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Section 1 : CPO Price Trend
24 Feb - 01 Mar 2020
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22 - 28 Jun 2020
POINTERS ON THE PRICE TRENDS
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Section 2: Global Palm Oil Market Focus
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2016 Market Direction - Twists and Turns of Palm Oil Prices
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POINTERS
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Second Half 2015 - Anticipating Market Price Direction:
Impact of El Nino on Global Palm and Vegetable Oil Supply - A Major Catalyst for Price Recovery?
Mr. Ling Ah Hong

Mr. Ling graduated from the University of Malaya with a Bachelor of Agricultural Science (Honors).

He has more than 40 years of experience in research and management of plantation crops and companies. He was a former Executive Director of IJM Plantations and his other past positions include: Research Officer with FELDA, Senior Agronomist in Dunlop Estates (now part of IOI Corporation), Plantation Controller of Perlis Plantations (now part of Wilmar International), Chief Operating Officer for Hap Seng Plantations. Mr. Ling has authored and co-authored numerous publications on oil palm and cocoa in Malaysia. He is also a frequent speaker at international conferences and seminars organized by Bursa Malaysia, GAPKI, MPOC, MPOB and investment banks.

He is currently the Director and Principal Consultant of Ganling Sdn Bhd, a Malaysian-based company focusing on plantation research, consulting and investments.

GANLING specializes in weather-based palm oil forecasting, benchmarking and productivity improvement programs and performance analysis of plantation companies. Ganling is a consultant to a number of listed oil palm companies and banks in Malaysia and South East Asia and also an associate to LMC International, London, in the publication of: Oil Palm Quarterly Report – Indonesia and Malaysia.

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Weather is one of the key elements in the production and supply of almost of all oilseeds and palm oil and a major catalyst for price movement. Not too long ago, towards the end of Q1 of 2014, there were growing evidence and concern on the emergence of an El Nino which could potentially alter the supply equation of oilseeds and palm oil. This concern had led to a temporary spike in palm oil prices in March-April 2014. The seriousness of this situation did not play out as envisaged as the threat of a full blown El Nino did not materialised.

However, El Nino- like conditions continue to persist into early 2015. In May 2015, the key El Nino monitoring agencies like BOM and NOAA confirmed the presence of El Nino conditions in the tropical Pacific region. All international climate models suggest an 80-90% chance that the El Niño will persist until at least the end of 2015. Models also indicate that further warming is likely to extend into Q1 2016. El Nino usually results in drier and below average rainfall or prolonged droughts in the key palm oil producing countries like Indonesia,

Malaysia and Thailand (which account for some 90% of the world’s production). The effects of adverse weather conditions especially rainfall in recent years on palm oil yield and supply and prices were analyzed (using the Ganling's weather-based forecasting model).

Palm oil production were significantly affected by the El Nino events in 1982/83, 1986/87, 1991/92 and 1997/98. The last El Nino event from June 2009 to April 2010 resulted in prolonged dry weather conditions in many parts of Indonesia and Malaysia (world's major palm oil producers) which, in turn, resulted in significantly lower palm oil supply to the world in 2010.

Malaysia suffered a decline in production of -3.9% (y-o-y) while Indonesia registered a significantly lower production growth of 4.8% (y-o-y) compared to 12.3% (y-o-y) growth registered in 2009. The El Nino also affected oilseed production in India and Pakistan. The supply disruption led to a spike in prices of palm oil from 4Q 2010 to Q1 2011.

How will the newly confirmed El Nino event affect palm oil and oilseeds production in the coming months? International climate models also indicate that there is a possibility of this El Nino reaching a strong level. What will be its likely impact on palm oil supply should it develops into a severe El Nino like the 1997/98 event (which caused major disruptions to agricultural production including palm oil and oilseeds)? Will this El Nino provide a catalyst for a price recovery in 2016? This paper will examine the various developing scenarios and impact on palm oil supply and outlook.
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