PALM OIL Despite the global COVID-19 pandemic, palm oil prices have rebounded. Will they remain high and what will 2021 production and demand look like? Serena Lim
Global palm oil landscape
Palm oil accounts for 32% or some 75M tonnes of the 234.4M tonnes of oils and fats produced globally (see Figure 1, below right), said Ng. It also accounted for 57% or 54M tonnes of the 95.5M tonnes of oils and fats traded worldwide in 2019. Indonesia and Malaysia are the main global producers of palm oil, accounting for 58% (43M tonnes) and 26% (19M tonnes) of global production respectively in 2019. Indonesia was also responsible for 55% (29.7M tonnes), and Malaysia 34% (18.36M tonnes) of world palm oil exports in 2019. Global demand is split into 70% for food (52.5M tonnes), 20% for biodiesel (15M tonnes) and 10% for oleochemical and other uses (7.5M tonnes).
immediate impacts on oil palms including fresh fruit bunch (FFB) failure and reduced yield and crude palm oil (CPO) output. “It was also clear that the severity of the water deficit would have a lagged impact on yields 12 months later with lower output frompalm drought-strained trees.” Global oil landscape There were also lower prices in 2019 Others 12% Thailand 4%
Malaysia 26%
and, therefore, less fertiliser application, with an expected effect on later yields. However, a year later in June 2020, floods arrived with rainfall at one point 80% higher than normal, washing away roads and creating logistical difficulties in CPO and FFBs to mills. inmoving 2019 Indonesian production in 2020 fell by u
Production
Others 9%
Exports
Guatemala 2% 75.6m MT
Indonesia (58%) + Malaysia (26%) = 84%
54.0m MT
Malaysia 34%
Indonesia 58%
Imports
Indonesia 55%
Indonesia (55%) + Malaysia (34%) = 89% India 19%
Others 52%
54.4m MT
Weather and rainfall
A key factor for the palm oil outlook is weather and rainfall, McGill said. Rainfall was around 60% below average levels between June-September 2019, with
Photo: Adobe Stock
Riding the price rollercoaster
EU 16%
China 13%
India (19%) + China (13%) + EU (16%) = 49%
Figure 1: Global palm oil landscape, 2019
SOURCE: MPOB, CGS-CIMB RESEARCH
Source: Ivy Ng, CGS-CIMB
The year 2020 has been a remarkable and volatile one for crude palm oil (CPO) prices, Dr Julian McGill, head of Southeast Asia at LMC International, told the Virtual POC2020 conference on 27-28 October. Hovering around US$550/tonne in January 2019, the price drifted slowly downwards for the next six months before rising rapidly due to more severe drought concerns in Indonesia, to hit a level of more than US$700/tonne in January 2020 (see Figure 2, p10). Then came COVID-19 lockdowns, leading to prices bottoming out in April 2020. Surprisingly, however, prices rebounded, reaching almost US$700/tonne in October. CPO prices are on track to record their best year since 2017, added Ivy Ng, regional head of agribusiness research at CGS-CIMB. “We have had a global pandemic that has disrupted everyone’s lives and affected many people’s livelihoods, and yet palm oil prices have remained immune to economic chaos,” McGill said. “The question is whether these high prices are justified, will we face a large price correction or will they persist?”
10
8 – OFI MARCH-SEPTEMBER 2021 ONLINE EDITION ● TO SUBSCRIBE CLICK HERE
Palm oil prices 8,10,12.indd 2
30/03/2021 12:27:38
