The Slowdown of Palm Oil Production and the Impacts on Global Supply, Demand and Prices of Major Vegetable Oils in 2016

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1 Thomas Mielke, The Slowdown of Palm Oil Production and the Impacts on Global Supply, Demand and Prices of Major Vegetable Oils in 216 POC 216, Price Outlook there somebody Conference, to pick Shangri-La me up Hotel, tomorrow Kuala at Lumpur, the airport Thomas Mielke, ISTA Mielke, Oil World, Global Market Research on Oilseeds, Oils and Meals Company Profil and Services ISTA Mielke GmbH publisher of OIL WORLD - was founded in 1958 ISTA = International STatistical Agricultural Information Leading private authority for global research and market analyses for oilseeds, oils & fats and oilmeals Independent, not involved in trading, unbiased information there somebody to pick me up tomorrow at Providing monthly the airport and quarterly world supply and demand balances Daily, weekly and monthly publications. Now also a Chinese Report! We are also providing individual studies and customer support If I can be of any assistance to you <Thomas.Mielke@oilworld.de> 1

2 Thomas Mielke, Prices of most commodities plummeting to multiyear lows in early 216 They may have reached their bottom last month Also: - Economic slowdown - High geopolitical risks - Financial uncertainties - Equity markets down in early 216 But vegetable oil prices have escaped the bearish trend Palm oil prices have bottomed first. Indonesian PO up $ 2 since August Also soy oil rising, while meal is on bearish trend Daily Prices of Soya Oil & Palm Oil (US-$/T) Soybean oil, Argentina, fob Palm oil crude, Indonesia, fob Jun Jly Aug Sep Oct Nov Dec Ja16 Feb Mar Daily prices from 1 June 215 until 7 March 216 2

3 Thomas Mielke, Price of palm oil and other veg. oils are divorcing from the trend of crude oil But are NOT totally immune to the price plunge of Brent and WTI to a 12-year low of less than US $ 3 per barrel in Febr But recovered to US $ on March Daily Prices of Palm oil & Gas Oil (US-$/T) ICE Gas Oil (Spot) Crude palm oil, cif Rott. Ja15Feb Mar Apr MayJun Jly AugSep Oct Nov Dec Ja16 Daily prices from January 215 until 7 March 216 Feb Monthly Prices (US-$/T) 15 RBD palm olein, fob Ma laysia Soya oil, Arg., fob Crud e mineral oil 1 Ja3JaJa5Ja6Ja7 Ja8Ja9Ja1Ja11Ja12Ja13Ja1Ja15Ja16 Monthly prices from Jan 23 until 7 M arch 216 High price competitiveness in the energy sector Energy use of veg oil only where mandates are enforced 3

4 Thomas Mielke, The price-elastic veg. oil demand for energy has disappeared Biodiesel exports Indonesia Argentina total Mn T!! More palm oil & soya oil exports pressuring on the world market BIODIESEL: World Production by Country ( Mn T ) J a n u a r y / D e c e m b e r 216F EU * 11.6* 12.* U.S.A *.9* Argentina * Brazil * Colombia....53* Singapore...73*.71* Indonesia... 2.* Malaysia....6* * Thailand.....9*.92* * Oth. ctries * 2.8* 2.9* 2.66* 2.2 Total * Change (in Mn T ) +1.3* World Production of Biodiesel (Mn T) : Indonesia +1. Mn T?? Brazil +.3 Mn T??

5 Thomas Mielke, PALM OIL: World Consumption, by Category Jan/Dec 215 total: 61.2 Mn T.2 Mn (71.9%) 9.7 Mn (15.8%).9 Mn (8.3%) 2. Mn (%) Food use Chemicals Other (animal feed, etc.) Energy (biofuels) Biodiesel Use of Major Feedstock (Mn T) 1 Palm oil 8 6 Soya oil Rape oil 2 Used oil Tallow

6 Thomas Mielke, World Production of 17 Oils & Fats 215/16F Mn T 1991/ Mn T Palm Oil 29,9% Soya Oil 2,9% Palm Oil 1,2% Rape Oil 11,% Soya Oil 2,1% Sun Oil 9,9% Rape Oil 12,3% Sun Oil 7,5% Others/An.Fats 2,7% PKO&CNO 5,2% Others/An.Fats 39,3% PKO&CNO,7% Production Deficit in Palm Oil PALM OIL : World Production Global Palm Oil Outlook in Oct/Sept 215/16 (in Mn T): Production -.2 (vs +2.1) Open stock +1.3 (vs +.7) Supplies +1.1 (vs +2.8 Mn) Annual Change (Mn T) -1 1/2 3/ 5/6 7/8 9/1 11/12 13/1 15/16F O c t o b e r / S e p t e m b e r 6

