Interest rate cycle, Heavy soft

oil supply and palm price

outlook for 2024

Mr . Nagaraj Meda,
Chairman and Managing
Director,
TransGraph consulting

4th to 6th March 2024, Shangri La hotel, KL,

Malaysia
Volatility Risks: Soy oil should become less risky to gain market share…
How much risk is each
commodity in your portfolio?
USD 40 per MT (4.21%) is
the average risk of holding
an MT of Indian SBO, which
tops the global edible oils
basket.

AR SBO and CME BO hold

2nd and 3rd ranks followed
by Indian CPO with 25 per
MT (2.75%) as 4th most
risky positions during the
last year.
 Domestic Cooking Oil Sales At HET is Profitable At Indonesia only if prices 3
comes down….and 25 dollars risk and -13 dollars refining margin
Particulars (19th Feb’2024) IDR/kg MY vs ID Refining Margins (USD/T)
MY Refining Margin $/T ID Refining Margin ($/T)

Local CPO 11970

Refining cost 400 500

400

Transportation costs 500 300

200
Distributor and others margin 1000 100 77
0 -7 -13
Cooking oil cost 13870 -100 -17

-200
Highest Retail Price for Bulk Cooking oil 15500

Jul-21

Jul-22

Jul-23
Mar-21

Mar-22

Mar-23
Nov-21

Nov-22

Nov-23
Sep-21

Sep-22

Sep-23
May-21

May-22

May-23
Jan-21

Jan-22

Jan-23

Jan-24
Profit or Loss 1630

At the current prices, refining CPO domestically and selling at the Highest Retail Price
remains profitable compared to exports. The domestic sales will turn unfavorable
only if the prices increases by another 12-15%, unlikely because of the upcoming
Soy Crop.
Thumb rule based approach….Sour thumb ???? System system
Hedging Strategies

The higher basis

risk of hedging soy
oil physical with
BMD, DCE and
CME varies…

Are you measuring

it ?
 BMD CPO Price vs. Stock Comparison Mar:1.93, May: 1.82, Dec 2.2
mln tons
MAL + INDO stocks vs. BMD CPO Price Veg Oil Origin stocks vs. BMD CPO Veg Oil Origin+Destination stocks vs.
8000 Price BMD CPO Price
8000 8000
7000
7000 7000
6000
6000
6000

BMD CPO price in MYR

BMD CPO price in MYR

BMD CPO price in MYR

5000 5000
5000
4000 4000
4000
3000
3000
3000
2000
2000
2000
1000
1000
1000 0
8.00 10.00 12.00 14.00 16.00 18.00 20.00
0
0
2.50 4.50 6.50 8.50 10.50 12.50
7.00 9.00 11.00 13.00 15.00 17.00 Veg Oil Origin +
MAL+INDO stocks in MMT Veg Oil Origin stocks in MMT Destination stocks in MMT
Relationship between Malaysia stock and prices. Malaysian P.O stocks on a stand-alone basis does not explain
Adj R2=0.275, means 27.5 % of the variability in the BMD CPO prices.
prices is explained by stock.
Ideally, it should be analyzed with a confluence of other
P-value=0.000 shows it is significant.
factors
 Time Cycles in Palm Oil Futures: What Next?

The above chart shows the Time Cycles on BMD CPO Futures. It has the periodicity of 197 weeks (+/- 7 weeks). The
ongoing Time Cycle has started form the May’20 low of MYR 1939, that has elapsed about 197 weeks since then. Taking
a cushion of 7 weeks to this periodicity, the next cyclical bottom is likely to form during March – June 2024.
VIDYA: Prices all set for a bullish BREAK-OUT?
ØVIDYA stands for Variable Index
DYnamic Average.
Ø21-Week VIDYA acts as good
support and resistance line for
the bullish and bearish trends,
respectively.
ØThe ongoing bearish trend have
honored the VIDYA line for five
times, sufficient enough times.
ØA BREAK-OUT in the coming
months, a close above MYR
4100 confirms the same.
ØWill 4100 break now upside?
 Global Macroeconomy
COMMODITY PRICE INDEXED (JANUARY 2021=100)

