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1、PALM OILSUPPLY AND DEMANDOUTLOOK REPORT 2022www.cpopc.orgPALM OIL SUPPLY AND DEMAND OUTLOOK REPORT 20222021 at a glanceLike many other commodities, palm oil experienced high prices throughout 2021. Pricing had more than doubled, over the past 18 months, to a record high of US$1,213.85 a tonne in Oct
2、ober 2021. In November and December, however, prices dipped and weighed on 2021s average pricing to US$1,000 per tonne.The high prices can be arguably attributed to lower palm oil output. For the most of 2020 and throughout 2021, Malaysias Covid-19 pandemic-led border closures had starved the countr
3、ys oil palm estates of many foreign workers who had gone back to their home countries and could not enter Malaysia. The CPOPC also sees structural changes in the global palm oil supply due to a slowdown in new plantings throughout Indonesia and Malaysia since 2015. With the ageing palm tree profile
4、across both countries, the replanting programme will also temporarily limit palm oil supply in the short to medium term. As agricultural land becomes limited, oil palm replanting is key to boosting palm oil yield across Indonesia and Malaysia. It is important to replant to sustain supply because Ind
5、onesia and Malaysia produce about 85% of the worlds palm oil needs.On the other side of the globe, severe drought at Canadas farmlands in 2021 resulted in its smallest rapeseed harvest in 13 years. The lower-than-expected supply of soft oils, had induced the sharp rise in other vegetable oil prices
6、to a 10-year high, which then had a spill-over effect onto palm oil pricing. The limited vegetable oils supply, all over the world, is likely to continue into the first half of 2022. In view of the Covid-19 pandemic that restricted border crossings, analysts predict the easing of labour shortage wou
7、ld only materialise in the first quarter of 2022, and palm oil output recovery after June 2022. LMC International highlighted the global palm oil supply will only see minimal growth in the 2019-2022 period due to year-end floods and labour shortage in Malaysia.1PALM OIL SUPPLY AND DEMAND OUTLOOK REP
8、ORT 2022Production OutlookPalm oil production in Indonesia was 6.7% higher in the second quarter of 2021, gathering pace from the 1.5% growth in the first quarter, spurred by better rainfall in 2020. Output in the third quarter of 2021, however, was slightly curbed by floods in Kalimantan, which dis
9、rupted oil palm fruit harvesting. In the fourth quarter, Indonesian Palm Oil Association (GAPKI) announced production fell further. Its initial forecast of better oil palm fruit harvest in the second half of 2021 than the first, did not materialise. So, for the full-year, GAPKI revised its palm oil
10、output forecast to 46.6 million tonnes, down 0.9% from 2020. The Malaysian Palm Oil Board (MPOB) estimated that in 2021 palm oil output in the country will drop to 18.3 million tonnes from 2020s 19.2 million tonnes. Palm oil ending stocks are expected to stay below average levels of 4.0 million tonn
11、es in Indonesia and 2.1 million tonnes in Malaysia.2PALM OIL SUPPLY AND DEMAND OUTLOOK REPORT 2022Going into 2022, Indonesian palm oil output is expected to recover due to good estate management and no halt of operations supported by the absence of La Nina impact. This, however, is not the case for
12、Malaysia. Since the start of the Covid-19 pandemic in 2020, foreign workers who account for about 75% of the 500,000 harvesters employed on Malaysian palm oil estates could not return due to border restrictions. Analysts forecast Malaysias plan to bring in 32,000 foreign workers would only likely ma
13、terialise towards March 2022. Last months signing of a 5-year memorandum of understanding between the governments of Malaysia and Bangladesh to hire more workers is a step in the right direction.The second challenge is the high cost of fertiliser. Small farmers are expected to lower fertiliser appli
14、cations due to sharply increased prices, potentially reducing future years output. Fertiliser and pesticide prices have surged significantly, resulting from the supply chains disruption, higher demand, rising freight and input costs. Fertiliser prices such as nitrogen and phosphate rose by 50-80% si
15、nce mid-2021, while herbicide prices such as glyphosate and glufosinate have more than doubled, due to supply disruptions and costlier raw materials.High pricing is not the only issue as it is getting difficult to source for supplies. Thus, the sector may again suffer from low fertiliser application
