Weekly Highlights (18 July – 24 July)

Section I:  Weekly Highlight on Fundamentals

High prices threaten to cut EU soya meal usage

Oil World reports that soya meal usage in EU in Oct/Sept 2011/12  may go down by as much as 1.4 Mn T from last season’s 32.6 Mn T, the lowest level since 2000/01.  The recent rally in soya meal prices to unprecedented levels is jeopardizing the profitability of livestock producers in many countries owing to their limited ability to pass skyrocketing feed costs onto consumers. Consumption of soya meal in the EU-27 will probably be more affected than in other countries by the supply shortage and the steep price increase. In general the European livestock sector benefits from its flexibility in adjusting feed rations to relative prices. However, alternative feedstuff such as corn and corn byproducts, have also become extremely expensive. The feed sector has to be prepared for soya meal prices staying at unusually high levels in the next 5-6 months, before the expected large South American soybean crops can bring relief on the supply side. Demand rationing will be inevitable in coming months due to the sharply reduced South American soybean stocks and deteriorating US crop prospects. But combined soybean exports of the US, Argentina and Brazil still exceeded the year-ago level in June. Losses in soya meal usage will curb global soybean crushings in coming months, eventually translating also in a pronounced tightening of soya oil supplies. Soybean oil prices have developed a premium relative to sun oil and widened it relative to palm oil.

Prospects of US corn and soybean yields are declining at an alarming rate

Crop conditions continued to deteriorate to one of the lowest levels ever recorded, reflecting the persistent heat and dryness in the major parts of the US Midwest. Markets are preparing for the worst-case scenario, meaning that after the drought-ravaged South American soybean crop in early 2012 the current drought in the US threatens to slash US soybean production severely after the corn crop had already suffered massive damage. The drought-stricken US Midwest received just spotted showers this week and some more are in the forecast for next week but for the time being this does not change the bleak production outlook. The US drought is the worst since 1988 but some observers even compare it to 1956.

Section II: Other Weekly Highlights

1. Asia Pacific

a.      China

Lower forecast of rapeseed output

China reduced its forecast for 2012 rapeseed output to 12.2 million metric tons in its July report, compared with 12.8 million tons forecast last month, the China National Grain and Oils Information Center said last Wednesday in a report. The country’s peanut-output forecast was raised to 16.2 million tons, from the previous forecast at 15.8 million tons.

China buys the  most soybeans in seven months

China, the world’s biggest soybean importer, purchased the most soybeans in seven months in June as higher cooking-oil prices helped processing margins, while concern that South American supplies may drop also spurred demand. According to data posted on Tuesday on the website of the Beijing-based customs authority shipments rose 6.4 percent to 5.62 million metric tons from 5.28 million tons in May, and compared with 4.3 million tons a year earlier.

In the first six months, imports climbed 22.5 percent to 29 million tons, customs officials said.

b.        Papua New Guinea

New Britain applauded for commitment to sustainability

New Britain Palm Oil (NBPO) has received applause from the Roundtable on Sustainable Palm Oil (RSPO) for committing to source 100% RSPO-certified palm oil supplies by the end of 2012. The development will enable food manufacturers in Europe to access sustainable supplies more easily. The ingredient is high in saturated fat and used in foods ranging from cooking oil to pastry and baked goods.

NBPO has pledged to have its entire palm oil estates and operations, inclusive of smallholders 100% RSPO-certified, through fully traceable, segregated, sustainable palm oil. NBPO is one of the largest fully integrated industrial producers of sustainable palm oil and a top five producer of RSPO certified sustainable palm oil (CSPO) in both production volume and area.

New Britain recently enabled the RSPO to reach six million tonnes of CSPO through the latest certification of its mill in Poliamba, West New Britain Province, Papua New Guinea (PNG).

c. Indonesia

Palm oil shipments hampered by dry weather

Crude palm oil shipments from Indonesia are being hit by dry weather conditions, with falling water levels on a river hampering transportation of the edible oil from West Kalimantan, an industry official said on Thursday. Shipments from West Kalimantan province had been halved from the usual 100,000 tonnes per month, Steaven Halim, an official at the Indonesian Palm Oil Association (GAPKI) told Reuters.

“Crude palm oil transportation has been affected by low water levels on the Kapuas river,” Halim said. “The dry season has caused the level of the river to drop and several areas of the river cannot be passed by ships carrying crude palm oil.” He added that transferring the crude palm oil to trucks was expensive and problematic because of a shortage of vehicles. “River transportation only costs a quarter of that by truck,” Halim said.

