Post on 27-Dec-2015
1 Ganling 6th CIOC, GUANGZHOU, 12-13 NOV 2011
GLOBAL PALM OIL SUPPLY AND DEMAND DYNAMICS AND
PRICE OUTLOOK 2012
BY
A. H. LINGGANLING SDN BHD
2 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
TODAY’S PRESENTATION
FOCUS ON KEY PALM OIL SUPPLY AND DEMAND DYNAMICS AND ITS LIKELY IMPACT ON PRICE TRENDS
1. GLOBAL PALM OIL PRODUCTION AND SUPPLY SCENARIO
2. WEATHER CHANGES AND PALM OIL SUPPLY
3. BIODIESEL - EMERGING DRIVER IN THE DEMAND EQUATION OF EDIBLE OILS
4. PRICE OUTLOOK 2012
3 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
GLOBAL PALM OIL PRODUCTION – DYNAMIC SUPPLY GROWTH
FASTEST GROWING EDIBLE OIL IN THE WORLD AVG GROWTH OF 7.8% PER ANN (SOYBEAN OIL: 4.8%) LOWER GROWTH IN 2009-10, DUE MAINLY TO ADVERSE
WEATHER CONDITIONS
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E0.0
10.0
20.0
30.0
40.0
50.0
60.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
24.0 25.428.3
31.234.0
37.3 38.8
43.345.1 45.8
49.7
PALM OIL PRODUCTION GROWTH % YOY
PA
LM
OIL
(M
n T
)
Gro
wth
Y-O
-Y %
Source: Oil World 2011
AVG GROWTH: 2.5 MN T PER ANNUM )
4
GLOBAL PALM OIL PRODUCTION –KEY PRODUCING COUNTRIES
Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
GROWTH IS CONCENTRATED MAINLY IN SOUTH-EAST ASIA (89%) INDONESIA + MALAYSIA = 85% OF WORLD’S PRODUCTION INDONESIA IS THE LARGEST PRODUCER WITH 48% AND
FOLLOWED BY MALAYSIA (37%) INDONESIA OVERTOOK MALAYSIA AS THE LARGEST PRODUCER IN
2007 AND LARGEST EXPORTER IN 2009 THAILAND IS THE 3RD LARGEST PRODUCER (3%)
INDONESIA
MALAYSIA
THAILAND
NIGERIA
COLOMBIA
ECUADOR
OTHERS
0.0 10.0 20.0 30.0 40.0 50.0 60.0
48.3
37.3
3.2
1.9
1.6
0.8
6.9Source: Oil World 2011
5 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
RAPID AREA EXPANSION BOOSTS GLOBAL PALM OIL PRODUCTION AND SUPPLY
Malaysia : 3.4-4.8 mn ha Indonesia : 4.1-7.6 mn ha
Production Growth
Malaysia : 5% pa Indonesia: 11% pa
Malaysia: negative growth for two consecutive years, 2009 (-1%) and 2010 (-3%)
Indonesia: still positive growth in 2010 (+4.8%)
Sig. shift in the supply epicentre to Indonesia
Sig. impact on the supply and trade of palm oil in the world
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
-
5.0
10.0
15.0
20.0
25.0
AREA EXPANSION AND CPO PRO-DUCTION OF INDONESIA AND
MALAYSIA
HA-MYS HA-IDNCPO-MYS CPO-IDN
PL
AN
TE
D A
RE
A (
Mn
Ha
)
CP
O P
RO
DU
CT
ION
(M
n T
)
Sources: MPOB, GAPKI
6 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
PALM OIL SUPPLY DYNAMICS TO CHANGE STRUCTURALLY MOVING FORWARD?
