Agricultural products: Horse palm production resumed in June, and it is concerned whether Indonesia can reduce taxes

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In the June MBE report, Malaysia's palm oil production is in the lower edge of the forecast, overall slightly lower than expected, export performance is less than expected, domestic actual consumption is high, and the final inventory growth rate is low, and the report is more favorable.

At present, the market pays more attention to the release of Indonesian inventories, the price of palm fruits at the raw material end in some areas has fallen below the cost line, and the effect of reducing the cost of palm oil in the medium and long term has gradually been lost, and the recent rebound in the spot price of crude palm oil in Indonesia and the trend of palm oil shock in the inner plate are also affected to a certain extent by the above. In the later period, the Indonesian government could reduce tariffs at historically high levels and cede import profits from demand countries, but it would also have an impact on the disk and spot.

At this stage, the price of palm oil in Indonesia is low enough to require biodiesel production subsidies, and there are additional production profits, so it is also possible for Indonesia to reduce the export tariffs of palm oil, and will not have a greater impact on the production of biodiesel that previously relied heavily on palm oil export taxes.

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01 In June, the resumption of palm oil production in Malaysia was less than expected

Malaysia's production in June was 1.545 million tonnes, up 5.76% month-on-month and down 3.8% year-on-year, and although production continued to increase month-on-month from March onwards, it was finally less than the 1.61 million tonnes produced in the same period in 2021.

Cumulative production from January to June was 8.27 million tonnes, down from 8.36 million tonnes in the same period in 2021. Cumulative year-on-year growth fell into negative for the first time, while the cumulative production from January to May was flat in the same period in 2021.

By region, production growth in East Malaysia (Sabah and Sarawak) in June was lower than that in West Malaysia (Peninsula in Malaysia). According to the Climate Prediction Center of the National Oceanic and Atmospheric Administration, there was an improvement in rainfall in West Malaysia in June compared to May, while the improvement in East Malaysia was limited.

Malaysia's palm oil exports in June were 1.19 million tonnes, down 13% month-on-month, greater than the monthly average of 4% in the same period of history, and a 16% decrease year-on-year assumption, on the one hand, Indonesia accelerated the impact of exports, on the other hand, India issued a duty-free export quota for soybean oil and sunflower oil.

From January to June, the cumulative export was 7.12 million tons, a cumulative increase of 1.08% year-on-year, and the cumulative export growth rate gradually slowed down.

Crude palm oil exports of 220,000 tonnes in June, down from 400,000 tonnes in May and also down from 380,000 tonnes in the same period in 2021. Exports of refined palm oil in June were 970,000 tonnes, slightly lower than the 980,000 tonnes in May and well below 1.04 million tonnes in the same period in 2021.

China imported 96,000 tonnes of palm oil from Malaysia in June, up from 85,000 tonnes in May. India imported 170,000 tons, significantly lower than the 310,000 tons in May, and the EUROPEAN Imports of 1.236 million tons, down from 1.39 million tons in May.

At the end of May, India announced that it would be exempt from taxes on the 2 million tons of sunflower oil and soybean oil it imported each year, which would be detrimental to palm oil imports, while India imported mainly crude palm oil, and the total tariff of 5.5% was lower than 13.75% of refined palm oil, so malaysia's crude palm oil exports finally fell more in June.

Apparent domestic consumption of palm oil in Malaysia was 280,000 tonnes in June, up from 270,000 tonnes in May and also up from 260,000 tonnes in the same period in 2021. From January to June, the cumulative consumption of palm oil was 1.59 million tons, a year-on-year decrease of 4%. In terms of biodiesel, the cumulative production from January to June was 340,000 tons, higher than 280,000 tons in the same period in 2021, so food consumption was weaker.

Recently, the Malaysian Inflation Task Force (FATF) instructed the Malaysian Palm Oil Board (MPOB) and other relevant agencies to approach 22 edible oil producers to study ways to reduce the price of edible oil. The Ministry of Domestic Trade and Consumer Affairs ensures that the supply of 60,000 tons of edible oil will not decline, and the supply is sufficient nationwide, but the price of subsidized edible oil is RM2.50 per kilogram, while the current price of palm edible oil is RM8 per kilogram.

Malaysian palm oil stocks were 1.66 million tonnes at the end of June, up 140,000 tonnes from May and up from 1.61 million tonnes in the same period in 2021, with inventories at a relatively low level.

02 Pay attention to whether Indonesia will reduce taxes

Recently, the Indonesian government is relaxing export controls and raising palm oil export quotas. The ratio of domestic market obligations (DMOs) to exports fell to 1:7 from 1:5 before, but Indonesian palm oil stocks remain high, estimated at 8.5 million tonnes at the end of June. But Indonesia is still facing a shortage of vessels, with the Indonesian Palm Oil Entrepreneurs Association (Gapki) claiming that so far, palm oil exports have not been smooth because the availability of vessels is still small. Gapki's secretary-general, Eddy Martono, reported that exporters are still struggling to acquire vessels that carry exported cargo because of the CPO export ban that led to ships being used to transport crude oil from Russia.

Exports are not smooth, Indonesia wants to reduce the pressure on palm oil inventory by increasing domestic consumption, plans to implement the B35 biodiesel plan from July 20, this year's Indonesian B35 project will absorb an additional 727804 kiloliters of biodiesel, the annual consumption will increase to 10.88 million, so that it will consume more than 100,000 tons of palm oil per month, and the effect is relatively limited.

The cost price of Indonesian palm oil to the mainland port is determined by FOB, importing country tariffs, value-added tax, exchange rate and port miscellaneous fees, etc., and the current domestic imported palm oil tariffs and value-added tax are relatively stable, port miscellaneous fees will not change significantly, even if the fluctuation of the exchange rate on the overall cost in the short term is also limited, and FOB is determined by the Indonesian domestic palm oil spot price and tariffs.

Recently, the price of palm fruit in some parts of Indonesia has fallen below the cost line, which will hit the enthusiasm for harvesting, so the effect of the decline in the price of palm fruit at the medium and long term raw material end to reduce export costs will gradually be lost. In order to solve the high inventory pressure, the Indonesian government may reduce export tariffs and give up import profits from demand countries, the current export tariffs on Indonesian palm oil are at the highest level in the same period in recent years, in addition, if you are not willing to wait for approval to implement the quota under the DMO, you can pay an additional $200 / ton of special export tariffs before the end of July.

The Indonesian HIP Biodiesel Price Index subtracts the HIP Diesel Price Index to obtain the subsidy amount, and the HIP Indonesia Biodiesel Price Index in June was 13033 IDR/L, while since the Indonesian Ministry of Energy and Minerals has not updated the HIP Diesel Price Index, only other data can be referred to.

According to the data on the globalpetrolprices website, the current Indonesian domestic diesel price is in 19460 IDR / liter, higher than the June biodiesel price index, so at this stage, indonesia's domestic palm oil prices are low enough to not need biodiesel production subsidies, there are additional production profits, so Indonesia's reduction of palm oil export tariffs is also possible, and will not have a greater impact on biodiesel production that previously relied heavily on palm oil export taxes.

This article originated from Shenyin Wanguo Futures