7 Thomas Mielke, PALM OIL : Production in Key Countries (Mn T) Palm Oil Outlook in 216 (in Mn T): Indonesia 33. vs. 33. in 215 and 31. Mn in 21 Malaysia 19.7 vs in 215 and in Malaysia Indonesia J a n u a r y / D e c e m b e r PALM OIL: World Production (Mn T ), Yields (T/ha ) and Mature Area (Mn ha P r o d u c t i o n Y i e l d s Mature Area 216F F F 215 Indonesia 33.* 33.* 31.* 28.82* 3.62* 3.87* 9.12* 8.63* Malaysia 19.72* *.18*.95*.78* C&S America.3* 3.83* 3.* 3.26* 3.17* 3.1* 1.27* 1.22* Oth ctrs. 5.8* 5.31* 5.23* 5.27* 1.99* 1.99* 2.76* 2.67* WORLD 62.23* 62.5* * 3.61* 18.1* 17.3* 7

8 Thomas Mielke, Major Oils : World Exports (Mn T) Palm Oil Soya Oil Sunflower Oil Rapeseed Oil /1 3/ 6/7 9/1 12/13 15/16F World exports of major veg oils doubled in past 11 years. Avg annual growth: Palm oil Mn T Soya oil +.22 Mn T Sun oil +. Mn T Rape oil +.27 Mn T oils Mn T Major Oils : World Exports (Mn T) Change from year ago Palm Oil 1y-avg. Palm Oil Oils (a) 1y-avg. Oils 2/3 /5 6/7 8/9 1/11 12/13 1/15 1/2 3/ 5/6 7/8 9/1 11/12 13/1 15/16F (a) Palm oil, soya oil, sunflower oil & rapeseed oil Below-average growth in palm oil exports means also a much below-normal increase in total veg. oil exports 8

9 Thomas Mielke, 17 OILS & FATS: Exports of Major Countries (Mn T) Indonesia 15 there somebody Malaysia to pick me up tomorrow at the airport 1 Argentina 5 U.S.A. Canada Ukraine 9/95 97/98 /1 3/ 6/7 9/1 12/13 15/16F Outlook in India Alarming Trend! INDIA: Oilseed Crops and Imports of Oils (Mn T) 99/ 1/2 Crops 3/ 5/6 7/8 Imports of Oils 9/1 11/ /1 15/16F 9

10 Thomas Mielke, INDIA: Imports of 6 Oils (1 T) Oct/Dec J anuary / December Soybean oil Sunfloweroil Rapeseed oil Palm oil Palmkern oil Coconut oil Total World palm oil exports increased steeply to 7.8 Mn T in 215 (up 3.2 Mn), of which to India 9.5 Mn T (up 1.5 Mn) India s rising dependence on veg. oil imports INDIA: Domestic Supply & Demand and Imports of 17 Oils & Fats (MnT) Domestic Disappearance Domestic Oil & Fat Output /1 3/ 6/7 9/1 12/13 15/16F O c t o b e r / S e p t e m b e r INDIA: Imports of 17 Oils & Fats (Mn T) Others Soya oil Palm oil /2 3/ 5/6 7/8 9/1 11/12 13/1 15/16F /1 2/3 /5 6/7 8/9 1/11 12/13 1/15 1

11 Thomas Mielke, Global Production of 1 Oilseeds 215/ Mn T Soybeans 61% 1 Oilseeds Mn T India 6% China 8% Argentina 12% Other 3 Oilseeds 2% Brazil 2% Copra & Palmkernels % Canada & U.S.A. 27% Rapeseed 12% Sunseed 8% Groundnuts 5% Cottonseed 7% C.I.S. 7% EU-28 6% Other ctries 1% Production of soybeans has increased much faster than that of other oilseeds Most of which in South America and the USA Other oilseeds output down a combined 12.2 Mn T in 2 years to 15/16 1 Oilseeds: World Production (Mn T) Soybeans Other 9 oilseeds 9 97/98 99/ 1/2 3/ 5/6 7/8 9/1 11/12 13/1 15/16F 11