16、s in 2022. Fertiliser cost is another major cost component after labour cost for oil palm producers, which is about 30% to 35% of the ex-mill cost. Companies would continue to feed their oil palm trees this nutrient despite the high price but they may not receive the ordered volume due to supply con
17、straints and uncertain shipment arrangements. Oil palm planters are highly dependent on imported fertilisers but those in Indonesia have an advantage as local urea production is sufficient to meet the domestic demand. Based on industry sources, the estimated fertiliser imports for 2021 are 60% to 65
18、% of the usual annual requirements. As the logistics bottleneck is unlikely to ease anytime soon, 2022 could see even lower fertiliser imports. Smallholders may be tempted to give less fertiliser to their trees, again. The impact of reduced fertiliser usage back in 2018 and 2019 is showing today as
19、the yield recovery is weaker than normal. As a result, Indonesia and Malaysia may not be able to deliver much output growth in 2022.3PALM OIL SUPPLY AND DEMAND OUTLOOK REPORT 2022LMC International reported that Indonesia and Malaysia are in a long La Nina period in which the Oceanic Nino Index (ONI)
20、 is more negative than -0.5. The pattern of the ONI curve since 2020 echoes that of 2010-2011, with a La Nina weakening and then returning. If 2012 is taken as a guide, La Nina should end in 2022. A rising ONI is correlated with rising output growth, and a falling ONI is linked to slowing output gro
21、wth. This is especially true for Indonesian production. El Nino is a phenomenon of dry conditions for harvesting with the benefit of the previous years rains. With La Nina, there would be twin blows from heavy rainfall at estates and El Nino drought in the following years. In view of the apparent li
22、nk between the ONI and output growth, in Indonesia, LMC International predicted there will not be much palm oil production growth in 2022. The US National Oceanic Atmospheric Administration (NOAA) predicts a 95% chance of a weak La Nina lasting through February 2022.Source: LMC International 20214PA
23、LM OIL SUPPLY AND DEMAND OUTLOOK REPORT 2022Demand OutlookThe International Monetary Fund (IMF) in its World Economic Outlook estimated the global economy grew 5.9% in 2021 and to further expand 4.9% in 2022. The economic outlook will continue to be positive led by India and China (Table 1). The lea
24、ding palm oil importers would still be China and India, the two most populous nations in the world. China is the worlds second-largest buyer of palm oil after India and imports about 6 - 7 million tonnes of this tropical commodity from Indonesia and Malaysia, every year. In 2022, Chinas palm oil con
25、sumption is expected to increase due to a lower supply of rapeseed oil and soybean oil. China is also seen to buy more palm products for its animal feed. In 2022, Indias palm oil purchase is likely to be spurred by recovery in its hotel, restaurant and catering segment (HORECA) and its governments l
26、owering palm oil import duties. Export to EU is expected to be muted in 2022, partly due to unattractive palm oil prices for biodiesel blending and early implementation of RED II by some EU member countries, thus curbing palm oil imports. The European Commissions proposed law and due diligence to re
27、quire proof that agricultural imports are not linked to deforestation, could potentially dampen palm oil sentiment.Table 1: The IMFs World Economic Outlook20192020202120222023India4.04-7.259.508.526.57China5.952.348.025.605.28Bangladesh8.153.514.606.547.20Indonesia5.02-2.073.205.946.36Pakistan2.08-0
28、.473.943.964.51Spain2.08-10.825.746.392.62Germany1.05-4.563.054.561.59Italy0.29-8.875.774.231.62Netherlands1.96-3.833.773.162.07USA2.29-3.415.975.202.18Note: In percentage (%)Source: IMF - October 2021 and GAPKI5PALM OIL SUPPLY AND DEMAND OUTLOOK REPORT 2022Table 2: Palm Oil Imports from Key Destina
29、tions2020/21 estimated imports2021/22 estimated imports(mil tonnes)(mil tonnes)India8.58.6China6.87.2EU-276.26.9Others26.127.9WORLD47.650.6Note: E Estimates as of DecemberSource: The United States Department of Agriculture (USDA) & RefinitivAccording to Refinitiv Agricultural Research, global palm o
30、il demand for 2021/22 is forecast at 50.6 million tonnes, up 6.5 % compared to the prior season (Table 2), provided there is no large-scale demand destruction.India palm oil imports are estimated at 8.6 million tonnes in 2021/22. The slight increase is boosted by the reopening of business activities
