Archive
2020
24 Feb - 01 Mar 2020
Section 1 : CPO Price Trend
24 Feb - 01 Mar 2020
Section 2: Global Palm Oil Market Opportunities
22 - 28 Jun 2020
POINTERS ON THE PRICE TRENDS
2019
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29 Jan - 04 Feb 2018
Section 1: CPO Price Trend
29 Jan - 04 Feb 2018
Section 2 : Global Palm Oil Market Focus
06 - 12 Aug 2018
Section 1: CPO Price Trend
06 - 12 Aug 2018
Section 2: Global Palm Oil Market Focus
2017
2016
22 - 29 Feb 2016
2016 Market Direction - Twists and Turns of Palm Oil Prices
22 - 28 Aug 2016
Section 1 : Palm Oil Price Fundamentals
22 - 28 Aug 2016
Section 2 : Trade Issues and Market Prospects
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POINTERS
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2nd Half 2014: Market Challenges, Predictions And Directions:
Expanding Palm Oil Production: Prospects for Africa
Mr. Abah Ofon
Abah has over 21 years’ macroeconomic, commodities, trade and research experience in financial markets in Africa, Asia, the Middle East and Europe. Prior to founding 3XG UK CONSULTING LTD, he was lead analyst at the London firm Agribriefing, Head of agri-commodity research and Africa economist for Standard Chartered Bank’s global franchise based in London, Dubai and Singapore. Abah has provided advisory services on agricultural markets to some of the largest agribusiness names and institutional clients including hedge funds and central banks. Abah is a prominent pundit in the financial and business media and was profiled in the UK’s Financial Times at the height of the 2008 commodity crisis. Abah is a graduate of the London School of Economics and has been a member of UK Society of Business Economists as well as a Financial Advisor licensed by the Monetary Authority of Singapore.
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Significant change is underway and gathering pace in Africa’s agricultural sector. While the region’s extractive industry has received most of the foreign direct investment (FDI) in the sector since 2008, Africa’s agro industry is now attracting greater interest from domestic, regional and international investors - especially in oil palm, sugar and rubber. According to the World Bank, agriculture accounts for over 30% of Africa’s GDP. This could be valued at over USD 1tn by 2030 if matched by the right infrastructure and institutional framework - particularly energy sufficiency and irrigation. To attain this target, a dynamic private agribusiness sector must work in tandem with farmers and consumers as Africa becomes increasingly urbanised.

While a number of factors have hampered the progress of farming in Africa, many are starting to be addressed. Indeed, as the world’s appetite for land and food grows, and as the African investment climate improves, the region is emerging as a key destination for agricultural investment.

According to the UN Conference on Trade and Development (UNCTAD), FDI inflows to Africa rose to USD 50bn in 2012 from USD 44bn in 2010. Africa is the only developing region to record two consecutive years of growth in FDI inflows to 2012. Investment in Africa is now more broad-based, with strong inflows to consumeroriented manufacturing. We believe this trend is a leading indicator of a surge in food demand in the region over the medium term. The palm oil market stands to be a major beneficiary of this development.

Private investment is needed to support Africa’s growing demand for CPO. Africa’s consumption of a range of agricultural commodities - especially edible oils such as palm oil - has grown exponentially over the past 30 years. However, acreage and yields have not followed suit, resulting in the region being a large net importer of palm oil. We estimate a 3mt supply deficit for palm in Africa in the 2012/13 season, which is 150% of Africa’s current production.

Given this deficit, there is a strong incentive to improve agricultural productivity in the region. The food import bill is growing; we currently estimate it at over USD 25bn, equivalent to more than 8% of imports to SSA. World Bank figures show that food accounts for an increasing share of Africa’s merchandise imports; this will have an adverse impact on the region’s trade and current account balances and currencies. Increasing farm productivity in the region will go some way towards reducing food inflation and improving food security, making food more accessible to both rural and urban dwellers.

We strongly believe that more investment is needed in Africa’s agro-industry. Investments by the private sector will contribute significantly to improving industry yields, in our view. The International Food Policy Research Institute (IFPRI) estimates that Africa needs USD 32-39bn of investment annually to realise the full economic potential of its farm sector, with up to 50% of the funding originating from the private sector. Africa needs investment on par with Asia and in South America during the ‘Green Revolution’ in the 1960s and 1970s, which was around 15% of their national budgets. Heavy investment in those regions raised productivity and triggered high and sustainable rates of economic growth.

We are bullish on the consumption story for palm in Africa. We believe that the economies of scale resulting from growing FDI in the sector will help to match the consumption growth that is likely over the next few decades. However, we caution that initial return on investment (ROI) could be lower than Asian levels due to the high operational costs of doing business in Africa. This is an important consideration for prospective investors, especially when combined with uncertainty over production costs.
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