ERA OF RAPID AREA EXPANSION MAY BE ENDINGMalaysia new planting : 2-4% (y-o-y ) since 2000Indonesia new planting : 3-4% (y-o-y) since 2009
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
-
1.00
2.00
3.00
4.00
5.00
6.00
-
2.00
4.00
6.00
8.00
10.00
12.00
PLANTING IN MALAYSIA HAS SLOWED DOWN
PLANTED OIL PALM AREAGROWTH %Y-O-Y
PL
AN
TE
D H
A -
MN
GR
OW
TH
-YO
Y %
Source: MPOB
2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.000
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
PLANTING IN INDONESIA START TO SLOW DOWN
PLANTED OIL PALM AREA
GROWTH % YOYP
LA
NT
ED
HA
(M
n)
GR
OW
TH
YO
Y %
Source: Gapki, Ganling estimates
7 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
SLOWER AREA EXPANSION TO IMPACT GLOBAL PALM OIL SUPPLY GROWTH
TABLE 1: NEW PLANTING OF 9 MAJOR PLANTATION COMPANIES FROM INDONESIA
2006 2007 2008 2009 2010
PLANTED HA 73,650 129,536 206,464 162,834 117,964
% Y-O-Y 75.9 59.4 (21.1) (27.6)
SOURCE: COMPANY DATA
COMPANIES STUDIED: FIRST RESOURCES, BW PLANTATIONS, AALI, WILMAR, SAMPOERNA AGRO, LONSUM, KAGRI, IFAR,GAR
NEW PLANTINGS IN INDONESIA HAVE SLOWED DOWN CONSIDERABLY SINCE 2009
SLOW-DOWN DUE TO: STRINGENT STATUTORY AND SUSTAINABILITY REQUIREMENTS AND A TWO -YEARS GOVERNMENT MORATORIUM ON FOREST AND PEATLAND CONVERSION- starting from 2011
SLOWER AREA EXPANSION IN INDONESIA FROM 2009 ONWARD WILL STRUCTURALLY CAP THE SUPPLY GROWTH OF PALM OIL FROM
2015
8 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
WEATHER CHANGES AND ITS EFFECTS ON PALM OIL SUPPLY
WEATHER IS ONE OF KEY DRIVERS IN THE SUPPLY EQUATION OF VEGETABLE OILS INCLUDING PALM OILS AND AN IMPORTANT CATALYST TO PRICE MOVEMENT
PAST, CURRENT AND EMERGING WEATHER PHENOMENA LIKE EL NINO AND LA NINA HAVE BEEN KNOWN TO HAVE SIGNIFICANT IMPACT ON GLOBAL PRODUCTION AND SUPPLY OF OILSEEDS AND PALM OIL
USE OF WEATHER-BASED YIELD FORECASTING AND PALM OIL SUPPLY FORECAST
9 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
HOW ADVERSE WEATHER CONDITIONS AFFECT PALM OIL PRODUCTION?
PROLONGED DRY CONDITIONS
8 T0 20 WEEKS DRY: FREQUENTLY REFER TO AS EL NINO INDUCED DROUGHT – caused moisture stress in palms
CAN AFFECT PRODUCTION: SOME 4-6 MTHS (bunch failure), 10-12 MTHS (floral abortion) AND 22-
24 MTHS (sex differentiation) AFTER ITS OCCURRENCE - lagged effect on production
CAN REDUCE PRODUCTION UP TO 30% OF NORMAL - DEPENDING ON SEVERITY
EFFECT OF LOW OR DELAYED RAINFALL ON OILSEEDS IS MORE IMMEDIATE AND SEVERE
10 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
IMPACT OF WET WEATHER ON PALM OIL PRODUCTION
PROLONGED WET CONDITIONS
8 TO 16 WEEKS OF HEAVY RAINFALL: SOMETIME REFER TO AS LA NINA INDUCED RAINS
CAN AFFECT PRODUCTION: IMMEDIATELY – disruption of harvesting and logistics, SOME 5-6 MTHS
AFTER ITS OCCURRENCE – poor pollination and fruit-sets - lagged effect on production
