China lockdowns overshadow palm oil outlook despite output slowdown (updated)

Global Palm Resources Holdings

07/11/2022 01:04

(Repeats story with no changes)

        * 
      China a disappointment for sellers -James Fry
    

        * 
      Malaysia benchmark seen at 4,500-3,500 rgt/T to
March-Mistry
    

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      Palm oil output yield downtrend "alarming" -Mielke
    

  
    By Bernadette Christina
       NUSA DUA, Indonesia, Nov 4 (Reuters) - The global
outlook for palm oil remains uncertain, with strict pandemic
policies in major importer China weighing on demand, while high
energy prices and a slowdown in output provide support, leading
industry analysts said on Friday.
    Malaysian benchmark futures  FCPOc3  earlier this year had
surged to record levels of more than 7,200 ringgit 
($1,517.07)per tonne due to top producer Indonesia's export
restrictions, which culminated in a three-week export ban late
in April.
    Prices have since come down amid concern over a global
economic slowdown and as China maintains a strict COVID-19
containment policy that has caused mounting economic damage.
    "China has been a real disappointment for sellers of
vegetable oils because the market happens to be under the
lockdown all the time," James Fry, chairman of commodities
consultancy LMC International, told participants at the
Indonesia Palm Oil Conference in Bali. 
    "I can't see this changing very quickly," he said,
contrasting it with the bright spot of top vegetable oil
importer India, which has seen purchases rise up to September.  
  
    Palm oil prices on a free-on-board basis at Indonesia's
Sumatra ports could ease to $920 per tonne from $940, Fry said.
    Malaysia's benchmark price was expected to trade between
3,500 to 4,500 ringgit ($737.46 to $948.17) per tonne in the
period from now until the end of March next year, said Dorab
Mistry, director of Indian consumer goods company Godrej
International.
    The contract closed at 4,365 ringgit on Friday.
    Mistry no longer expects palm futures to fall to 2,500
ringgit per tonne, an estimate he made in September, unless
Brent crude prices drop to $70 per barrel. Brent crude is
currently trading above $94 a barrel.
    BIODIESEL PLANS
    Meanwhile, Thomas Mielke, head of Hamburg-based analyst firm
Oil World, told the conference that global palm oil output is
seen rising by 2.9 million tonnes in the 2022/23 season, but
noted that output yield has been on a downtrend in recent years,
which he said was "alarming". 
    "This is for the first time, palm oil is at the edge of
marginal growth," Mielke said, adding output may not be enough
considering various bio-energy agendas globally. 
    All analysts were monitoring Indonesia's plan to increase
its biodiesel mandate to B40, which contain 40% palm oil, from
30% currently.
    Fry said if Indonesia implemented its B40 biodiesel mandate
in January, Sumatra's FOB prices could reach $1,080 per tonne in
June. Mielke warned that if the policy is not considered
carefully, it could cause prices volatility down the line.
    Indonesian officials on Thursday said high crude oil price
were making it more feasible to use a higher mix of palm oil in
fuel.
    Fadhil Hasan, an executive with Indonesia's Palm Oil
Association, said the government should not increase the
blending this year, or next, to avoid pushing prices higher.
    "It is going to impact domestic market prices of CPO, in
turn going to cause cooking oil prices to increase," he told
reporters.
 (Reporting by Bernadette Christina
Writing by Fransiska Nangoy
Editing by Ed Davies, Martin Petty)
 ((Fransiska.Nangoy@thomsonreuters.com;))