By end this year Indonesia’s total CPO export would reach 20 million tons, lower than the volume of 2013 at 21 million tons. As disclosed by the Director of GAPKI Fahdi Hasan on Monday [21/7] this downturn was because of entering semester 1 of 2014, export of CPO and by-products from Indonesia which was not as bright as estimated. Export volume of CPO and by-products in Semester I 2014 which only reached 9.8 tons or down by 7.7% against same period last year at 10.6 million tons.
By year-on-year basis downturn of Indonesia’s CPO export volume was due to less demand from India quite significantly by 37% from 39 million tons in Semester I 2013 to 2,12 million tons in Semester I 2014. Besides soon in Semester II there would by El Nino climate disturbance. There was hope price of palm would improve, and Indonesia’s export of CPO would improve in Semester II against Semester I.
Meanwhile export of CPO and by-products in June 2014 was starting to move up by 5% against previous month from 1.7 million tons in May to 1,79 tons in June. Considering that Ramadhan and Idul Fitri was just coming near, increase of export volume would not be significant and was still below expectation. However there was increase of CPO export to some countries. By predicted, increase of demand would come from Muslim populated countries due to Ramadhan and Lebaran.
Significant demand was from Bangla Desh, Export volume to Bangla Desh was seen to increase by 55% against last month from 116 thousand tons from Pakistan where export volume increased by 10% against previous months from 145 thousand tons to 260 thousand tons.
Significant increase of demand also was from non-Muslim countries in Uni Europe where export increase was booked at 37% compared to June last month from 277,4 thousand tons to 381 thousand tons followed by China where increase was posted at 9%. India only booked increase of demand by 3%. However America posted reduction of CPO and by products from Indonesia by 27% compared to May from 36 thousand to become 26.5 thousand tons.
The dynamic demand above was in the persective of global economy as price of CPO weakened in the past week. Downturn of Indonesia’s raw oil was due to change of demand from buyer countries from CPO by-products to soy oil.
In case of the USA, downturn of demand was due to over supply of soy and lowered price. The US Agricultural Department reported that supply of soy by August 31 2015 would be 415 million bushels. The amount increased compared to stock in June at 325 bushels. Average price of CPO in Roitterdam in June 2014 moved in the range of USD 825 – USD 875 per MT, the average price being USD 856 per MT. The average price dropped by around 4% compared to average price in May at USD 896.6 per MT.
In the past years, toward Ramadhan fasting month demand for soy increased significantly followed by price increase, but this year demand for CPO and by products from Indonesia was low, way below expectations. In July prices was predicted to stagnate, Ramadhan and Idul Fitri had not been able to jack up demand or price. Negative sentiment would still be prevalent because CPO supply from Malaysia was plentiful while demand was low. CPO price in the next week would depend on economic condition in China. China was the world’s second biggest consumer of CPO, so if economic growth in China was positive, there was hope of increasing demand from China.
In the first 2 weeks of July, global price of CPO was in the range of USD 845 – USD 855 per MT. GAPKI predicted that price of CPO by end of July would not move far from USD 840 – USD 880 per MT. Hopefully in the next 2 weeks before Idul Fitri global price could be elevated, the same was with demand. Meanwhile export price in July 2014 was set by the Ministry of Trade at USD 805 and export tax 10.05% with average considered price [Rotterdam, Kuala Lumpur and Jakarta] USD 865.35.
Meanwhile in expanding CPO market to Turkey, by end of May GAPKI collaborated with the Ministry of Agriculture of RI conducted a business forum session between Indonesia CPO producers and businesspeople in Istanbul. The objective was to promote trade between Turkey and Indonesia and promote Indonesia’s CPO to the Middle East especially Turkey because Turkey was business hub in the region.
To make sure that CPO price from Indonesia remained competitive, GAPKI recommended the Government through the Ministry of Agriculture and Ministry of Trade to sign PTA agreement with Turkey. Malaysia had sooner signed PTA with Turkey so import tax for ex Malaysia CPO was lower than that from Indonesia. Ever since signing of the agreement taxes for ex Malaysia CPO was lowered from, 31% to 20%, making Malaysian CPO more competitive than that of Indonesia. GAPKI was expecting the Government to pay more attention to this matter.(SS)
Business New - July 25, 2014