CAN REDUCE PRODUCTION: UP TO 15% OF NORMAL IN SEVERE LA NINA EVENT
MILD TO MODERATE LA NINA EVENTS ARE BENEFICIAL TO PALMS AND ARE USUALLY ASSOCIATED WITH HIGH
PALM OIL PRODUCTION CYCLE
11 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
0
200
400
600
800
1000
1200
Jan
Ap
r
Ju
l
Oct
Jan
Ap
r
Ju
l
Oct
Jan
Ap
r
Ju
l
Oct
Jan
Ap
r
Ju
l
Oct
Jan
Ap
r
Ju
l
Oct
RA
INF
AL
L (M
M)
MONTH/YEAR
0906 07 0805
3M -DRY
4M -WET
3M -WET
-
2,000
4,000
6,000
8,000
10,000
12,000
JA
N
AP
R
JU
L
OC
T
JA
N
AP
R
JU
L
OC
T
JA
N
AP
R
JU
L
OC
T
JA
N
AP
R
JU
L
OC
T
JA
N
AP
R
JU
L
OC
T
MONTH/YEAR
MT
/M
ACTUALPOTENTIAL
0706 0 0905
LAGGED EFFECT OF RAINFALL ON FFB PRODUCTION
WEATHER-BASED FFB YIELD FORECASTING
12
EFFECTS OF EL NINO AND LA NINA ON CPO PRODUCTION IN MALAYSIA
Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
CPO YIELD CAN DECLINE UP TO 17% IN THE YEAR IMMEDIATELY FOLLOWING THE START OF AN EL NINO EVENT
LA NINA IS USUALLY ASSOCIATED WITH A SHARP INCREASE OF CPO PRODUCTION (V-SHAPED RECOVERY)
A SHARP RECOVERY IN PALM OIL YIELD IN 2011 IS FORECASTED
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
ONI SEVERITY INDEX : EL NINO >1.0, LA NINA> -1.0
CPO PRODUCTION (MT/HA)
ON
I SE
VE
RIT
Y IN
DE
X
CP
O P
RO
DU
CT
ION
(M
T/H
A)
-10.4% 13.3% -4.2% -16.8% -2.5% -5.9%
SOURCES: MPOB, NOAA, GANLING ESTIMATE
13 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
PAST, CURRENT AND EMERGING WEATHER - POSITIVE FOR PALM OIL SUPPLY IN 2012?
Jan-0
9
Mar
-09
May
-09
Jul-0
9
Sep-0
9
Nov-09
Jan-1
0
Mar
-10
May
-10
Jul-1
0
Sep-1
0
Nov-10
Jan-1
1
Mar
-11
May
-11
Jul-1
1
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
OC
EA
NIC
NIN
O IN
DE
X (
ON
I)
SOURCE: NOAA CPC
Wet to neutral weather conditions in the previous 16 months unlikely to have any significant adverse effect on palm oil production in 2012
BOM, Australia and NOAA, USA predicted the re-emergence of La Nina
from now till 1st Q 2012 in the equatorial pacific basin - unlikely to pose a weather risk to palm oil production in 2012
Concerns that the emerging La Nina may lead to excessive dryness in South America and rains in North America – weather risk to soyabean
Re-emerging La Nina in 1st
Q 2012
EL NINO
LA NINA
14 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
PALM OIL SUPPLY FORECASTS FOR 2011-12
KEYPRODUCER
YEAR CPO(Potential)Mn tonnes
CPO(Forecast) Mn tonnes
CHANGES (Y-O-Y)
Mn tonnes
MALAYSIA 2010 17.9 16.9 (A) -0.5 (-3.2%)
2011(f) 18.4 18.0 1.1 (+6.5%)
2012(f) 18.8 18.4 0.4 (+2.2%)
INDONESIA 2010 23.3 21.9 (A) 1.0 (+4.8%)
2011(f) 24.9 23.7 1.8 (+8.2%)
2012(f) 26.7 26.0 2.3 (+9.7%)
TOTAL 2011(f)2012(f)
43.345.5
41.744.4
2.9 (+7.5%) 2.7 (+6.5%)
according to weather-based yield forecasting model
15 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
SUPPLY OUTLOOK FOR 2011/12
Palm oil production in 2011 are expected to recover fairly strongly aided by the La Nina. A sharp recovery of production was observed in the 2nd Q and 3rd Q 2011
