA it has been in use particularly, in the real estate industry and there are states who have amended their laws to recognize the legality of Blockchain based contracts.
5 years ago

Anthony Yap:
Hi Izham; thank for your explanation; my further question: a) By implementation using Blockchain what is the Cost involved? Any incentive given by Government or MPOB for implementation? b) If the cost of implantation of Blockchain is higher and complicated; it won’t take off. c) Blockchain can be incorporated into MSPO but so far what we knew, new platform of System Pemantauan Sawit (SPS) {eg: SPS 2.0} will be developed. SPS 2.0 will be the traceability for MSPO. Please advise. d) On “Smart Contract” based on blockchain; currently using by some shippers to issue “shipping documents” eg: BL..etc. e) Thus; Blockchain it only good for monitoring and create efficiency on operation flows; it won’t increase or affect palm oil Demand 2019 as per slide mentioned. f) I think by using Drone ( with 5G and others tool of Industry 4.0, Big Data ..etc) to monitor plantation productivities will be more helpful& impact into palm oil industry.
5 years ago

Izham Hassan:
Dear Mr. Yap, Blockchain is useful whereby it creates a digital footprint on every step. As you mentioned, it is good for monitoring and create efficiency on operation flows. If implemented widely, it would not only improve monitoring and efficiency of smart contracts for shippers, but for the whole industry supply chain itself, which is imperative to penetrate markets where sustainability is a pressing issue. This may be complemented by the upcoming 5G technologies where data can be collected more efficiently and can be traced throughout the supply chain. Thus, adopting blockchain may impact markets that are sustainability sensitive through increased transparency on traceability.
5 years ago

YAP YAU KOONG

5 years ago

The US-China trade war should bode well for takeup of PO by China due to greatly reduced import of soybean oil from US by China. What are the steps taken by Malaysia to ensure we get the major orders from China?

Izham Hassan:
Dear Mr. Yap, Thank you for your question. Malaysia has a strong presence in China insofar as palm oil supply is concerned. From January to July 2019, Malaysian palm oil exports to China has exceed 1 million MT which is 13% higher compared to the same period last year. Among the major steps Malaysia has taken are signing of an MOU with China to buy an additional 1.9 million tonnes of the commodity, worth about RM4.56bil, from 2019 to 2023. China was represented by Cao Derong, president of the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-products while the Malaysian side was represented by Malaysian Palm Oil Council board member Datuk Dr Tan Yew Chong. In addition, the Malaysian palm oil industry through MPOC has a number of flagship programs to support Malaysian palm oil such as POTS, TEMPO, Technical Collaborations on Research and Market, Exhibitions and Social Media engagement through Wechat as part of our effort to reinforce Malaysian palm oil intake in China. We have also conducted regular meetings with major buyers of palm oil in China to address their concerns as a strategic move to ensure Malaysian palm oil foothold in China remain strong.
5 years ago

FENCY

5 years ago

1.What is the possible consequences of higher population growth on the overall oils and fats where the Food and/or Energy Supply and Demand is actually involving the same source of oils 2.Whether the competition between Food and/or Energy will give double impact to oils&fats price, how will the price outlook be?

Izham Hassan:
1. Population growth and increased income, especially in developing countries, will result in higher demand for oils and fats. The demand for oils and fats for energy use is segmented and is mainly in developed countries such as USA and Europe and other countries such as Malaysia, Indonesia, Brazil and Colombia. Although it may be possible that oils and fats use in energy may impact supply for food use, the consequence will be cushioned by higher production through more efficient land use and technology applications. 2. The energy market is very big and the oils and fats production is unlikely to be sufficient to totally replace fossil fuels. There is no competition between food/energy and the impact is limited as these markets are very segmented. The price outlook will remain positive as production will always rise to meet consumption.
5 years ago