12 Thomas Mielke, World soybean stocks are likely to rise to a new record of 9 Mn T at the end of this season (up 3) Soybeans have probably not seen their price lows yet So yb e an s: W orld Sto ck s as o f end -A ug u st (M n T) F Soybeans: World Production and Consumption (Mn T) 15/16 1/15 13/1 12/13 11/12 Production Consumption Stock change S o y b e a n s : W o r l d S t o c k s a s o f e n d -A u g u s t (M n T ) F 12

13 Thomas Mielke, SOYBEANS: Output in South America ( Mn T ) 15/16F 1/15 13/1 12/13 11/12 Brazil * 97.* Argentina 58.* 6.* 51.* 7.5* 39.8* Paraguay. 9.2* 8.6* 9.* 8.5*.* Bolivia * Uruguay.. 3.3* 3.* 3.35* 3.2* 2.5* Total * Arg Government made various reform steps in agriculture and trade Big soybean crushings and exports of soya oil and meal in Jan/Mar 16 ARGENTINA : Soybean Crushings & Product Exports (Mn T) Feb Jan Jan/Feb Crushings Soybeans * * 3.9 Exports Soybeans *.1.5*..11*.5 Soya oil *.2.8*.26.9*.5 Soya meal * * * 3.38 Boost in grain sowings in 16/17 at expense of soya! 13

14 Thomas Mielke, 1 China 9 Rest of world Imports of Soybeans (Mn T) 95/96 97/98 99/ 1/2 3/ 5/6 7/8 9/1 11/12 13/1 15/16F 9/95 96/97 98/99 /1 2/3 /5 6/7 8/9 1/11 12/13 1/15 O c t o b e r / S e p t e m b e r World soybean trade has quadrubled in the past 2 years (from 32 to 132 Mn T) China absorbs 62% of world soybean imports Also other countries raised imports CHINA: Domestic Use of Oils & Fats Domestic Use, Mn T (y1) Annual Change, Mn T (y2) there somebody to pick me up tomorrow at the airport 89/9 91/92 93/9 95/96 97/98 99/ 1/2 3/ 5/6 7/8 9/111/12 13/1 15/16F 9/91 92/93 9/95 96/97 98/99 /1 2/3 /5 6/7 8/9 1/11 12/13 1/15 O c t o b e r / S e p t e m b e r

15 Thomas Mielke, 1 Oilseeds : World Crushings (Mn T) Soybeans 9 other seeds /1 3/ 6/7 9/1 12/13 15/16F O c t o b e r / S e p t e m b e r Record drop of 5.8 Mn T in crushings of 9 other seeds in 215/ OILS & FATS: Production Change From Year Ago in Mn T 5/6 7/8 9/1 11/12 13/1 15/16F /5 6/7 8/9 1/11 12/13 1/15 O c t o b e r / S e p t e m b e r Soya oil output rises from.5 Mn T in 13/1 to 51.3 Mn T in 215/16 (up 6.8 Mn T or +15%) Soya oil share recovers to 2.8% in 15/16 from 22.2% in 13/1 World palm oil output 61.8 in 15/16 against 59.9 Mn T, +1.9 Mn / +3% OILS & FATS : World Production (Mn T) 9 Other oils Sun oil Animal Fats Rape oil Palm oil Soya oil 9/95 97/98 /1 3/ 6/7 9/1 12/13 15/16F 15

16 Thomas Mielke, 35 CBOT: Daily Soya Meal Futures ($/ST) 37 CBOT: Daily Soya Oil Futures (c/lb) Soya Oil May 216 position 5-day moving average Soya Meal May 216 position 5-day moving average Jun15 Jly Aug Sep Oct Nov Dec Jan16 Feb Mar Daily futures from 1 June 215 until 7 March Jun15 Jly Aug Sep Oct Nov Dec Jan16 Feb Mar Daily futures from 1 June 215 until 7 March 216 Soya oil to be relatively firmer than soybeans and meal Soya oil price increase likely to be resumed Soya oil - > crush margin Soya meal may fall to new contract lows CBOT: Daily Indices of Soybean Complex 26 August 215 = 1 Soya Oil May 216 Soybeans May16 A trend which is likely to continue in months ahead Soya share rising to -2% 95 9 Soya Meal May Aug Sep Oct Nov Dec Ja16 Feb Mar Daily indices from 26 Aug 215 until 7 March