The 22-24 months lagged effect of the last El Nino will again be felt in the last Q 2011 or early 2012 and will result
in a short term decline in palm production in both Malaysia and Indonesia
Forecast 2011 - Malaysia : 18.0 Mn T (up 6.5% y-o-y) and Indonesia : 23.7 Mn T (up 8.2% y-o-y). Total supply growth for both countries in 2011: 2.9 Mn T (7.5%)
Forecast 2012 - With good rainfall from mid-2010 to mid-2011 and the last residual El Nino effect ending in last Q 2011, the palm oil production and supply is expected to resume its normal growth in 2012 – an increase of 2.7 Mn T (6.5% y-o-y) is forecasted and with growth
coming mainly from Indonesia
16 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
IMPACT OF SUPPLY RECOVERY ON PALM OIL ON PRICES
BIODIESEL DEMAND GROWTH TO DRIVE VEGETABLE OIL PRICES
PALM OIL PRICE OUTLOOK
17 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
0
500
1000
1500
2000
2500
3000
3500
4000
Jan-9
6
Jan-9
7
Jan-9
8
Jan-9
9
Jan-0
0
Jan-0
1
Jan-0
2
Jan-0
3
Jan-0
4
Jan-0
5
Jan-0
6
Jan-0
7
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
CP
O P
RIC
ES
(R
M/M
T)
EL NINO AND PALM OIL PRICES
1997-98 2002-03 2006-07
2009-10
EL NINO EVENT IS USUALLY FOLLOWED BY A SPIKE IN PALM OIL PRICES (UP 15% -125% )
RECENT 2009-10 EL NINO: PRICE UP BY 70% TO PEAK AT RM 3962 PMT IN FEBRUARY 2011
18 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
MALAYSIAN PALM OIL STOCKS AND CPO PRICES – INVERSE
RELATIONSHIP
STOCK INCREASE TO ABOVE 2.0 MN TONNES IN SEP 2011 DUE TO STRONG SUPPLY RECOVERY - PRESSURING ON CPO PRICES
PRICES DID NOT COLLAPSE DUE TO LINKAGE TO ENERGY SECTOR AND NEW DEMAND DRIVER- BIODIESEL
3871
8
3880
8
3889
9
3899
1
3908
3
3917
3
3926
4
3935
6
3944
8
3953
9
3963
0
3972
2
3981
4
3990
4
3999
5
4008
7
4017
9
4026
9
4036
0
4045
2
4054
4
4063
40
500
1000
1500
2000
2500
0
500
1000
1500
2000
2500
3000
3500
4000
4500
PALM OIL STOCK (LHS) CPO PRICES (RHS)PA
LM
OIL
ST
OC
K (
MT
)
CP
O P
RIC
ES
(R
M/M
T)
19 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
BIODIESEL–EMERGING DRIVER FOR VEGETABLE OILS DEMAND
2008 2009 2010 2011E0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
MANDATED BIODIESEL DEMAND GROWTH
EU SOUTH AMERICA USA SE ASIA
BIO
DIE
SE
L(
MN
T)
SOURCE: OIL WORLD,OSK RESEARCH 2011
BIOFUEL FOR ENERGY SECURITY BESIDES ENVIRONMENTAL NEEDS BIODIESEL DEMAND INCREASING STEADILY SINCE 2008 INCREASINGLY USE IN MANDATORY BLENDS – EU, BRAZIL (6%) ,
ARGENTINA (7%) , USA (RFS2)
20 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
CPO PRICES LINKED TO CRUDE OIL PRICES SINCE 2007
Based on LMC study, price linkage within a band CPO usually premium to world’s crude oil prices Price differential: - USD 22/barrel to +USD 93 per barrel
1/13
/200
6
3/24
/200
6
6/2/
2006
8/11
/200
6
10/2
