KUALA LUMPUR – The Plantation Industries and Commodities Ministry said that Indonesia’s move to lift its ban on palm oil exports, effective tomorrow, will see a knee-jerk correction in palm oil prices but not a big downward adjustment as the market is well aware that the ban was temporary.
Minister Datuk Zuraida Kamaruddin, in a statement today, urged all Malaysian oil palm growers – both plantation firms and smallholders alike – not to be unduly concerned with the recent development.
Moreover, the recent weakening of crude palm oil (CPO) prices could have already factored in this possibility.
“Market analysts expect Malaysian planters to be the largest winners in the long run as they are able to sell their CPO at high spot prices which should translate into higher profit margin in the second quarter of 2022, coupled with higher production year-on-year and quarter-on-quarter,” she said.
“While the export ban lifting is a big relief to Indonesian planters, they have certainly missed out on the high CPO price period (February-April 2022) when Indonesia’s palm oil prices were trading at a larger discount to Malaysia with all the export control policies put in place since late-January 2022.”
Indonesia’s policies could work to Malaysia’s advantage
Zuraida said Indonesia’s policies could well work to Malaysia’s advantage as the world’s second largest palm oil producer, given this would enable it to emerge as a dominant supplier to India, which is the world’s top buyer of the edible oil.
The combination of Malaysia’s lower export taxes and the Indonesian ban may mean Indonesia’s share of palm oil exports to India will fall to 35% in the current marketing year ending October 31, 2022, from more than 75% a decade ago, according to an estimate from the Solvent Extractors’ Association of India (SEA), a vegetable oil trade body.
In the first five months of the 2021/22 marketing year, India bought 1.47 million tonnes of Malaysian palm oil compared with 982,123 tonnes from Indonesia, data compiled by SEA indicates.
Trader estimates for May show India imported around 570,000 tonnes of palm oil with 290,000 from Malaysia and 240,000 from Indonesia, Zuraida said.
“Above all else, the ministry believes that CPO prices will remain at elevated levels going forward, given the output uncertainties on major oilseeds (such as soybean, corn, rapeseed and sunflower seed) either due to geopolitical tensions or unfavourable weather.”
Lastly, even as Indonesia would resume its palm oil exports tomorrow – barely a month after imposing the ban on April 28 – it may not end there, given palm oil prices in its domestic market have yet to come down to the desired level (in fact, the lifting of the ban could result in a recurrence of domestic shortages in the country).
Given that the medium to long-term outlook of the Malaysian palm oil industry remains bright, the ministry calls on all Malaysian oil palm growers to join hands in helping to make the Malaysian Palm Oil Full of Goodness campaign, which seeks to counter various misconceptions with regard to Malaysian palm oil, a global success. – Bernama, May 22, 2022
