Some regions in Indonesia
over the past few weeks, also in Malaysia and Thailand, are hit by drought due to very little rainfall. Adverse weather led to speculation of the
possibility of El Nino coming although it is too early to conclude. By
contrast, in Brazil, there is high rainfall that caused soybean land to be very
wet so it cannot be harvested. This causes a decline in the supply of soybeans
in South America.
Wet weather also hit
Paraguay, which is adjacent to Brazil. The same was experienced by Argentina.
In addition to delayed harvest, soybean crops were threatened by insect and
fungi. As reported by Oil World at the end of February, the port in Vancouver
Canada is overcrowded with 48 ships queuing waiting for agricultural
commodities, including canola. This is a nightmare for the freight forwarders
due to high cost of waiting.
Based on the information
obtained from Executive Director of the Indonesian Palm Oil Association
(GAPKI), Fadhil Hasan, adverse weather and high global vegetable oil demand has
boosted price of vegetable oils, including CPO and its derivatives from
Indonesia. CPO price was recorded at USD902 per MT in the second week of
February and continues to climb to USD965 per MT at the end of February. CPO
price increase is the effect of decrease of supply from CPO stocks in Malaysia
and demand began to increase in the world market, due to scarcity of other vegetable oils, as a consequence of
adverse weather in vegetable oil producing countries. Therefore, CPO as
substitute oil is hunted by importers.
The volume of exports of
CPO and its derivatives in February reached more than 1.58 million tons, an
increase of 13% compared with exports of last month at 1.57 million tons. The
rise in exports of CPO and its derivative products from Indonesia is due to
increasing demand from major export destinations, except China. Exports to
India rose 20% from 261 thousand tons last month to 313 thousand tons in
February 2014.
Exports to Bangladesh also
increased significantly up to 122% from 41 thousand tons in January to 91
thousand tons in February. Likewise, exports to the European Union and the
United States, each of which rose by 13% and 30%. In contrast, exports of CPO
and its derivatives from Indonesia to China recorded a decline of 33 thousand
tons (12%) of 287 thousand tons in January to 254 thousand tons in February.
The fall in exports to China is due to high vegetable oil stocks as a result of
the cumulative arrival of imported soybeans, CPO and sunflower oil in January.
In terms of price, the average price of CPO in February 2014 moved in the range
of USD 863 - USD 965 per MT with average price of USD 903 per MT. The average
price is up approximately 4% from the average price in January at USD 865 per
MT.
In March, the price is
expected to continue to rise in line with declining global vegetable oil stocks
due to bad weather. Until mid-March, price moves in the range of USD 965 - USD
1,000 per MT. GAPKI estimated that CPO price until the end of March will still
move in the range of USD 970 - USD 1,000 per MT. Meanwhile, export check price
(HPE) in March 2014 determined by the Ministry of Trade at USD 813 and export
duty at 10.5% with reference to the average CPO price in Rotterdam at USD
884/MT. (E)
Business New - March 21, 2014
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