FALLING GLOBAL 220

Commodity Price Index Composition:
Agriculture Average Index Palm Oil

INFLATION AMID 200

180
24% weightage to agriculture, 31% to
energy, 26% to industrial metals, and

EASING AGRICULTURE
19% to precious metal prices.
160

140

AND METAL 120

100
104

COMMODITY PRICES 80

60
96 101

PAVING WAY FOR 40

Feb-19

Feb-20

Feb-21

Feb-22

Feb-23
Nov-19

Nov-20

Nov-21

Nov-22

Nov-23
Aug-19

Aug-20

Aug-21

Aug-22

Aug-23
May-19

May-20

May-21

May-22

May-23
INTEREST RATE CUTS
DURING H2’24…..
 USA inflation to gradually tread lower towards 2% target supported by favorable energy prices 9

US CPI Inflation Projections Under Different USA Unemployment Rate (%)

Assumption of Global Oil Prices 8.10
US CPI (Crude 90) US CPI (Crude 110) US CPI (Crude 70) US CPI Actuals
10.0%
5.40
8.0%
4.40 4.30
6.0% 3.60 3.70
4.0%
2.0%
0.0%
-2.0%
2015-2019 2020 2021 2022 2023 2024
Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Jul-23

Jul-24
Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-24
Average

Public Interest Burden (USD Billion)

2022 2023 2024 • UNEMPLOYMENT RATE IN THE USA
1280
Brackets represent Interest
Payment as a % of Revenue
FOR 2023 LOWER THAN 2015 TO 2019.
948
• RATE REDUCTION IS NOT A URGENT
726
24%
NEED FOR INDUSTRY AND
19% 429
18% 247
335
38% 39% 42%
CONSUMERS BUT DEFINITELY TO
7%
8%
10%
12 13 16 GOVERNMENTS WITH HIGH DEBT.
USA EU INDIA
 CHINA CHINA LEADING THE WORLD IN SHIFT TO RENEWABLE ENERGY AND
ELECTRIC VEHICLES
China Ex-China

INDUSTRY GROWTH 120%

100%
80%
70% 62%

WITH EMPHASIS ON
60%
40% 16%
20% 2%
37% 30% 38%
0% 5%

GREEN ENERGY
2019 2024 2019 2024
EV as % of Total Auto Sales Renewable capacity as % of Global

SOURCES Industry
CHINA GDP (CNY BILLION)
Construction Real Estate Others GDP
126092

OFFSETTING REAL
121021
114924

66063 70240

ESTATE SLOW
61873

-345 -5 7372
7722 7377
7874 8077 8569

DOWN IN CHINA…
+ 2049 + 406
37455 39504 39910

2021 2022 2023

 GROWTH OUTLOOK
Global Economic Growth Projections USA Fed Net Liquidity (USD Billion) S&P 500 (rhs)
Real GDP - 2010 BASE (USD 8000 5000
Real GDP Annual % Change
BILLION) 7000 4500
2022 2023 2024 2022 2023 2024 4000
6000
3500
USA 2.10 2.50 1.80 19559 20044 20413 5000
3000
Euro Area 3.30 0.50 1.10 14671 14743 14908 4000
2500
Malaysia 8.65 3.96 4.27 430 447 466 3000 2000
Indonesia 5.31 4.97 4.95 1288 1353 1420 2000 1500

OND 13

OND 14

OND 15

OND 16

OND 17

OND 18

OND 19

OND 20

OND 21

OND 22

OND 23
AMJ 14

AMJ 15

AMJ 16

AMJ 17

AMJ 18

AMJ 19

AMJ 20

AMJ 21

AMJ 22

AMJ 23
Japan 1.00 1.85 0.67 6201 6316 6359
China 3.00 5.25 4.93 13162 13853 14535
Special Bond Spending (CNY Trillion), rhs 1-Year LPR 5-Year LPR
India 7.20 7.04 6.48 3156 3379 3538
5.0% 5.0
World 3.50 2.99 2.79 97548 100466 103273 4.45
4.04 4.20
3.60 3.58 4.0
4.5%

“GLOBAL ECONOMY POISED FOR SOFT LANDING” 3.0

4.0% 2.15
RESILIENT LIQUIDITY 2.0
MODERATING INFLATION 3.5%
1.0
INTEREST RATE CUTS
3.0% 0.0
FISCAL AND MONETARY STIMULUS IN CHINA 2019 2020 2021 2022 2023 2024
 DXY Index Spot- Elliott Wave Analysis 12

DXY is likely to hold below the resistance of 105 and retreat lower to extend the ongoing weakness towards 99 by Jun’24.
 USDMYR Spot- Elliott Wave Analysis 13

USDMYR is likely to hold below the resistance of MYR 4.81 on any gains and retreat lower subsequently towards MYR 4.56 by
Jun’24.
 USDIDR Spot- Elliott Wave Analysis 14

