Brutalfacts06, Oil World, surplus or shortage?
However, a closer look at the Oil World data shows the 3 key issues we mentioned before are very much still there.
- First palm oil production, even though recovering,, is growing below 4% structurally & that’s close to average growth of demand for edible oil, which relies on Palm. So any year of demand growth above 4% will mean a shortage of oil.
- This means there’s a reliance on strong growth of other oils, because as you can see from he chart the gap between palm oil supply & edible oil Demand is small. If any other oil disappoints, then shortage.
- Lastly, because of higher demand here in Indonesia, export supply is now below demand. So if any other country like say China needs more oil, then shortage.
Price should rebound soon.
Brutalfacts05, why IPOC2017 was the most controversial GAPKI conference ever!
- Indonesia is now both the largest palm oil producer & consumer in the world, means less for everyone else.
- Global edible oil demand is now bigger than meal. Therefore the world needs high yield edible oil & palm oil is the highest.
- But Palm oil productivity & yields haven’t increased in 10 years, so we need more land for palm oil.
- Palm oil production is less than expected.
- Soybean has had 7 bumper harvests in a row & is unlikely to have an 8th.
- China had a loaded gun & already fired it, selling its edible oil stocks.
- By June 2018 stock levels will be the tightest ever.
- The discount to Soybean oil must go.
- Indonesian palm oil replanting will rise to 600,000 hecatares by 2021.
- New plantings in Indonesia are now only 150,000 hectares.
If palm oil consumption was the leading economic indicator then you’d be getting super bullish on Indonesia. The latest monthly report from Oil World forecasts in the next 12 momths starting October, Indonesian consumption will jump 6.3% to reach 10 million tons of palm oil. The first time any country has reached that level. Exciting times.
Many people think the risk for Palm oil demand is users switching to another oil. But which oil? Just 10 years ago there was a choice, Soy was bigger than Palm. But then Palm took over. In the last 2 years, yes the gap closed. But now it's widening again,
For edible oil demand the brutal truth is there's only one choice, Palm. Supply of Palm is structurally slowing & demand is just about to pick up,
Yesterday we met up with the great & colorful palm oil analyst Dr James Fry. As we chatted about the state of the Palm oil industry, he noted that anecdotally palm oil stocks in Indonesia are very low & asked if we know why given demand negatives for biodiesel (less this year than last) & the Indian import tax.
We said we we didn't have an exact explanation, but that (having just come back from our plantation) there was not much Palm oil in our tanks too,
Always fascinating to chat with the great & #colorful Dr James Fry on the outlook for our #palmoil me flying back from the #plantation he flying back to the ?? #ehp #eaglehighplantations #soekarnohattainternationalairport #meeting ? ? ??
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Before Palm oil supply growth was always plenty for the market. While edible oil demand growth averages 4% & ranges from 3-5%, palm oil supply was alwyas higher, until now,
As you can see average palm oil supply growth has slowed. It reached the 4% level in 2008-10, then recovered. Nows it has fallen below.
As Dr Fry noted, despite the strong growth this year, supply will be similar to 2015, i.e. on average almost no growth.
Maybe the question isn't where has al the palm oil gone, but what will happen if it doesn't come back....?
1 Look at how Indonesia has risen from last to first place in just 10 years.
2 China is much smaller than you think.
3 Demnad has been weak for 4 years, it's time for a jump back up.