The firewood plan expands demand and palm oil returns to the rising channel

Global demand improvement

According to a monthly report issued by the Malaysian Palm Oil Board (MPOB), Malaysia's palm oil production in September was 1.84 million tons, an increase of 1.15% from the previous month; exports fell to 1.41 million tons, a decrease of 18.77% from the previous month; stocks rebounded to 2.45 million tons, an increase from the previous month. At 9.27%, the recovery capacity of palm oil production was less than expected, which caused the increase in inventory at the end of the month to be lower than market expectations. Due to the Indian government's consideration of the import tariff on palm oil, the early Indian traders purchased a large amount of palm oil, which boosted the market consumption and led to a decline in Malaysian palm oil exports. However, the demand for palm oil in the Chinese and European markets is strong, making up for the gap in the Indian palm oil consumption market. According to the shipping survey agency SGS, Malaysia's palm oil exports from October 1 to 25 were 1.202 million tons, an increase of 9.0% from the same period last month. Malaysia’s palm oil exports rebounded in October, indicating an improvement in global demand and Malaysia’s palm oil stocks are expected to fall. ?

Firewood plan expands demand

The biodiesel industry has a good outlook for consumption. The Indonesian and Malaysian governments have decided to adopt a new biodiesel blending program that is expected to stimulate demand for biodiesel in palm oil producing areas. According to the oil world report, the Indonesian government said that it will implement B30 mandatory blending in January 2020. The total quota of B30 will reach 8.44 million tons, an increase of 2.6 million tons compared with 2019, plus other industry consumption, it is estimated that 2020 The total consumption of biodiesel in Indonesia is close to 9.5 million tons. At the same time, the Malaysian government decided to implement the B20 plan by 2020. By then, the proportion of Malaysian palm oil biodiesel blending will rise to 20%. It is estimated that Malaysia's biodiesel consumption will increase to 1.7 million tons in 2020, an increase of 200,000 from 2019. Tons, will offset the increase in production in 2020.

Domestic imports remain high

Domestic palm oil imports increase or push up port stocks. According to the monthly report released by the General Administration of Customs of China, China’s imports of 24 degrees palm oil in September 2019 were 450,000 tons, a decrease of 130,000 tons from the previous month, a decrease of 22.4% from the previous month and an increase of 32.35% from the same period of last year. It was 510,700 tons, an increase of 34.35% over the same period last year. Since the beginning of this year, domestic palm oil imports have increased sharply. Due to the confusing Sino-US trade negotiations and the tension between China and Canada, the risk of soybean and rapeseed imports has become more prominent. The increase in palm oil imports can make up for the supply gap between soybean oil and vegetable oil. In addition, the Malaysian palm oil export zero-tariff policy stimulated the enthusiasm of traders to purchase, coupled with the large difference between bean brown and vegetable brown, the substitution effect of palm oil appeared, and the profit margin of imported palm oil increased to further enhance the purchase of palm oil by traders. .

The decline in the import cost of palm oil and the increase in replacement demand will help the company's import profit to improve. It is expected that domestic palm oil purchases will increase in the fourth quarter. Although the demand for palm oil consumption has decreased with the temperature drop, the palm oil production area has entered the production-reduction season, and traders continue to increase their purchases under the stimulus of good profits, which will push up the port inventory. As of the end of October, the national port palm oil inventory was 559,000 tons, an increase of 124,000 tons compared with the same period of last year, an increase of 28.5% year-on-year, rising to a three-year high. Palm oil consumption has entered the low season of consumption, and the continuous increase in imports has increased the difficulty of destocking, which has led to a slowdown in domestic port inventory. And traders' import profits are still acceptable. It is expected that the arrival of Hong Kong will remain high in the later period, but the price of Malaysian palm oil is strong and domestic oils just need to hedge the negative impact of high inventory.

In summary, palm oil production continues to be affected by the dry weather and the decline in yields. The global demand for palm oil is good for the decontamination of stocks. With the boost of biodiesel policy, palm oil is basically oriented and supports the market trend. (Article source: Futures Daily).