USDIDR is likely to hold below the resistance of IDR 15900 on any gains and retreat lower subsequently towards IDR 15150 by
by Jun'24.
 Crude oil supplies on the rise despite the output cut measures 15

Global Crude oil supply overview OPEC + nations output change (MBpd)
20.0
17.2 17.6
101.8 101.8 102.0 102.3 101.8 102.0 103.4
15.0

10.3 9.7
10.0 9.0 9.3
67.0 67.4 68.5 68.8 68.2 68.1 68.8
5.0

0.0
Saudi Arabia Rest of OPEC Russia
34.9 34.6 H1 2023 H1 2024
34.4 33.5 33.6 33.7 33.9
USA, Brazil & Canada output change (MBpd)
JFM-23 AMJ-23 JAS-23 OND-23e JFM-24p AMJ-24p JAS-24p
14.0 12.7 12.9
OPEC Non-OPEC supply Global supply
12.0
10.0
• OPEC + cuts are effectively only Saudi Arabia’s 8.0
5.6 6.0
6.0
cuts 4.0
3.9 4.3

2.0
• Sharp rise in non-OPEC countries output 0.0
keeping the supplies ample USA Brazil Canada

H1 2023 H1 2024
 Strong Crude oil demand growth – markets to revert to surplus in JAS’24 16

Global Crude oil demand overview Global Crude oil SnD Balance (in MBpd)
1.85
100.0 101.6 102.8 102.8 101.7 102.3 103.0

0.48
54.9 55.9 56.6 56.6 56.3 56.6 57.0 0.16 0.16

-0.28
-0.44
-0.77
JFM-23 AMJ-23 JAS-23 OND-23e JFM-24p AMJ-24p JAS-24p
45.1 45.7 46.2 46.2 45.4 45.7 46.0
OECD Commercial Crude Oil & Its Derivatives Stocks
2916
JFM-23 AMJ-23 JAS-23 OND-23e JFM-24p AMJ-24p JAS-24p 2815 2818
2759 2735 2746
OECD demand Non OECD demand Global demand
2604
67
• Demand growth mainly driven by non-OECD 60 59 60 62 61
57
region increment
• Crude oil & products stock build-up over the Mar-21 Sep-21 Mar-22 Sep-22 Mar-23 Sep-23 Mar-24

last year to keep prices under pressure OECD inventory levels (million barrels) Forward Cover (Days)
 17
Brent Crude oil 1M Futures (USD/bbl) – Price Outlook
Brent Crude Oil vs Natural Gas Price Trend
140 (USD/bbl)
Brent Crude oil 1M Futures: Prices are likely to 120

hold below the resistance of USD 85 and retreat 100

lower towards USD 74 by Jun’24. 80
60
40
20
0

Nov-19

Nov-20

Nov-21

Nov-22

Nov-23
Aug-20

Aug-21

Aug-22

Aug-23
Feb-20

Feb-21

Feb-22

Feb-23

Feb-24
May-20

May-21

May-22

May-23
Brent Crude oil Natural Gas price in Crude oil equivalent terms Spread

Natural Gas prices slumped back to pre-COVID lows - Bearish

for crude oil demand in residential & commercial sector
demand
Price premium after Russia war reduced sharply as the EU
continues to import NG from Russia contrary to early
speculations.
 PO-GO Spread Indonesia
Indonesia Palm Oil – Singapore Gas Oil (PO-GO) weekly spread (USD/T)
2022 2023 2024

450 Current PO-GO spread looks attractive

compared to last couple of years.
But a price decline in crude oil towards 75
250 USD/Bbl & lower would make the spread
unattractive.
Price spread in USD/T

50 51

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
-150
Week number

-350

-550

-750
 Indonesia Biodiesel Fund Looks Sufficient for 2024
BPDPKS Fund Balance Sheet (USD Billion)
2020 2021 2022 2023 2024

Opening balance 1.14 0.66 1.79 1.44 1.63

Levy Collection 1.40 5.01 2.32 2.24 1.62

Total Revenue 2.80 5.55 4.12 3.71 3.29

Subsidy for biodiesel 1.94 3.64 2.33 1.86 2.38

Other expenses 0.20 0.12 0.40 0.24 0.48

Total Expenses 2.14 3.75 2.74 2.11 2.87

Ending balance 0.66 1.79 1.44 1.63 0.42

Assumption : - Brent crude oil prices taken at 73.5 USD/bbl or USD 540/T and local
Indonesia CPO at 660/T • In 2024, increment in the Biodiesel distribution
All figures in USD/T 2023 Average 2024 Average* along with high PoGo spread would increase the
Indonesia FOB 906 795 subsidy requirement over 2023. Ample carry-in
Levy + Duty 174 135 funds from the previous year is likely to suffice
Indonesia Local Prices 732 660 the requirement.
 At Malaysia And Indonesia Domestic Consumption Is Driven By Industrial Consumption 20

