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CPO PRICES PLUNGE AFTER MAHATHIR’S RESIGNATION

CPO PRICES PLUNGE AFTER MAHATHIR’S RESIGNATION
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By Charles F. Moreira, Editor

Prices of crude palm oil (CPO) listed on the Malaysian Palm Oil Board’s (MPOB) website plunged from RM2,645.00 per tonne at 4.30pm on 24 February 2020 to RM2,545.00 per tonne at 4.30pm Malaysian Time on 25 February 2020, a drop of RM100 per tonne in a day.

This sharp drop come in the wake of Prime Minister Tun Dr. Mahathir Mohamed’s submission of his resignation to His Majesty the Yang Di-Pertuan Agung on 24 February and his re-appointment as Interim-Prime Minister by the Agung that evening.

In the bigger picture, the CPO price had slid from a monthly high of RM2,885.00 per tonne on 7 February 2020 down to RM2,548.50 per tonne as of 8.30am Malaysian Time on 25 February 2020 morning.

Prior to this, the CPO price had dropped from RM2,984.00 per tonne on 24 January 2020 down to RM2,658.50 per tonne on 3 February 2020 and perked up to RM2,696.00 per tonne on 4 February 2020 after Pakistan Prime Minister Imran Khan said during his state visit to Malaysia that Pakistan would buy more palm oil from Malaysia to try and compensate for India’s curbs on Malaysian refined palm oil imports in January 2020 amid a diplomatic row.

Since then, the CPO price rose in what looks like what stock traders call a “dead cat bounce” to RM2,885.00 per tonne on 7 February 2020 before it trended downwards again.

Unlike for CPO prices, the MPOB posts daily oil palm fresh fruit bunches prices around noon on each current working day, and the FFB prices for 26 February 2020 range between RM481 and RM542 per tonne for grades A, B and C across Malaysia’s six price regions, which were down by between RM5 and RM6 per tonne from the previous day, which is not good news for large and small oil palm plantation owners.

Moreover, the MPOB website carries a Royal Malaysian Customs notice which listed the dutiable value-per-tonne of CPO exports for March 2020 as M2,982.63, which falls within 6% export duty price bracket (RM2,851 –RM3,000), with no change form 6% in February 2020. CPO and FFB prices generally rise and fall in tandem.

It appears that neither did former Minister of Primary Industries Y.B. Puan Teresa Kok nor the former Minister of Finance Y.B. Tuan Lim Guan Eng had heeded our calls to exempt CPO from export duties like the Finance Ministry did from May to December 2019.

However, this is a moot point, now that Malaysia’s Cabinet was subsequently also dissolved following Prime Minister Tun Dr. Mahathir Mohamed’s resignation.

Perhaps whoever are appointed to these ministerial posts after the current dust over who will be the Malaysia’s next prime minister and government has settled will listen.

Over in India

Meanwhile, over in India, Reuters of 20 February 2020 reported that government and trade sources had informed the news agency that India had issued import licenses for 1.1 million tonnes of refined palmolein from Indonesia.

On 8 January 2020, India had placed restrictions on the import of refined palm oil and palmolein in a move sources had told Reuters were in retaliation against Prime Minister Mahathir’s criticism of India’s actions in Kashmir and its new citizenship law.

This resumption of India’s imports of refined palmolein was believed to have been able to support Malaysian palm oil futures FCPOc3, which had corrected a fifth from a three-year high in January 2020.

On 8 January 2020, India’s Director General of Foreign Trade (DGFT) had amended the policy to regulate excessive import of refined palm oil into India and placed RBD (refined, bleached and deodorised) Palm Oil and RBD Palmolein on the “restricted list”.

Following this policy change, imports of refined palm oil require a license issued by the DGFT and it was learned that India’s Union Commerce Ministry, which oversees foreign trade, had received over 100 applications for import licences for refined palm oils.

India’s edible oil industry upset

Meanwhile, according to The Hindu Business Line of 21 February 2020, India’s domestic edible oil industry was upset with their government’s decision to allot import licences for 1.1 million tonnes of refined palm oil and requested that the government review this decision. 

The Solvent Extractors’ Association of India (SEA) had said that allowing 1.1 million tonnes of refined palm oil imports would allow a flood of refined oils into India, and the industry body had appealed to the Commerce Ministry to stop issuing further licences and review the rationale for issuing such licences which are at variance with our country’s stated objective of Make in India”.

“We are dismayed at this action which has the potential of destroying palm refining industry in the country. This is contrary to our PM’s vision of Make in India,” said SEA President, Atul Chaturvedi.

The SEA had complained that, “In the last one and half month, edible oil prices in international market as well as domestic market are showing downward trend and there is no shortage of RBD Palmolein or edible oils in the country.”

“Further, India’s duty difference between CPO and RBD Palmolein being only 7.5% will open the flood gates for import of RBD Palmolein as we have seen last year during January to September 2019 when the duty difference was just 5% for import from Malaysia. This will also have serious impact on domestic refining Industry and capacity utilisations will go down,” Chaturvedi said.

Currently, in Indonesia, RBD Palmolein is cheaper than CPO and with a higher levy of US$50 per tonne on CPO versus a lower US$30 per tonne of RBD Palmoelin, gives Indonesia great advantage to push the export of RBD Palmoelin into India.

Also, their concerns go beyond just palm oil, as the SEA had also complained that with a massive mustard crop ready for harvesting, imports of refined oil would greatly dampen prices of domestic oil seeds, and this could result in mustard selling below its minimum support price (MSP) and once again the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) getting saddled with huge stocks.

NAFED was established on 2 October 1958 to promote co-operative marketing of agricultural produce to benefit the farmers and it main members are agricultural farmers. It’s registered under India’s Multi State Co-operative Societies Act.

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