Data on Indonesia from GAPKI showed that January to May palm exports totalled 7.37 million tonnes, with May shipments 7 percent lower versus April at 1.4 million tonnes. This year total palm oil output from Indonesia is expected to be between 23 million and 25 million tonnes, up at least 7 percent, according to industry estimates. According to Rabobank, 78 percent of Indonesian palm oil production comes from Sumatra, with Kalimantan output accounting for 18 percent.  For most of the country, the rainy season is from October until April, although this can fluctuate.

2. Middle East

a. Turkey

Turkey: Imports of oil & fats further boosted

Turkey further boosted imports of oil and fats and oil meals in May 2012 owing to sizably rising domestic demand, insufficient production and imports of oilseeds as well as record re-export of refined sun oil to the neighboring countries, mainly to Iraq. Imports of oils and fats soared to 0.66 million MT in Jan-May vs. 0.47 million MT a year ago and 1.18 million MT in the full calendar year of 2011. Imports of sunflower oil reached 93,000 MT in May, bringing the total for Jan-May to 0.34 million MT (almost doubling on the year), almost exclusively supplied by Russia and Ukraine.

While on the other hand, imports of oil meals increased to 0.87 million MT in Jan-May, up 81% from last year and compared to 1.32 million MT in Jan-Dec 2011. Imports of soybean meal rocketed by 0.26 million MT in the first five months of 2012, while those of sunflower meal jumped by 0.12 million MT.

b. Iran

Recovery seen in export of key commodities

Exports of some key commodities to Iran have recovered pronouncedly in recent months, indicating that the effects of the financial embargo on Iranian imports have subsided. It is estimated that combined imports of soybean oil and sunflower oil increased steeply from 127,000 MT a year ago to around 330,000 to 340,000 MT in June and July 2012. In particular imports of soybean oil nearly come to a standstill in preceding months, enforcing a severe depletion stock in Iran. The bulk of sunflower oil came from Ukraine.

Latest export registrations indicate that soybean imports will jump to roughly 180,000 MT in June/Aug 2012, against nil in Feb/May 2012 and 151,000 MT a year ago. Iranian crushers suffered a severe blow with soybean imports plunging to a multi-year low of only 184,000 MT in July/June 2011/2012, down from 762,000 MT a year earlier.

3. Sub Continent

a. Bangladesh

Trade Corporation of Bangladesh to import palm oil directly from Malaysia

Trading Corporation of Bangladesh (TCB), the state trading agency, will import crude and refined palm oil directly from Malaysia. Chairman of TCB, who is visiting Malaysia as an entourage of Commerce Minister of Bangladesh coinciding with Showcase Bangladesh – 2012 being held in Kuala Lumpur, said this and expressed his hope that the MPO suppliers will participate the international tenders to be floated for the procurement of palm oil. Initially, TCB will procure 20,000 – 30,000 tonnes of palm oil, both in bulk and in consumer packs.

Malaysian investors encouraged to participate in Bangladesh

In the inaugural session of Showcase Bangladesh – 2012, recently held in Kuala Lumpur, Commerce Minister of Bangladesh called upon the Malaysian investors to undertake new ventures in Bangladesh’s fast growing manufacturing, services and infrastructure sectors. About the proposed FTA between Bangladesh and Malaysia, Commerce minister said that more negotiations is needed to make the same benefited for both. On the same issue, Malaysian Minister for International Trade and Industries said that Malaysia had been working on the matter and there would be a progress within two months.

Palm oil import increase in the first six months

During the week July 11 – 17 of 2012, a quantity of 40,931 tonnes of RBD PL arrived in the country of which 23,000 tonnes or about 56% came from Malaysia and rest 17,931 tonnes or about 44% came from Indonesia. Accordingly, during Jan. – July 17 period of 2012, the total import quantity of palm oil (CPO, CPL, RBD PL/PO together) stands at 596,295 tonnes, which is about 65% of total import of oils and fats imported in the country during the period and is about 33% higher compared to the quantity imported during the corresponding period of 2011. The quantity of palm oil imported from Malaysia was 149,726 tonnes i.e. about 25.2%, while that from Indonesia was 435,627 tonnes i.e. 73.4% and the rest quantity of 8,188 tonnes i.e. about 1.4% from Singapore.

b. India

Edible oil price surges on tariff value revision

Edible oil prices shot up by more than Rs 10 on revision of tariff value on imported RBD Palmolien by Government. The Cabinet Committee on Economic Affairs has approved the proposal of Ministry of Consumer Affairs, Food & Public Distribution, to defreeze the tariff value on imported RBD palmolein from $484 a tonne and align it with the current international prices and scrapped the proposal to lower import duty rate on the refined oil.

Barring groundnut oil which rule steady, all other edible oils shot up in par with higher import parity due to revision of tariff values. Imported Palmolein rose by Rs 9, soya refined oil up by Rs 8, rapeseed oil increase by Rs 13, sunflower expeller refined and cotton refined oil improved by Rs 5 each in Mumbai market. Sentiment was dull for a short while but expectation of higher demand in coming festival days keep under current positive.