Malaysia Palm oil Consumption (MMT) Indonesia Palm oil Consumption (MMT)
Industrial Food Total Industrial Food Total

4.27 4.33
24.38
23.10
3.57 3.46 1.02 1.02 20.64
3.27 3.37 19.54 6.60
3.21
2.96 17.67 6.55
2.86 0.95
2.66 0.95 0.90 5.90
0.94 0.84 15.08 6.35
0.88 0.90 6.45
0.90 11.75
5.55
9.34 9.28
3.25 3.30 4.90
7.33 16.55 17.78
2.62 2.51 2.47 2.37 14.74
2.08 2.33 5.15 4.95 13.19
1.76 1.96 11.22
5.10 9.53
6.85
4.19 4.33
2.23

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Anticipated for 2024, industrial consumption comprising Biodiesel and Oleochemicals is

foreseen to remain stable around 3.3 MMT in Malaysia and reach approximately 17.8
MMT in Indonesia, attributed to heightened consumption levels in both Biodiesel
and Oleochemicals sectors.
 Transition of El-Nino To La-Nina In 2024 21

SST vs FFB Yield- Malaysia °C Official NOAA CPC ENSO Probabilities (Feb 2024)
100% 100%
Neutral La Nina El Nino SST Values °C 100%

90%
79% 77%
80% 75% 74%
1.8 1.9 2 1.9 70% 68% 68%
1.6 1.6
1.1 1.3 1.2
0.8 0.7 60% 55%
0.5
0.2 0.3
50%
42%
-0.1 -0.2 40%
-0.4
-0.7 -0.6 -0.8 -0.8 30%
-0.8 30% 26%
25% 24%
19% 20%
20%

10% 6%
3% 2% 2% 3%
0%
Apr-23
May-23

Apr-24
May-24
Mar-23

Mar-24
Nov-23
Aug-23

Aug-24
Jul-23

Oct-23

Jul-24

Oct-24
JFM FMA MAM AMJ MJJ JJA JAS ASO SON
Dec-23
Feb-23

Sep-23

Feb-24

Sep-24
Jun-23

Jun-24
Jan-23

Jan-24

La Nina Neutral El Nino

A transition from El Nino to ENSO-neutral is likely by April-June 2024 (79% chance),

with increasing probability of La Nina developing in June-August 2024 (55% chance).
 22
Marginal Improvement In The Palm Oil Production At Origins
Malaysia and Indonesia Acreage (M.Ha) Malaysia and Indonesia Production (MMT)
Malaysia Indonesia Malaysia Indonesia

14.99 15.30 15.56 50.10 50.80 51.50

14.46 14.59 14.62
14.05 14.33 46.47 45.28 48.09
41.41
11.26 11.20 36.90
35.34
31.78

5.64 5.74 5.81 5.85 5.90 5.87 5.74 5.67 5.65 5.63 19.96 19.92 19.52 19.86 19.14 18.11 18.45 18.55 18.66
17.32

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024* 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024*

Low acreage and enhancements in the labor situation in Malaysia is forecasted to increase
production marginally. Simultaneously, improvements in the cultivation area are anticipated to
boost Indonesian production by an additional 0.70 MMT.
 23
Palm Oil Is Staying At A Premium Over Soft Oils
FOB Spreads (USD/T)
Arg CDSBO- MY Olein (USD/T) Ukr SFO- MY Olein

700

500

300

100
0
-100

-300

-500
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24

Currently, Malaysian Olein is commanding a premium of USD 40-50/T over Argentina SBO
and Ukraine SFO. Even at the major destinations also prices are not in favor of palm oil. This
premium of palm oil over soft oils is anticipated to dampen demand for palm oil.
 A tipping point for the US Soybean Oil Market?
Parity and disparity of refined SBO at U.S for domestic vs Arg
imported SBO, USD/MT
• Currently importing SBO into US
2022 2023 2024 attracts an anti dumping duty of
200
0 45% which leads to disparity of ~
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-200
-400 -295 300 USD/T. However, if Phillips 65
-600
-800
can procure imported SBO without
-1025
-1000
-1200
duty, it shall lead to a parity of ~50
USD/T
US Biodiesel/Renewable Diesel operable production

