The most widely used edible oil in the world has a terrible year, while a powerful combination of factors reduces prices, from a sharp decline in oil spending to claims that the growth of plantation destroys orangutan habitats.
Comparative futures in Malaysia declined by nearly 18% this year, little as the annual decline in 2017, and prices are at its lowest for more than three years.
Used in all types of products, from chocolate to fuel, palm oil is likely to close the year at a price of 2000 RM / ton, according to a Bloomberg study this month. This compares to 2,044 rings this Friday.
The decline predicts more problems for producers in Indonesia and Malaysia who feel pressure because prices are moving around production costs. Kuala Lumpur's plantation index dropped 9.4 percent this year and is about to reach its largest decline since 2014.
These are some of the factors that reduce the price of palm oil:
Growth in production and stocks, as well as under-export, deepened stupidity in the largest producers, Indonesia and Malaysia. Demand simply is not enough to accommodate the rising supply, said Ivy Ng, regional director of agribusiness at CIMB Investment Bank Bhd. in Kuala Lumpur. Prices should be even more attractive to win buyers in India, the world's largest importer, the CEO added.
Dravab Mistys, a veteran analyst at Godrej International, says demand for biodiesel will be the most important factor determining the price next year. Market participants have an ambitious B20 mandate for biodiesel in Indonesia that requires blending conventional fuel with 20% palm biofuel to absorb delivery. Malaysia plans to put into operation its long-awaited B10 mandate in transport and other subsidized sectors as of December 1, according to a letter sent by the ministry of primary industries to oil companies and seen by Bloomberg News.
3. Commercial War
Palm oil was not spared by tensions in trade between the US and China, which led to tariffs, shook up agricultural markets, and destroyed trade flows, especially for soybeans that are digested to produce competitive oil. The uncertainty of the trade war makes investors nervous while waiting to see how vegetable oils will be affected. If the tension continues and China has problems with replacing American soybeans, buyers in this country can turn to palm oil, said Ng of CIMB.
And there are orangutans. The image of palm oil is dazzled by a negative publicity avalanche that depicts tropical oil as a destroyer of jungles and orangutan habitats, which makes governments and producers strive to improve the public image of palm oil and its marketability.
This month, Greenpeace activists were arrested after organizing a protest on a ship with palm oil ships on their way to Europe. The group also accused several participants, from suppliers of palm oil to Mondelez International Inc., of destroying orangutan habitats in Indonesia, which appeared shortly after the viral Christmas advertising against tropical oil in the United Kingdom. united.