Indonesia’s large palm oil stocks, swollen by export restrictions, will “continue to weigh” on prices for now, Sipef said, while stressing that values are already particularly competitive amid a “tight” world vegetable oil market.
Indonesia’s palm oil inventories expanded to 7.23m tonnes in May, up 150% year on year, after the country, the top producer of the vegetable oil, in late April banned exports in a bid to curtail growth in domestic cooking oil prices.
“Tanks were filled in the refineries and mills,” said Sipef, the banana-to-rubber group which produces palm oil in Indonesia and Papua New Guinea, adding that some plantations left palm fruit unharvested “to rot in the fields”.
Although Indonesia’s stocks had eased back to 6.68m tonnes as of June, after a reopening to exports – which soared by 240% month on month – supplies remain sizeable enough to undermine international values.
“At the present time, the high local Indonesian stocks will continue to weigh on the palm oil market,” Sipef said.
Nonetheless, in comments more supportive to values, the group underlined that the world vegetable oil supply picture overall “remains tight”, with Indonesia and war-torn Ukraine, historically the top sunflower oil exporter, “the only two countries that have abundant stocks”.
In all other producing nations, inventories “remain very tight”, with “almost all importing countries… operating with depleted stocks” too, Sipef said.
“The extremely high prices of the last six to nine months have certainly rationed demand and stretched pipelines to extremes.”
‘Very competitively priced’
Palm oil itself was “very competitively priced”, compared with other vegetable oils, the group added.
Best-traded Kuala Lumpur November palm oil futures, in trading down 3.3% on the day at 4,055 ringgit a tonne in Kuala Lumpur, stood at a discount of $522 per tonne, or nearly 60%, to Chicago December soyoil, on GrainPriceNews calculations.
The discount between best-traded Kuala Lumpur palm and Chicago soyoil lots entered 2022 at less than $120 per tonne, equivalent to 10.5%.
The “huge” discount of palm oil to the likes of soyoil, rapeseed oil and sunflower oil meant that “more [palm] exports are expected in the coming months”.
‘Low local selling prices’
The comments came as Sipef unveiled earnings up 45% at $67.19m for the January-to-June half.
Revenues rose by 37% to $249.8m, boosted by higher palm oil production and international prices – contrasting with depressed values in Indonesia itself, thanks to the export curbs.
“Sipef sold virtually no crude palm oil in Indonesia in May and June, due to low local selling prices for palm oil,” the group said.
However, while gross profit in palm oil near-doubled to $129.1m, that in bananas sank by 60% to $964,000, reflecting an easing in prices and volumes.
“The European banana market remained generally well-supplied by all origins, despite major disruptions in maritime logistics.”
Rubber losses doubled to $1.94m, reflecting a “very quiet” market, and the impact of a shift by Sipef towards converting these plantations to palm.
Sipef shares rose by 3.1% to E60.80 in morning deals in Brussels.