25.00
capacities (MMT per year)
• This new feedstock supply into the
13.58
20.00 US should put downside pressure on
15.00 6.16
Chicago soybean oil as it will ease
10.00 7.97 7.32
5.00 the tightness of the US SBO market.
-
Dec-22
Apr-22

Apr-23
Feb-22

Feb-23
Oct-22

Oct-23
Jul-22

Jul-23
Mar-22

Mar-23
Nov-22

Nov-23
Aug-22

Aug-23
Sep-22

Sep-23
May-22

May-23
Jun-22

Jun-23
Jan-22

Jan-23

Biodiesel Renewable Diesel

 U.S Renewable Diesel Profitability Analysis
As of Scenario Scenario
U.S Renewable Diesel
3rd Mar 1 2 • As of3rd Mar, RD margins
D4 RIN prices (cents/gallon)
46 40 40 dropped sharply and were
D4 RIN prices (USD/T)
138 121 121 reported at -116 USD/T.
RIN Credit (USD/T)
CME Soybean Oil May Futures
235 205 205 • A zero margin will be achieved
(Usc/lb) 45 36 33 when CME SBO prices fall
CME Soybean Oil May Futures
(USD/T) 984 794 717 further towards 36 USc/lb
Processing Cost (USD/T)
250 250 250 with Crude Oil prices at 73
Renewable Diesel Cost (USD/T)
1234 1044 967 $/bbl which is a most likely
Zero Margin Renewable Diesel
Price (USD/T) 999 838 762 scenario in long term.
Crude Oil Price ($/bbl)
79.7 73 65
Diesel Price (USD/T)
883 838 762
Margin P/L (USD/T)
-116 0 0
 Cost Dynamics of UCO at China & USA
US SBO export & RSO, UCO import China UCO Exports (KMT)
trends (KMT) EU+UK Singapore US Malaysia South Korea Others
SBO exports RSO imports UCO imports 2000
4000 1500
2850
2000
1405 1000
0 170 500
2018 2019 2020 2021 2022 2023
0
2018 2019 2020 2021 2022 2023
• SBO Spot 1107 $/T • CNF Stearin/Olein 910-915 $/T
• CNF UCO from China 935 $/T • UCO FOB 875 $/T
• Impressive Margin (Gross Margin - 40 $/T)

UCO Export
Palm Olein/Stearin
Export
Any UCOME/HVO/SAF 2022 3% 2023
producer in U.S would prefer 2%
1%
to import Chinese UCO as a 3%
EU+UK 8% 3% 11% During 2023 China
feed stock compared to using 22% EU+UK
domestic SBO.
Singapore Singapore UCO exports enjoys a
US US lions share from U.S
20%
Malaysia Malaysia shifting away from EU
South Korea 19%
65% South Korea
others 45%
others
 Changing U.S Biodiesel Feedstocks & impact on CI score
CI score (Kg per Mmbtu
Input Feedstock
Co2em)
Inputs 2020 2021 2022 2023 2024F Canola Oil 53.6
Corn Oil 33.4
Canola Oil 0.57 (8%) 0.62 (7%) 0.66 (6%) 1.38 (10%) 1.62 (11%)
Soybean Oil 66.1
Tallow 45.5
Corn Oil 0.69 (10%) 1.20 (13%) 1.36 (12%) 1.60 (11%) 1.70 (11%) White Grease 39.8
Yellow Grease 39.8
Soybean Oil 3.80 (55%) 4.12 (44%) 4.76 (43%) 5.39 (38%) 5.25 (35%)