17 Thomas Mielke, 17 oils & fats in Oct/Sept 15/16: 17 OILS & FATS: Surplus/Deficit of Output vs. Usage Mn T Surplus 3 Production deficit Declining stocks Appreciating prices Deficit -2 1/2 3/ 5/6 7/8 9/1 11/12 13/1 15/16F 17 oils & fats in Oct/Sept 15/16: Production only +2.7 Mn Total consumption growth to accelerate to 5.7 Mn T Recovery in biodiesel, driven by Indonesia 17 Oils & Fats: World Output & Consumption (Mn T) 15/16F 1/15 13/1 12/13 11/12 Production Consumption for energy other uses Stock change Strong food demand 17

18 Thomas Mielke, Demand drivers in Oct/Sept 15/16 are India and Indonesia with growth in Mn T: India +1. Indonesia +1.2 China +. Other Asia +.9 America +1.1 European Union -.2 C.I.S. +.2 Africa Oils & Fats: World Output & Consumption (Mn T) 15/16F 1/15 13/1 12/13 11/12 Production Consumption for energy other uses Stock change While global soybean supplies are ample and stocks increasing further this season, Oils & fats are tightening and stocks declining 22, 2, 18, 16, 1, 12, 1, 17 OILS & FATS Annual Stocks / Usage Ratios (%) Palm Oil Sun Oil Soya Oil 17 Oils/Fats 8, 1/2 3/ 5/6 7/8 9/1 11/12 13/1 15/16F 18

19 Thomas Mielke, Price setback of the past weeks will be reversed. Prices dropped, partly because of a slowing down of palm oil exports: Oct/Dec 13.3 Mn T (+.7 Mn) Jan/Mar 9.6 Mn T (-. Mn) Apr/Sept 2. Mn (-.7 Mn) MALAYSIA: Crude Palm Oil Futures Close First position in Malaysian Ringgit/T Jan15 Mar AprMay Jun Jly Aug Sep Oct Nov Dec Jan16Feb Prices from January 215 until 7 March 216 Price setback of the past weeks will be reversed. The extent of the recovery will depend on: - Palm oil production and stocks in March & April, - the buying activity of the consuming countries, - biodiesel developments Palm oil futures are seen to recover to 27-3 Rg MALAYSIA: Crude Palm Oil Futures Close First position in Malaysian Ringgit/T Jan15 Mar AprMay Jun Jly Aug Sep Oct Nov Dec Jan16Feb Prices from January 215 until 7 March

20 Thomas Mielke, Palm oil output & stocks to decline from last year in Jan/June 216 Palm oil prices jumped to US $ 6 in Indonesia. How will this affect biodiesel output? Assumption only +1. Mn. Additional upward potential of US $ -8 Or more, if new production problems occur? Daily Prices of Soya Oil & Palm Oil (US-$/T) Soybean oil, Argentina, fob Palm oil crude, Indonesia, fob Jun Jly Aug Sep Oct Nov Dec Ja16 Feb Mar Daily prices from 1 June 215 until 7 March 216 On March 7 coconut had rallied to US $ 1335 in Rotterdam and Palmkern oil to $ 18, while crude PO $ 665. I consider lauric oil prices overvalued and expect declining premiums against PO Demand response. Looking for substitutes. Daily Prices of 3 Oils in Rotterdam (US-$/T) Coconut oil,phil/indo,cif Rott Palmkern oil, Mal./Indo., cif Rott. Palm oil crude, cif N.W. Eur Jly1 Sep Nov Jan15 Mar May Jly Sep Nov Ja16 Daily prices from July 21 until 7 March 216 2

21 Thomas Mielke, I forecast prices to reach till June or July in US $ in Rotterdam: Crude palm oil 7-75 Palmkern oil 1-15 Coconut oil Daily Prices of 3 Oils in Rotterdam (US-$/T) Coconut oil,phil/indo,cif Rott Palmkern oil, Mal./Indo., cif Rott. Palm oil crude, cif N.W. Eur Jly1 Sep Nov Jan15 Mar May Jly Sep Nov Ja16 Daily prices from July 21 until 7 March 216 About 9 Mn T of Palm Oil Required in the Year 225 PALM OIL : World Production by Major Countries ( Mn T ) Forecasts A c t u a l D a t a Production 225F 22F Malaysia 25.5* 23.* Indonesia 9.* 1.5* 33.* Nigeria 1.7* 1.2*.9* Colombia 1.85* 1.5* 1.28* Thailand 3.35* 2.76* 1.85* Oth ctrs. 8.83* 7.* 5.* WORLD 9.* 77.*

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