1. Will India import less veg oil in 2016-17 ?
By Dorab E Mistry
Godrej International Limited

2. Congratulations
Congratulations to TEFLA’S and SEA on bringing Globoil to New Delhi
Congrats to all Organisers
National Capital Region is a powerhouse for our industry
You all deserve a big pat on the back for making this conference in our Capital as success

3. What happened to Indian imports
In the Oil Year 15-16, India surprised the world by importing only mln tonnes as against 15,600 mln Expected and 14,612 mln in 14-15
This was DESPITE a big decline in domestic production due to drought !
What were the reasons for this dramatic fall

4. Dramatic fall in Imports
Stocks were run down
Pipelines were thinned
Consumption slowed due to high prices and poor water availability
The industry has become more efficient
Current year will confirm this trend of slower growth in consumption

5. Indian Imports 15/16 Actuals 16/17 Soya 4,200 4,235 3,500
Palm , , ,650
Sun , , ,750
Total , , ,300

6. Palm Situation
In 2016 Indonesian production recovered strongly from September onwards
Malaysian production has still not begun to recover.
Drought in Q1 of 2016 in Malaysia has hurt the recovery
Overall palm supply is still very tight

7. PALM Production Total palm prod Down 6 million tonnes in 15-16
In Malaysia, December 2016 was the Turning Point – December 2016 production was Higher than December 2015 – After 11 successive months of Y o Y declines
We await Malaysian Jan 17 production

8. Palm Stocks and Prospects
Total palm stocks fell 5.5 mln mt
16-17 Prod will RISE 6 mln mt
Calendar 2017 – Malaysia 19.5 and Indonesia 33.5 to 34 million tonnes
What will be Malaysian stocks as on 31st Jan and on 28 Feb Have prices done their job ?

9. Other Oils
Sun oil has been the big winner of 2016 and will be the big winner of 2017
Soya oil was too high in price and became uncompetitive.
Uncertainty over US bio diesel regime has cast a shadow on soya oil
Rape oil is becoming expensive

10. CHINA
Release of old Rape oil from State Reserve in 2016 was a game changer
Increased soya crush & import of sun oil
Without the cushion of Chinese Reserve stocks, we may see bigger volatility in Rape oil prices
Rape crop down from 12 mln to 5 mln ?

11. Biodiesel - Indonesia
Subsidy from the Estates Crop Fund can cover only 200,000 tonnes per month of Palm Biodiesel at current POGO
However in SH 2017, their Revenue from the Export Levy will be much higher due to higher exports. If CPO prices are lower, the Subsidy required will be lower. What happens if CPO prices fall by US$ 100 ?

12. U S Biodiesel Mandate This is the most critical Uncertainty
Rural America voted for Trump but his administration has shown utter disdain for their interests
Eventually, I believe all bio fuel incentives will be restored and will be safe
The current uncertainty led to the recent sell-off. It was not justified

13. Soya Oil The recent sell off made soya oil competitive once again
If Blenders Credit is turned into Producers Credit, it will be very bullish CBOT futures
I believe US bio diesel regime will be clear by the end of March.
Soya complex will respond to US plantings and weather at an early stage this year

14. World Energy Demand
World Energy demand for veg oils grew in by 2.5 mln tonnes. Led by Indonesia and USA
Growth in will depend on the USA biodiesel regime and on Indonesia. Could rise by 2 million tonnes.

15. World Food Demand Food Demand rose at 2.5 mln mt in 15-16
In expected to grow by 3 million tonnes

16. Incremental Supply 000 tonnes 15-16 16-17 Soya oil + 3,000 + 2,500
Rape oil , ,500
Palm oil , ,000
Others , ,000
Total Supply , ,000
Total Demand , ,000

17. Sustainability RSPO has had a good year
Indonesian Sustainable Palm Oil has also made progress
Premium for MB has soared
Let us not make sustainability unaffordable

18. Short Term Outlook
Between now and POC in Kuala Lumpur, prices must remain high to ration demand
End Jan Malaysian stocks could go below 1.5 million tonnes
Cash CPO price for spot material has already traded well above 3300 Ringgits
BMD futures can rise to 3300 Ringgits and CPO Fob should rise to US$ 800

19. Short term Outlook
At some stage – perhaps around POC time, we shall get the signal that CPO production in Malaysia has begun to recover strongly
At that stage we must expect a sharp decline in prices. However, I wonder if that decline is to be ignored or bought
Stocks will ease only around June
India must import more soya oil immediately

20. Assumptions for Medium Term Price Outlook
Brent crude USD 50 to 70 per barrel
Two Rate Hikes by FED in 2017
Developing Country Currencies to be stable against USD. Ringgit may improve
No major Trade Wars or Disruption
President Trump will be different from Candidate Trump

21. Price Outlook 2017 may be Election Year in Malaysia
Market will give a knee jerk reaction at the first signal of rising production – possibly in early or mid March
We can see the Inverse of almost USD 40 from Q2 to Q3 disappear quickly
By June or July 2017, BMD to 2500,
RBD Olein at USD 650 FOB

22. Price Outlook
Soya oil is now well priced and it may not decline from current levels.
New crop MJJ is well priced
All eyes on US Biodiesel Regime
Sun oil will compete with Soya oil
Lauric prices must decline from Q3 of 2017
We may see a dramatic collapse in laurics

23. Some Political Possibilities
These mainly relate to President Trump and his policies
An Import Tax into USA ? Stronger USD
World tensions rise. Scope for a misadventure
Brazil descends into chaos ?
Malaysia has instability? Hope not

24. Conclusion
I hope and believe President Trump will be different from Candidate Trump
India is returning to normal quickly
2017 will be the Year of Emerging Markets and of stronger growth in Asia
GOOD LUCK & GOD BLESS