Tallow 0.17 (2%) 0.60 (6%) 0.79 (7%) 1.57 (11%) 1.97 (13%) • Over the last 4 years, SBO
White Grease 0.28 (4%) 0.31 (3%) 0.30 (3%) 0.25 (2%) 0.27 (2%)
%feedstock in Biodiesel has gone
down from 55% towards 38%
Yellow Grease 0.48 (7%) 1.54 (16%) 2.27 (21%) 2.80(20%) 2.98 (20%)
owing to higher prices.
Other (Poultry, Alcohol,
• The CI score has improved by ~ 2.5
Catalyst)
0.90 (13%) 0.91 (10%) 0.89 (8%) 1.13 (8%) 1.23 (8%)
Kg per Mmbtu over the last 5
years with scope of further
Total (mln tons) 6.88 9.30 11.03 14.11 15.01
reductions based on incentives
BioDiesel CI Score 49.76 47.75 48.37 47.90 47.25 agreed by the U.S government.
 28
Piling Global Soybean stocks build and impact on prices!!
Global soybean ending stocks(MMT) vs Annual prices (USD/T) • Global ending stocks of
GlobalSoybean E.S (MMT)
BMD CPO annual prices (USD/T)
CME Soybean annual prices (USD/T)
Arg SBO annual prices (USD/T)
Soybean are set to increase
1600 120.00 towards 110 MMT (+11
111.38 110.42
1400 100.43 101.65
MMT ), which are close to
98.78 99.07
96.8
92.05
100.00
record stock levels seen in
1200
81.62 82.61
80.00
2019.
• Any pickup in demand from
1000
67.72

800
641
60.00 destination countries would
600 511
lead to additional
40.00

400
export/crushing of these
323

20.00
available seed.
200

0 0.00
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
 Projected price trends based on CME crush margins
U.S CME Soybean net crush margins(USD/T) Crushing Revenue Share
Meal Share Oil share
160.00
140.00 70%
120.00 65%
60%
60%
100.00
55%
80.00 50%
60.00 45%
40.00 40%
20.00 38.21 35% 40%
0.00 30%

3/ 22

5/ 22

7/ 22

9/ 22

/3 2

3/ 23

5/ 23

7/ 23

9/ 23

/3 3

24
1/ 22

1/ 23
3/ 22

5/ 22

7/ 22

9/ 22

/3 2

3/ 23

5/ 23

7/ 23

9/ 23
11 023

24
1/ 22

2
2

02

20

20

20

20

20

20

20

20

20

20

20
0

0
20

20

20

20

20

20

20

20

20

20
0

/2

/2
/2

/2
2

3/

3/

3/

3/

3/

3/

3/

3/

3/

3/

3/
3/

3/

3/

3/

3/

3/

3/

3/

3/

3/

3/
/3

1/
1/

1/

11

11
11

CME Bean
(Usc/Bu)
CME Soymeal
(USD/STn)
CME
SBO(USc/Lb)
Margin
USD/T
Oil meal
ratio
• Currently, CME soybean crush
margins are reported at ~38 USD/T.
Scenario 1 1080 315 40 21.70 2.54
• Ample veg oil supplies expected in
JAS’24, CME complex prices will be
Scenario 2 1000 295 37 20.95 2.51
further suppressed with CME SBO
Scenario 3 920 280 33.5 22.37 2.39
falling towards 33 Usc/lb.
 Argentina SBO – CME SBO Basis trends
Basis Spread: Argentina FOB - CME Futures Weekly Average (USc/100Lb)
2021 2022 2023 2024 5 Year Avg
2000
1500
1181
1000
500
343
0
-500 1 5 9 13 17 21 25 29 33 37 41 45 49 53
-695
-1000
-1500
-2000
-2500
-3000
Week Number

• Considering overall supply pressure on veg oil complex in the next two
quarters, Arg SBO FOB prices are likely to fall towards ~650 USD/T (29.5
USc/lb) with CME SBO moving lower towards 36 USc/lb.
 31
SBM getting substituted by Rice and Maize/Corn based feed
INDIA CHINA
Particulars Units Maize Broken Rice Soybean China Ex-Mill feedmeal prices (CNY/T)
DDGS (Shangai) Wheat (Shanghai) SBM (Shanghai)
Grains Crushed Kg 1000 1000 1000 4700 Price Spread
~1500 CNY/T
4200
3700 3880
Feed Recovery Kg 300 150 820
3200
2700
Feed Price INR/KG 18.5 26.5 39 2200 2382
1700
Protein Content % 26 - 28 40 46 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 (4
months)

• Chinese government urged to decrease the

• DDGS production is projected to increase dependency of on soy imports and use other
by 70% from 0.79 MMT in 2022-23 MY to feedstocks like DDGS (cheaper feedstock)
• However, to maintain the prices and keep the
1.34 MMT in 2023-24 MY.
employment stable in China, government is
• The incremental production of 550 KMT planning to export the soymeal into the global
DDGS is likely to substitute the soybean market giving the tax rebate.
meal demand.
 Consumption Trends at major destinations
Total Domestic Consumption of edible oils in India (MMT) Total Domestic Consumption of edible oils in Europe (MMT)
25.00 30.00
22.19
Domestic Consumption in MMT

