Palm Oil Market Review and Outlook 2020 GlobOil India, Mumbai, 25 - 27th of September 2019 Dr. Sathia Varqa Palm Oil Analytics, Singapore sathia.varqa@palmoilanalytics.com

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Outline Main story Main factors impacting palm market Jan to Sept 2019 Production outlook Demand Indonesia and Malaysia Reference to China, India & biodiesel Stocks Consumption outlook Laurics oil Conclusion & price outlook

Main story Protectionist trade policies African Swine Fever Export growth accelerating Production growth slowing Jump in energy prices

SLOWER PRODUCTION RISE Main factors impacting palm in 2019 MACRO SECTOR EXPORT GROWTH TRADE POLICY SLOWER PRODUCTION RISE AFRICAN SWINE FEVER ENERGY PRICES RISING SBO – DCE & CBOT

CPO prices rising late in the year

Lower prices & narrower difference In a low price scenario, Malaysian and Indonesia government frequently tweak their taxes to influence prices in order to win market share

YoY Price change on major exchanges

Production : Jan-Aug 2019 vs. Jan-Aug 2018 Production up 14.36% from Jan-Aug 2019 vs. Jan-Aug 2018

Palm Oil Production

Hotspot Distribution 20th September 2019 1st September 2019 Potential loss of 1.20 to 1.50 million tons of CPO production from Indonesia 20th September 2019

Indonesia production to see a fall -Western Kalimantan accounts for 29% of total oil palm planted area in Kalimantan. -Kalimantan accounts for 36% of the total CPO production in Indonesia -Worst affected dry weather in Western Kalimantan accounts for 7.22% or 3.095 million tons of the national output -South Sumatera accounts for 14% of the total oil palm planted area in Sumatera -Sumatera accounts for 60% of the total CPO production in Indonesia -Worst affected dry weather in South Sumatera accounts for 9% or 3.767 million tons of the national annual output

2019 production estimate & 2020 projection Indonesia CPO output cut by 1.20 to 1.50 million tons in 2020 to 45 million tons due to losses from extreme dry weather conditions. Malaysia output seen rising 780,000 tons or 4% in 2019 from the previous year but to rise at a slower pace in 2020.

Export growth Accelerating Export is up 7.40% from Jan-Aug 2019 vs. Jan-Aug 2018

Demand - Malaysia Overall exports rose mainly on support from zero export taxes and lower import tariffs from India & increased buying from China. Malaysia exports rose 19% Jan-Aug 2019, while domestic consumption was up 2.80% Though domestic biodiesel did not see a rise, biodiesel exports saw a strong growth.

Demand – Malaysia biodiesel outlook Malaysia is expected to export 700,000 tons of biodiesel in 2019 or 37% more versus 2018. Jan-Jul exports are at 367,000 tons. Malaysia biodiesel exports on strong growth. CPO-GO discount E.U RED II E.U anti-dumping duties on Indonesia

Malaysia RBD Palm Olein export to China China is the main buyer of RBD palm olein in August Edible oil deficit from lower soybean oil, lower crushing from poor soymeal sales and seasonal demand for mid-autumn festival

Malaysia export to India Tariff reduction helped to increase 1.586 million tons of Malaysia RBD palm olein to India from Jan-Aug 2019 Tariff reduction diminished Indian refining utilisation rate from 1.50 million tons in Q4 2018 to 1.34 million in Q1 2019 and lower to 1.07 million in Q2

Malaysia displaces Indonesia in Olein export

Demand - Indonesia Robust domestic demand from biodiesel segment helped to lower Indonesian stocks to 21 months low in March Domestic consumption could overtake exports in about 3-5 years if biodiesel mandates are maintained

Demand – Indonesia biodiesel outlook Indonesia biodiesel to see another year of increase in production (30%) and consumption (65%) in 2019 from the year before.

Indonesia Biodiesel Capacity & Utilisation

Demand – stock levels YoY change

RBD palm olein export to India RBD palm olein export to China 4 main demand growth areas Biodiesel exports Biodiesel mandate RBD palm olein export to India RBD palm olein export to China

Consumption outlook

Laurics - cpko Ample supply at origin market. Prices in correction mode now.

Laurics – Ccno-cpko spread CPKO Rotterdam offers to trend below US$ 600 on spot delivery CCNO-CPKO widened to over US$ 100 from the end of June

Conclusion & price outlook BMD FCPO to trade RM 2100-2000 (US$ 508-484) in Oct & Nov but higher in Dec to RM 2200 (US$ 532) First half of 2020 to see a rebound in prices to RM 2300-2400 (US$ 560 – 580) Indonesia CPO FOB to range US$ 530 – 550 in the first half of 2020 Biodiesel & RBD palm olein will be the main price support in 2019 & H1 2020. Indonesia B30 will be keenly watched. Malaysia biodiesel export looks strong again in 2019 CPKO prices will be under pressure in Q4 after the recent rise due to persistent high stocks

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