Market sources said the import duty on refined palm oils is currently calculated at a base price of $484 a tonne, far lower than the current import price of about $1,030 a tonne. As tariff value remained unchanged for about six years, though import duty on refined oil is 7.5 per cent, the effective rate is only about 3.6 per cent on current prices. Considering said revision of tariff value as a doubling the import duty cost domestic refineries have increase the price of palmolein by more than Rs 10. Soyabean and other edible oils shot up on bullish futures markets and on strong fundamentals.

Analyst said in India, tariff value for imported edible oils remained unchanged since long. In September, 2011, Indonesia the largest exporter of Crude Palm Oil (CPO) to India increased export duty on CPO from 15-16.5 per cent and reduced export duty on refined palmolein from 15 per cent to 8 per cent, which heavily affected the domestic refining industry. India imported 12 lakh tons of refined palm oil during November-June, up nearly 90 per cent from a year ago. The Government had sought a rise in the base import price of edible oils to encourage higher import of crude edible oils instead of refined oils to protect local refineries.

4. Europe


Ukraine market overview of sunflower oil, sunflower seed, sunflower meal

The price of sunflower oil is on rise as domestic prices have increased by 50 grn. / Ton, which due to the continuing decline in supply from major producers. As a result of higher exports and more attractive prices, domestic low cost offers have practically vanished in response to this increasing demand. In the near future export prices may moderately go up and then get stabilize leading to lower domestic prices. The increase in domestic prices for sunflower seed is an incentive for refiners to keep selling prices of meal unchanged. In the coming 1-2 weeks meal may remain stable in price and sales.

Indonesia aims to boost palm oil export to Russia

Indonesia is seeking to expand its footprint in the Russian crude palm oil market, saying there remains a large opportunity to tap the country, where only 2 percent of Indonesia’s CPO is currently exported. “We keep looking for new markets, including Russia, which has market potential for CPO up to 2 million MT,” the Director General for foreign trade at the Trade Ministry, Deddy Saleh, told a press conference on Indonesia’s palm oil industry in Jakarta on Tuesday.

He added that Indonesian officials had discussed the issue with their Russian counterparts during the recent APEC Food Security Ministerial Meeting in the Russian city of Kazan. Deddy said Indonesia might be able to export CPO directly, without the help of third parties, by sea to Vladivostok, a Russian city that hosts the country’s largest port on the Pacific Ocean and distributed via railway network.

The Executive Director of the Indonesian Palm Oil Association (Gapki), Fadli Hasan, said Russia had been largely importing CPO from the Netherlands and Ukraine. “But the palm oil actually comes from Indonesia and Malaysia,” he told the same press conference. “And there remains a perception that CPO is not healthy, but I’m sure demand for CPO will increase every year, especially because CPO prices are more competitive than those of other vegetable oils.”

In 2011, Indonesia exported 323,800 tons of palm oil, worth $357.8 million, to Russia, approximately 2 percent of Indonesia’s total CPO exports. The figure is higher than the 250,000 MT recorded in 2010.

5. Americas

a. USA

Midwest drought shows little sign of abating

A Reuters report stated that broiling heat blanketed much of the Midwest on Tuesday, exacerbating the region’s worst drought in more than 50 years and devastating corn, soy and other vital crops. From Chicago to St. Louis to Omaha, Nebraska, temperatures eclipsed 100 degrees Fahrenheit and the National Weather Service (NWS) issued heat advisories across Midwest and mid-Atlantic states. Many of the NWS heat advisories don’t expire until next week. Temperatures in Kansas City, Kansas for instance, are expected to hit 104 degrees Fahrenheit (40 degrees Celsius) on Wednesday. The current drought is the worst since 1956, the National Oceanic and Atmospheric Administration said in a report posted on its website.

In Iowa, Gov. Terry Branstad convened a hearing to discuss the drought and its effect on the state’s pork industry, which relies heavily on corn feed. “It’s important that we do all we can to help people through this difficult time,” Branstad told local radio station KILJ. “And obviously more rain would help.”

About 55% of the contiguous United States is in a drought, just as corn plants should be pollinating, a period when adequate moisture is crucial. The United States ships more than half of all world exports of corn, which is made into dozens of products, from starch and ethanol to livestock feed. “We’re moving from a crisis to a horror story,” said Purdue University agronomist Tony Vyn. “I see an increasing number of fields that will produce zero grain.”