Domestic Consumption in MMT

21.32
19.17 23.93 24.08 23.30 23.08 23.49
20.00 18.39 18.72 3.40 25.00 22.63 22.76 22.95 22.43
17.96 17.55 17.84 17.75 3.31
2.29 2.54 2.48
2.29 2.340 3.06 3.02 20.00
15.00 9.59 10.079 10.23 9.18 9.59 10.89
9.89 9.70 9.719 10.74
10.09 15.00
8.99 9.29 8.81 9.41 7.71
10.00 8.28 7.84
10.00 6.52 6.58 6.60 6.58 6.36 4.85 4.50 4.30
6.70
5.00 5.54 2.60
5.00 4.67 4.79 4.87 4.89 4.50 4.95 2.23 2.26 2.38 2.99 2.44
5.04 5.00 2.29 2.21 2.51
1.65 2.15 2.58 2.41 2.61 2.00 1.93 2.92 3.37 3.94 4.45 5.05 5.00 5.16 4.49 4.87 5.40 5.70
0.00 0.00
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Sun Soy Palm Rapeoil Total Sun Soy Palm Rapeoil Total

Total Domestic Consumption of edible oils in China (MMT)

Sun Soy Palm Rapeoil Total
Incremental consumption is mainly
40.00
33.98 35.47 35.68 contributed by Palm oil demand in India
33.55
Domestic Consumption in MMT

33.46
35.00
30.00
29.86 29.62
31.63
8.34 8.15 8.75
30.96
8.85
8.62 & SBO demand in China with EU
8.60
25.00
20.00
8.60 8.40
5.10 6.85 6.20 6.55
8.15
5.10 5.60
6.30 remaining flattish in the past few years.
4.80 4.75
15.00
10.00 16.50 16.77 17.45 18.10 17.30 19.00
15.08 15.14 16.75
5.00
0.00 1.38 1.33 1.43 1.50 2.18 2.07 0.96 1.80 1.76
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
 Major 4 Veg-Oils Global Balance Sheet 33

ALL FIGURES SOY OIL SUN OIL PALM OIL RAPE OIL OVERALL
IN MMT 21-22 22-23 23-24 21-22 22-23 23-24 21-22 22-23 23-24 21-22 22-23 23-24 21-22 22-23 23-24

CARRYOVER 4.58 3.93 4.72 1.23 1.85 3.27 9.65 14.52 12.50 4.48 3.64 3.91 19.95 23.94 24.40

PRODUCTION 59.33 59.66 63.82 18.36 22.03 22.06 79.17 82.07 83.41 28.43 31.13 30.80 185.29 194.88 200.09

MY IMPORTS 12.41 11.85 12.57 10.31 13.12 12.83 45.93 49.40 47.55 4.16 4.86 4.83 72.81 79.23 77.79

TOTAL SUPPLY 76.33 75.44 81.12 29.90 36.99 38.16 134.75 145.99 143.45 37.07 39.62 39.55 278.05 298.05 302.28

MY EXPORTS 12.03 11.66 13.23 9.56 13.19 12.95 43.49 49.61 46.33 4.02 4.34 4.65 69.10 78.79 77.16

INDUSTRIAL CONS’N 12.54 12.42 13.56 0.98 0.99 1.01 25.76 28.87 30.42 8.21 9.11 8.99 47.49 51.39 53.98

FOOD & FEED USE 47.84 46.65 49.80 17.51 19.55 21.02 50.97 55.01 54.73 21.20 22.26 22.34 137.52 143.47 147.89

TOTAL DEMAND 72.40 70.72 76.58 28.05 33.73 34.98 120.23 133.50 131.49 33.43 35.71 35.99 254.11 273.65 279.03

ENDING STOCKS 3.93 4.72 4.54 1.85 3.27 3.18 14.52 12.50 11.97 3.64 3.91 3.56 23.94 24.40 23.25
INCREMENTAL
FOOD+FUEL 1.14 -1.31 4.29 -1.16 2.05 1.49 -3.42 7.14 1.27 -0.42 1.97 -0.04 -3.85 9.85 7.01
DEMAND
ALL FIGURES ARE IN MMT - Marketing Year – Oct to Sep
 Conclusion 34

The bullish factors such as

Flattish YoY stocks of major 4 veg oils during AMJ’24

Higher global food and industrial consumption increment of 7 MMT
Bullish Technical in VIDYA Indicator and Cycle Analysis

