08.08.2020 (www.theborneopost.com) - KUCHING: Analysts anticipate an uptake in crude palm oil (CPO) sales in the future, spurred by Malaysia’s suspension of export tax for CPO in Malaysia from June until year-end which improved the competitiveness of Malaysia’s palm oil against Indonesia’s.

Due to restocking activities by some buyers, Affin Hwang Investment Bank Bhd (AffinHwang Capital) saw that there was a pick-up in global demand for palm-oil products during June and July.

To note, Malaysia’s move to cut the export duty rate on CPO to zero beginning June 2020 until year-end has made its products more attractive compared to other producing countries, especially to buyers that are more price-sensitive.

“Thus, there could be some shift to buying Malaysia’s palm-oil products, in our view. On the hand, Indonesia has raised its export levy on CPO shipments, starting June 1, 2020, by US$5 per metric tonne (MT) to US$55 per MT as the government seeks to raise funds for its biodiesel programme.”

Meanwhile, India has been trying to reduce its dependency on imported edible oils as part of its quest for food self-sufficiency. Due to the country’s lockdown because of the Covid-19 pandemic, there have been renewed talks of India wanting to slash its huge edible oils import bill.

This led AffinHwang Capital to eye this development cautiously as India could potentially raise its import taxes on edible oils and use the funds to encourage and support its farmers to increase oilseeds production as well as allocating land for oil palm plantations.

“For India, its consumption of edible oils was 25.3 million MT in 2019, of which it imported 15.9 million MT, or 63 per cent of total consumption,” it added. “The Indian government aims to cut import dependence to about half of the country’s total requirements by 2025.

“We do not discount that India would try to plant more oilseeds or oil palm in the short- to mid-term but there will be challenges, which could include a lack of infrastructure backlash from non-governmental organisations for converting forests into agricultural land, a lack of technological and general expertise, and the weather.

“Even if India manages to increase its edible oil production by 2025, we believe worldwide consumption of edible oils going forward will rise with the growth in population and household income.

“And as both Malaysia and Indonesia continue to actively market the benefits of palm-oil products to existing and new markets, future demand should be supported, in our view.”

Meanwhile, China’s consumption of palm oil rose by 31 per cent year on year (y-o-y) to 7.1 million MT in 2019.

AffinHwang Capital said this was partly attributable to the drop in consumption of soybean oil due to less crushing of soybeans given the African Swine Fever (ASF) situation in China (soybeans are crushed for soybean meal for animal feed and soybean oil is the byproduct), which started in August 2018.

“Currently, pockets of outbreaks can still occur as there is no vaccine in the market for ASF, but the overall situation appears to be relatively under control, in our view.

“Given the recovery in the ASF situation in China, there has been an increase in the number of new pig farming projects in the country since end-2019 as it tries to rebuild its swine population. However, this may require time, potentially 2-3 years, in our view.

“As such, the crushing of soybeans for soybean meal for feed is expected to rise slowly in tandem with the growth in swine production, and this could potentially slow down demand for palm-oil products as more soybean oil will be released to the Chinese market.”

https://www.theborneopost.com/2020/08/08/countries-likely-to-restock-cpo-amidst-fear-of-second-wave/