The soonest rain is expected in the Midwest is the middle of next week, said Jason Nicholls, meteorologist for AccuWeather. The new forecast calls for rains of 0.2 to 0.7 inch around the region, up from earlier outlooks of 0.1 to 0.6 inch. The dry weather and intense heat likely will continue through August, further damaging the corn crop, AccuWeather said. Corn prices are at 13-month highs and have surged 45 percent this summer, with analysts expecting the crop to deteriorate further as the drought lingers. The U.S. Department of Agriculture (USDA), in its weekly crop progress report on Monday, said just 31 percent of the corn crop was in good to excellent shape, down from 40 percent a week earlier and below analysts’ average estimate of 35 percent.

Soybean conditions fell to 34 percent from 40 percent in the good to excellent category, below estimates for 35 percent. “We need soaking rains now. We need two-to-three-inches and that’s not in the forecast,” AgResource Co analyst Dan Basse said.

6. Africa

a. Liberia

Sime Darby plans Liberian palm oil bulking facilities

Sime Darby Bhd, one of the top three largest plantation companies in the world, plans to build palm oil bulking facilites in Liberia or neighbouring areas in the next one or two years. This will be a preparatory move in storing the edible oil before it is exported to markets such as Europe and the United States. A source said Sime Darby had tasked Felda-Johore Bulkers Sdn Bhd with building a tank farm as a preparatory move before it starts harvesting its oil palm plantations in Liberia.

Sime Darby ventured into the African country two years ago and now owns some 220,000ha there. “Sime Darby has to prepare the storage facilities now before the oil palm trees start to fruit between the fourth and seventh year. It has to prepare now because the bulking facilites in Liberia are small and not systematic,” said the source. He said the cost, capacity and location of the tank farm or farms were not finalised. “The bulking facility can also offer its services to other plantation companies in Africa in the future to store all types of edible oils before they are transported,” he added. Sime Darby also owns Sime Darby Hudson & Knight in South Africa, which is a full-fledged multi-oil refinery producing premium bakery fats, frying oils and bulk industrial fats.

Other plantations companies that own bulking facilities include IOI Corp Bhd with its wholly-owned subsidiary Loders Croklaan in the United States.

Section III: Weekly Data

Palm Oil Prices

  • Average CPO price fell by RM72.72 from RM3,051.60 to RM2,978.88. CPO futures on Malaysia’s derivatives exchange ended lower Wednesday, succumbing to profit-taking pressure and declines on the Dalian Commodities Exchange.
  • Malaysian crude palm oil futures dropped to the lowest in more than a month on Monday, tracking broader financial market weakness on fresh concern over Spain’s ability to avoid a costly bailout that could worsen the euro zone debt crisis.
  • Palm oil prices fell following improved weather forecasts in drought-hit areas of the U.S. Midwest, easing worries over deteriorating yields and limited supplies.
  • Malaysia’s palm oil exports fell 23 percent over the July 1-20 period from a month earlier, said cargo surveyors Intertek Testing Services and Societe Generale de Surveillance.
  • Crude oil prices rose above $103 per barrel on Tuesday after China’s economy showed signs of improvement, but gains were checked by further evidence of damage to Europe’s economy as investors sold off riskier assets and fled for the perceived safety of the dollar on fears that Spain will be unable to avoid a costly sovereign bailout.

International Prices

  • CPO average price fell by USD12 from USD1,022/MT to USD1,010/MT (cif Rotterdam) during the week. Price was lowest on 23 July 2012 at USD995. A gloomy global economic outlook also weighed on palm oil and other commodity markets, with a surge in Spain’s borrowing costs raising concern that the country could seek a costly bailout.
  • Prices of all other commodities also traded lower during the week in the European market. Only prices in the South American region registered average increases as SBO (Brazil) and SFO (Argentina) registered average increase of USD3/MT to USD1,218 and USD7 to USD1,161 respectively.
  • Weather updates on Monday forecast some rains for soybean crops in the U.S. Midwest this week, helping to offset a weekly crop condition report from the U.S. Department of Agriculture that downgraded soy crop ratings.
  • A Reuters poll showed an expected decline of 15 percent from record high prices for soybeans by the end of the year but still at an end-of-year record high of $15.40, up 28.5 percent from the close of 2011.
  • World soybean stocks are projected to shrink to a three-year low by the end of the current marketing year on Aug. 31 and look to remain uncomfortably tight until South America’s next crop is harvested in early 2013.
  • Demand from China, which imports two-thirds of the soybeans traded on the world market, should remain robust, although the world’s top buyer has already booked a considerable share of its 2012/13 import needs.
  • Palm oil’s widening discount to rival soyoil will also likely support prices. “Some investors anticipate the price gap to widen to US$300/ton soon” and that could drive price-sensitive buyers to switch to palm oil, a trader at Kuala Lumpur-based LT International, said. Soyoil’s premium to palm oil is around $230/ton now, compared with a historical average of $100/ton




1.  Malaysia’s Exports & Imports

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2. Exports to Major Countries


3.    Production & Stocks


4. Monthly Average Prices