0/20
06
12/2
9/20
06
3/9/
2007
5/18
/200
7
7/27
/200
7
10/5
/200
7
12/1
4/20
07
2/22
/200
8
5/2/
2008
7/11
/200
8
9/19
/200
8
11/2
8/20
08
2/6/
2009
4/17
/200
9
6/26
/200
9
9/4/
2009
11/1
3/20
09
1/22
/201
0
4/2/
2010
6/11
/201
0
8/20
/201
0
10/2
9/20
10
1/7/
2011
3/18
/201
1
5/27
/201
1
8/5/
2011
-50
0
50
100
150
200
CPO PRICES CRUDE OIL PRICESPRICE DIFFERENCES:CPO vs CRUDE
PR
ICE
S (
US
D P
ER
BA
RR
EL
)
21 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
PRICE OUTLOOK CONFERENCE, KL in March 2011 – we forecasted:
FCPO PRICES MAY HAVE PEAKED AT 3967 PMT IN FEB 2011
FCPO PRICES UNDERGOING CORRECTIONS, RETRACING TO RM 3400 AND MAY TRADE
BETWEEN RM 3200-3800 PMT UNTIL MAY/JUNE 2011
PRICES MAY THEN RETRACE FURTHER TO RM 2700 PMT LEVEL TOWARDS 2ND HALF 2011
2011(F): AVG CPO PRICE OF RM 3100 PMT (2010: RM 2748 PMT)
Above forecasts have been partially fulfilled and will still hold true in the last Q 2011 with minor adjustments – average for 2011: RM 3200 PMT
22 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
RECENT FCPO PRICE TREND AND PRICE OUTLOOK - 2012
PRICE SPIKE FOLLOWING EL NINO INDUCED SUPPLY TIGHTNESS-PEAK IN FEB 2011 @RM3962 PMT (USD 1020)
PRICES FELL BY 30% TO RM 2762 PMT(USD 920) FOLLOWING STRONG SUPPLY RECOVERY AND CONCERNS ON EU AND US ECONOMIC WOES
PRICE OUTLOOK 2012: MAY BE VOLATILE AND TRADE BTW RM 2500 -3400 PMT (USD 800-1100)
23 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
CONCLUDING REMARKS1. THE RESIDUAL EFFECT OF THE LAST EL NINO (22-24 MTHS AGO) WILL
BE FELT AGAIN IN THE LAST Q 2011 AND EARLY 2012 - SHORT TERM DECLINE IN PRODUCTION AND MAY PROVIDE SOME SUPPORT TO PRICES IN THE NEAR TERM
2. MINIMAL WEATHER RISK TO PALM OIL PRODUCTION IN 2012 - PAST AND EMERGING WEATHER ARE FAVORABLE AND POSITIVE FOR PALM OIL SUPPLY
3. INCREASING DEMAND FROM BIODIESEL MANDATES - EMERGING DRIVER FOR DEMAND GROWTH
4. CPO PRICES IN 2012 MAY BE VOLATILE AND TRADE BETWEEN RM 2500-3400 (USD 800–1100) PMT WITH AN AVERAGE SIG. LOWER THAN 2011(E) OF RM 3200 OR USD 1030 PMT
5. PRICES MAY BE CAPPED BY ADEQUATE SUPPLY OF CPO IN 2012 AND WEAKER ECONOMIC GROWTH WORLDWIDE
6. PRICE UPSIDE WILL DEPEND ON WEATHER RISK ON SOYBEAN PRODUCTION IN NORTH AND SOUTH AMERICA IN THE COMING SEASON
24 Ganling 6TH CIOC, GUANGZHOU, 12-13 NOV 2011
Thank you
By: A.H.LING , Director, Ganling Sdn Bhd, Sandakan, Malaysia
Email: lahong1@gmail.com
Disclaimer:
The author has endeavored to ensure the accuracy of the data, estimates and forecasts contained in this presentation. The views expressed in no way shall be construed as guidance to trade. The author accepts no liability regarding information and forecast contained in this presentation.
Acknowledgements: MPOB, Bursa Malaysia, IPOB, Oil World, OSK Research Sdn Bhd, Plantation Companies (for rainfall data), Bureau of Meteorology Australia and NOAA, USA