31、, multiple import tax cuts, and lifting of import restrictions on RBD palm olein. However, the upside to Indias palm oil imports is limited by its narrowing discount to soybean oil and sunflower oil. Also, the Indian government implemented stock limits on edible oils in October 2021, regulating the
32、stocks that retailers and wholesalers can carry, limiting the markets upside further. Despite higher domestic oilseed supplies (including soybean, rapeseed and groundnut) on the back of ample rainfall and planted area expansion, crushing activities have not kept up. So, lower domestic vegetable oil
33、production may potentially prompt higher palm oil imports.China palm oil imports are expected to rise to 7.2 million tonnes in 2021/22 boosted by economic recovery. There are more palm oil shipments to the middle kingdom ahead of the Lunar New Year and Winter Olympics in February 2022. However, the
34、upside could be limited in the months ahead by recent higher soybean crushing activities amid better crushing margins, which will lead to higher domestic soybean oil supplies. Also, RBD palm oleins discounts on soybean oil have been narrowing thus potentially dulling consumer buying interests.6PALM
35、OIL SUPPLY AND DEMAND OUTLOOK REPORT 2022The EU-27 palm oil imports are estimated at 6.9 million tonnes in 2021/22. Although the reopening of economies and the competitive prices of palm oil versus other edible oils will likely increase overall demand for the product in 2021/22, renewed lockdowns, f
36、ollowing the discovery of the Covid-19 virus Omicron variant, have cast doubts. The impact of the Omicron variant on the EU-27s palm oil demand is unclear, at this point.Price OutlookPalm oil industry experts forecast a tight stock situation and higher prices to run into the first half of 2022. Key
37、factors to watch are the pace at which foreign workers are allowed to return to Malaysia, the ongoing impact of massive floods at many oil palm estates in 5 states across Malaysia, high costs of fertiliser and the new COVID-19 Omicron variant that may threaten production recovery.Two months ago, at
38、our webinar titled Opportunities and Challenges for Palm Oil Producer Countries (OCOPOP)”, the majority of the speakers expected palm oil prices to remain buoyant in the first half of 2022 and trend lower in the second half. Last month, at the Indonesian Palm Oil Conference (IPOC) many market analys
39、ts also forecasted prices to remain firm, supported by a limited vegetable oil supply in the first half of 2022. While these experts were optimistic in their predictions, they differed as to when and how much the palm oil prices would fluctuate, throughout 2022.LMC International indicated that tight
40、 supplies of palm oil, rapeseed oil and soybean oil had fuelled the current high palm oil price. It cautioned palm oil prices may be moderated by rising interest rates and hesitancy by major biodiesel users. It also predicted that there would be a small drop in the Crude Palm Oil-Brent premium until
41、 all vegetable oil outputs recovered in the second half of 2022. The key potential bullish factors that will keep prices higher are weather conditions until the first quarter of 2022, a prolonged labour shortage at oil palm estates in Malaysia, oilseeds farmers holding on from selling and biofuel po
42、licies.GAPKI expects palm oil to stay above US$1,000 per tonne in the first half of 2022 and potentially for the rest of 2022. The planters association projects weaker output growth from Indonesian estates due to lack of new replanting, adverse weather and low fertiliser use. Indonesias palm oil sto
43、ck for 2021/22 is forecast to be at 3.84 million tonnes, much lower than 2020s 4.90 million tonnes.7PALM OIL SUPPLY AND DEMAND OUTLOOK REPORT 2022Palm oil trading trend in 2022 would depend heavily on the biodiesel mandate, which has been fuelling price support. The success of the Indonesian Export
44、Tax system provides significant insulation from further palm oil price volatility. This was also aided by the level of vegetable oil stocks and the markets tightness since the Covid-19 pandemic.Indonesias B30 biodiesel mandate is likely to stay for 2022 and 2023 before the green diesel or hydrogenated vegetable oil (HVO) is commercially available. The Indonesian government has raised the B30 biodiesel quota for 2022 to 10.0 million kilolitres. Earlier, in 2021, Indonesia exp