 STRONG CPO PRICING DURING SECOND HALF OF 2024
The board of M.P. Evans Group PLC, a producer of sustainable Indonesian palm oil, is pleased to report the recent and continuing strength in the price of crude palm oil ("CPO"), the Group's main product, which will have a beneficial impact on the Group's results for 2024.
In the Group's 2024 interim results announcement on 16 September 2024, the board indicated that the Group's total crop for processing in 2024 was expected to be similar to 2023 at 1.6 million tonnes. Taking account of volumes since that date, this remains the board's expectation.
The board also stated that, having achieved an average mill-gate price for its CPO of US$777 per tonne for the first eight months of the year, there was a risk that prices could fall in the remainder of the year. This has not happened and, furthermore, CPO prices have strengthened significantly since the Group's interim results announcement in response to a tightening of global vegetable-oil supplies. As a consequence, the Group has consistently achieved mill-gate prices higher than the eight-month average such that the average for the first ten months of the year has increased to approximately US$800 per tonne. Some Group sales in November have exceeded US$950 per tonne.
This more favourable pricing environment, combined with a continued focus on cost control, means that the board expects Group revenue to be higher than that previously envisaged, and that there will be a more significant impact on anticipated profitability. |
"PETALING JAYA: Buyers of crude palm oil (CPO) are stocking up ahead of the higher export duties both in Malaysia and Indonesia, where over 80% of the world’s CPO is produced.
The increased demand, coupled with the industry’s tight supply situation, has pushed the daily price of the vegetable oil above RM4,400 per tonne this week.
From its recent low in August 2024, daily CPO price has increased by about 15%.
Amid elevated prices, market pundits like CGS International Research analyst Jacquelyn Yow and the Council of Palm Oil Producing Countries deputy secretary-general Datuk Nageeb Wahab said CPO’s price premium over soybean oil would persist.
Speaking to StarBiz, Yow said the increase in Malaysia’s CPO export duty and the significant hike in Indonesia’s export duty and levy for November had prompted higher purchases.
Effective Nov 1, the revised Malaysian export duty schedule will include additional export taxes involving CPO prices of between RM3,601 and RM3,750 per tonne that is subjected to an export duty rate of 8.5%.This is followed by RM3,751 to RM3,900 at 9%; RM3,901 to RM4,050 (9.5%) and more than RM4,050 (10%).
According to Plantations and Commodities Minister Datuk Seri Johari Abdul Ghani, the increase in CPO export tax was to encourage local downstream refining operations.
Yow said the higher export duty would be a “slight negative” for the planters.
“With the current CPO prices at about RM4,000 per tonne level, the export duty would increase by about RM60 per tonne as compared to the previous duty structure,” she said.
The new export duty structure and the minimum wage hike to RM1,700, in Yow’s opinion, would offset the “slight positive” arising from the announced increase in the threshold of the windfall profit levy on the production of fresh fruit bunches.
Budget 2025 proposed that the threshold for Peninsular Malaysia be raised from RM3,000 to RM3,150, and for Sabah and Sarawak from RM3,500 to RM3,650,
On Indonesia, Yow said the sum of CPO export duty and levy is expected to increase by US$54 per tonne in November.
Yow also noted that the lower-than-expected production in Indonesia has supported the recent spike in CPO prices.
In addition, she said CPO prices are lifted following China’s easing of economic policies and geopolitical tensions in the Middle East that drove crude oil prices higher, which, in turn, led to increased demand for vegetable oils.
Meanwhile, Nageeb said CPO prices of RM4,000 to RM4,500 will be a “new normal” for the industry.
Tight supply, alongside changing weather patterns and Indonesia’s transition to B40 biofuel mandate, would keep CPO prices elevated, he said.
In the near term, the upcoming Deepavali festive celebration in India will also raise palm oil demand. India is among the largest consumers of palm oil.
“We are not going to see higher palm oil production. Malaysia can only do about 20 million tonnes annually, while Indonesia can do about 50 million tonnes amid its stagnating yields.
“We anticipate CPO demand to grow 3% to 5% annually, but production volume can’t catch up.”
He also noted that for every 10% increase in Indonesia’s biofuel mandate, it will increase palm oil usage by three to four million tonnes.
This would further contribute to the shortage of CPO, said Nageeb.
Nageeb was formerly the chief executive officer of the Malaysian Palm Oil Association.
Indonesia is looking to implement a 40% mandatory biodiesel mix with palm oil-based fuel. Currently, a 35% blend is in practice.
The archipelago’s agriculture minister, Andi Amran Sulaiman, also said the government is working towards implementing B50 in the future.
CIMB Securities head of Malaysia research Ivy Ng Lee Fang said Indonesia’s B50 plan is contributing to the increase in CPO prices.
“Concerns over lower oilseeds supply with high oil content like rapeseed and sunflower seed, as well as tight palm oil supply, as Indonesia production affected by dry weather in 2023, have also contributed to the higher CPO prices.”
Ng expects CPO prices to stay firm until the supply situation improves.
“Probably, (CPO prices) will exceed market expectation of weaker fourth quarter prices. The higher CPO prices will help to offset some of the rising costs, assuming prices stay higher than this year,” she added."
Not that it matters etc. |
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