Palm & Lauric Oils Price

Outlook 2018

By Dorab E Mistry
Godrej International Limited
 Greetings
• Greetings & Thank You to GAPKI
• I have spoken at every IPOC
• This conference in Bali is becoming more
important with each passing year
• Indonesia is now the Policy Leader in Palm
Oil
Three aspects of my speech today
• Background to 2017

• Specific points on palm complex

• Outlook for 2018

 Background
• El Nino of 2015
• Palm oil production Down 6 mln mt in 2016
• Bullish outlook but prices did not rise
• China released 4 mln mt Reserve Stocks
• Finally Chinese Funds pushed up prices
towards end of 2016
 Background
• 2017: Expected rise in palm production by
almost 7 million mt
• 2017 started strong but prices declined until
June. Then came the rally until mid
September
• Chinese holidays led to a decline
• My Bullish forecast in Bogota on 18 Oct
 Factors for 2017
• Recovery in palm oil production
• Excellent soya crop in USA
• Excellent sun seed – Russia & Ukraine
• Excellent Demand in developing world
• Great demand for beans in China
• Depletion of Chinese Reserve Stocks
 2017 Palm Production
• Earlier forecast: Malaysia 19.8 to 20 mln
• Indonesia 34.5 to 35 mln mt
• Actual production is Lower. Palms need to
rest after high production for 8 to 11 months
• My Current Forecast: Malaysia will produce
19.1 to 19.3 & Indonesia 34 to 34.5 mln mt
• World production 17/18 up only 4 mln mt
 2018 Prospects
• 8th Bumper soya crop in South America?
• LA NINA?
• Sun oil will be less than in 2016-17
• Rape oil also less than 2016-17
• Malaysian palm production 19.97 mln mt in
2018 & Indonesian palm at 36.5 to 37 mln
mt in 2018
 CHINA
• Release of old Rape oil from State Reserve
in 2016 was a game changer
• Those releases have now ended
• China Rapeseed crop is down from earlier
levels of 12 mln to 5 or 6 mln mt today
• Chinese Funds are now big players
 India – Import duties
• Import duties were raised in August
• There is a possibility that India may raise
import duty again in November. The rise
will be small and will not affect
consumption of veg oils
• For CPO the Indian Biting Point is Rs
60,000, after considering inflation. Current
price is below Rs 55,000. Spread is $ 60
 Indian Imports
• 15-16 16-17 17-18
• Soya 4,235 3,500 3,400
• Palm 8,510 9,320 9,850
• Sun 1,516 2,130 2,150

• Total 14,738 15,250 15,900

 Biodiesel demand
• Malaysia is at B7
• Indonesian bio diesel mandate has worked
well so far. Consumes about 2 million
tonnes of palm oil annually
• USA: We have some clarity now. RVOs
not announced yet but volumes will be at
least same as last year.
 World Energy Demand
Veg oil use for bio diesel grew by 3 million
tonnes in 2016-17. Mainly due to increases
in Indonesia
• Growth in 17-18 will depend on the USA
biodiesel regime. Brazil is expanding too.
Could rise by 2 to 3 million tonnes.
 World Food Demand
• Food Demand rose by 3 mln mt in 16-17

• In 17-18 expected to grow also by 3 million

tonnes
 Incremental Supply
• 000 tonnes 16-17 17-18
• Soya oil + 2,400 + 2,000
• Rape oil - 300 ----
• Palm oil + 6,500 + 4,000
• Others - 1,500 + 1,000
• Total Supply + 7,100 + 7,000
• Total Demand + 6,000 + 6,000
 Sustainability
• RSPO had another successful year
• Indonesian & Malaysian Sustainable Palm
Oil have made progress
 Assumptions for Price Outlook
2017-18
• Brent crude USD 45 to 65 per barrel
• FED will tighten very gradually and will
also raise interest rates
• US Dollar will get stronger against
currencies of Brazil, Argentina, India
• No major Trade Wars or Disruption but
Trump will be Trump !
 Price Outlook
• Currently Palm production is in HIGH cycle
• Yet Stocks are NOT building up
• From Jan 2018 stocks will decline each
month and we shall see tightest ever palm
stocks
• The current discount of US$90 for palm
against Argentine soya oil MUST GO
 Price Outlook 2018
• CPO price CIF Rotterdam will rise from
US$ 735 to 800 by January 2018
• Then we watch SOAM soya crops,
European Rape crops, Ukraine Sun crops.
• If all 3 crops are not Bumper, CPO CIF
Rotterdam can rise to US$ 850 by March
2018. After that we review at POC in KL
 Price Outlook 2018
• In terms of BMD, futures can rise to 3100
Ringgit by January 2018
• In terms of RBD Olein FOB PK/PG, we can
rise to US$ 750
• If the soya crop in South America is
affected, prices can rise by another US$50
• All bearish factors are already in the market
 Other Oils
We have already seen a recovery in soya oil
prices to US$ 780 FOB Argentina and by Jan
2018 we can go to USD 820 FOB
Sun oil prices are very competitive and they
will remain so
Rape oil prices will rise unless European
crops improve
 LAURIC OILS
• CPKO price around US$ 1400 CIF
Rotterdam seemed unbelievable a few
months ago
• Big switch from CNO to CPKO as CNO
price rose due to diversion from Copra to
Coconut Water
• Now premium of CNO over CPKO is lower
so some demand will return to CNO
 LAURIC OILS
• Demand for CPKO based products is
booming. Stocks are not building up.
Unlikely that CPKO prices will decline
• From April to June 2018, CPKO prices may
rise further slightly
• From July stocks will build and prices will
decline to a range US$800 to 1000 CIF Rtm
 E U Bio Fuels Policy
• Original purpose of EU bio fuels policy was
Support for EU farmers
• That policy still remains
• Gap between Rural & Urban areas has got
wider
• Finally, bio fuel mandates will remain with
some adjustment and more certification
 Will Acreage keep Expanding
• Malaysia has reached the Limit
• Indonesia now has a Moratorium. Only old
permits are being worked. Expansion has
slowed from 500,000 hectares per year to
150,000 ha per year
• From 2021-22 plantation prices and palm
oil prices will have to rise much higher
 Conclusion
• Next Speech Nov 15 at CHINA conference
in Guangzhou

• Direction of prices is UP

• GOOD LUCK & GOD BLESS