• Bloomberg reported that Indonesia will lift the export ban on crude and refined palm products from 23 May onwards. This is after considering improvements in local supply as well as the livelihood of 17mil workers in the industry.

• President Jokowi said he is confident that local cooking prices will become more affordable in a few weeks’ time. The government will also improve regulations and procedures for its palm oil export funds so that it can be more adaptive to domestic supply and prices.

• This is not a surprise as market players have been expecting the export ban to be lifted by the end of May. There are not enough storage tanks in Indonesia, especially as CPO production is expected to pick up during the peak production period in 2H2022.

• Also recently, farmers and smallholders in Indonesia have been protesting against the export ban. Palm smallholders have been affected by the plunging prices of FFB in Indonesia amid poor demand. Palm oil millers in Indonesia have been reducing purchases of FFB due to the export ban. We understand that FFB prices have fallen by 40% to 60% in Indonesia.

• We believe that CPO prices will weaken due to the increase in supply from the lifting of the export ban. Indonesian refiners and millers will be moving their crude and refined palm products from the storage tanks to be exported.

• Reuters quoted the executive director of the Indonesia Vegetable Oil Industry Association as saying that Indonesia has 6 million tonnes of storage capacity, including at ports, and domestic stocks had reached around 5.8mil tonnes by the end of May.

• We maintain our UNDERWEIGHT rating on the plantation sector. Apart from the lifting of Indonesia’s export ban, palm supply is expected to rise as foreign workers start arriving in Malaysia during the peak production period in 2H2022.

Source: AmInvest Research - 20 May 2022