Could potentially prompt veg oil prices to stay higher, However, the bearish factors such
as
Surplus in Crude Oil SnD until JAS’24
Global soybean stocks approaching a record of 111 MMT
Premium of PO over soft oils
Cheaper and increasing availability of other feedstocks (UCO & Tallow) and
Surplus RIN Situation at USA to lower demand for SBO
Overall, the bearish factors would potentially remain in play during the H1 of 2024 before
the bullish factors would start to pan out during the H2 of 2024 with US Soy crop size should
be watched with caution.
 Palm Oil Price Outlook 35

BMD CPO 3M Futures, MYR/MT Malaysian RBD Palm Olein, FOB, USD/MT

BMD CPO 3M Futures prices are likely to hold below MYR 4000- RBD Palm olein prices are likely to hold below USD 900-920 zone on
4050 zone on further recovery and turn lower towards MYR 3200 in further recovery and turn lower towards USD 700 in the coming 3-
the coming 3 to 4 months, ahead of any notable recovery in the 4-months, ahead of any notable recovery in the subsequent
subsequent months. months.
 Soy Oil Price Outlook 36

CME Soyoil 1M Futures cont. USc/Lb. Argentina Soyoil FOB 1M Forward, USD/MT

Argentina Soyoil FOB 1M Fwd prices are extending weakness

CME Soyoil 1M Futures are extending weakness unfolding within
unfolding within Intermediate Wave [Z] of Primary Wave “A”. Prices
Intermediate Wave [Z] of Primary Wave “2”. Prices are likely to hold
are likely to hold below USD 900 on any recovery and extend
below Usc 46.50 on any recovery and extend weakness towards
weakness towards USD 730/700 in the coming 3 to 4 months,
Usc 40/38 in the coming 3 to 4 months, ahead of any notable
ahead of any notable recovery in the subsequent months.
recovery in the subsequent months.
 Risk if Prices were down by 15%
Actual Vs Simulated VaR
6500 0.00% Actual Vs Simulated PnL
30.00
6400 19.73
-2.00% 20.00
6300
-4.00% 10.00
6200
-5.91% 0.00
6100 -6.00%
6000 -10.00
-8.00% -20.00
5900
5800 -10.00% -30.00
Actual AVaR ('000 USD) Simulated AVaR ('000 USD) -31.02
-40.00
Actual P&L ('mln USD) SimulatedP&L ('mln USD)

Actual Vs Simulated Market Price • In a scenario where market prices were down by 15% and
750 0.00% Volatility increases by 10% is likely to affect the PnL severely
700 -5.00% leaching out all the profits.
-10.00%
650 -15.00%
-15.00% • At the same time, an anticipated increase in Volatility is likely to
600 -20.00% check any sharp drop in Risk by restricting to 5 to 6%.
550 -25.00%
Actual Market Price (USD/MT) Simulated Market Price • The above scenario suggests for increase in Hedging to offset the
(USD/MT)
sharp fall in PnL.
 Position note = Outlook + Strategy + Actual Portfolio vs Simulated +
Approvals before taking
Actual Price Outlook Position Plan

Palm Oil BMD CPO 3M Futures prices are likely Sell 28KMT in BMD
to hold below MYR 4000-4050 zone CPO June Futures
on further recovery and turn lower within MYR 4000-
towards MYR 3200 in the coming 3 to 4050
4 months, ahead of any notable
Simulated
recovery in the subsequent months.

Soybean CME Soyoil 1M Futures are likely to Hedge 25KMT around

Oil hold below Usc 46.50 on any recovery 46.5 cents. Evaluate
and extend weakness towards Usc buying Put option vs
40/38 in the coming 3 to 4 months, Collar option vs naked
Actual Vs Simulated VaR Actual Vs Simulated PnL ahead of any notable recovery in the futures in CME.
subsequent months.
6600 0% 30 19.73
6400 -2%
20 Approval Action Status
6200 -5.91% -4%
10
-6%

6000 -8% 0 Head

5800
-11.60% -10%
-12%
-10
-20
5600 -14%
Risk
-16% -30 -24.93
5400 -18%
-40 -31.02 Manager
Actual AVaR ('000 Simulated AVaR Simulated With
Actual P&L ('mln USD) SimulatedP&L ('mln SimulatedP&L with
USD) ('000 USD) increase in Hedge
USD) Increased Hedge('mln
AVaR ('000 USD)
USD)
Trader
 THANK YOU

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