The Slowest Ever
July 31st 2019
⏰ 1 minute read
⏰ 1 minute read
Data
Data for our palm oil industry is not that easy to get or to analyze. Especially the Indonesian data. One of the sources for planted area data is the Ministry of Agriculture. Their latest numbers which include now 2018 have just come out. Here’s what they look like & the conclusions we can draw.
Adjusted
First the bad. The Ministry occasionally adjusts their numbers if they think they missed some plantings. The adjustment comes all in one go so it looks strange. They’ve made a big adjustment which is put into 2017. The total hectares increased from 11 to 14m. This is of course ridiculous.
Slowest
But let’s forget about the magic 3m hectares. & let’s take out the other 2 one off adjustments. Then let’s look at the growth of plantations since the early 1990s & up to 2016. We can see that the growth of palm oil has been slowing down for a long time. 20 years ago 20%, by 2016 the lowest ever, just 2%.
Production
Given all the noise about palm oil plantings you might find this surprising. But it’s true. 2016 would be mature this year. If we assume mature area growth is a proxy for production, we are looking at the slowest growth on record for production growth. This is not enough to satisfy normal demand.
Price
Right now, normal demand (exclude biofuel) is clearly very weak from Europe, China, Indonesia. But imagine if demand now picks up.... the impact will have to be much higher prices. Despite the one off adjustment in hectares, this growth will slow even further. Prices will go even higher.
Data for our palm oil industry is not that easy to get or to analyze. Especially the Indonesian data. One of the sources for planted area data is the Ministry of Agriculture. Their latest numbers which include now 2018 have just come out. Here’s what they look like & the conclusions we can draw.
Adjusted
First the bad. The Ministry occasionally adjusts their numbers if they think they missed some plantings. The adjustment comes all in one go so it looks strange. They’ve made a big adjustment which is put into 2017. The total hectares increased from 11 to 14m. This is of course ridiculous.
Slowest
But let’s forget about the magic 3m hectares. & let’s take out the other 2 one off adjustments. Then let’s look at the growth of plantations since the early 1990s & up to 2016. We can see that the growth of palm oil has been slowing down for a long time. 20 years ago 20%, by 2016 the lowest ever, just 2%.
Production
Given all the noise about palm oil plantings you might find this surprising. But it’s true. 2016 would be mature this year. If we assume mature area growth is a proxy for production, we are looking at the slowest growth on record for production growth. This is not enough to satisfy normal demand.
Price
Right now, normal demand (exclude biofuel) is clearly very weak from Europe, China, Indonesia. But imagine if demand now picks up.... the impact will have to be much higher prices. Despite the one off adjustment in hectares, this growth will slow even further. Prices will go even higher.