CPO price disruption
THE abrupt lifting of Indonesia’s palm oil export ban starting this Monday will once again disrupt the commodity’s price movement in the global edible oil market.
Barely three weeks ago, crude palm oil (CPO) prices hit the roof, trading at almost RM7,000 per tonne when Indonesia announced its full palm oil export ban on April 28.
Now, the short-lived export ban will see CPO succumbing to some price corrections in the near term.
While CPO will likely hover at the RM5,500 to RM6,000 per tonne levels, it is envisaged that the commodity will remain at lofty prices as the world is still facing an edible oil shortage. Many observers believe that the imposition or lifting of Indonesia’s palm oil export ban may not be the answer to its quest to stabilise high domestic cooking oil (palm olein) prices.
The export ban imposed since April 28 has allowed ample palm oil supply that saw bulk cooking oil prices there easing by 11% to 13% to 17,200 rupiah (RM5.16) to 17,600 rupiah (RM5.28) per litre from a high of 19,800 rupiah (RM5.94) per litre. However, it still failed to achieve Indonesia’s target of 14,000 rupiah (RM4.20) per litre.
Hence, the republic’s cooking oil price dilemma will not be resolved soon, as the lifting of the export ban will see more supply leaving the country.
The most likely scenario will be more new policy changes by Indonesia, which is the world’s largest palm oil producer and exporter. Its palm oil policy changes will also impact its peers, with Malaysia being the world’s second-largest palm oil player.
Among the options by Indonesia include raising of the ceiling price of its bulk cooking oil to 17,000 rupiah (RM5.10) per litre, the setting up of a government entity to buy controlled price palm olein from producers to ensure supply to the domestic market, potentially raising the export levy to set aside money specifically for cooking oil subsidies and to re-initiate the domestic market obligation scheme with different parameters.
This constant disruption in policies does not bode well for the industry as a whole, especially where the price of CPO is concerned.
Oil palm planters are basically price-takers. A mere RM100 increase in the CPO price per tonne could translate to a hefty contribution to the profits of industry players as well as the respective government export earnings.