• S&P Global Platts cited sources as saying that Indonesia’s palm exporters are reaping the benefits of low export taxes and a levy waiver. Also, the widening price gap between Indonesian and Malaysian palm oil is expected to affect demand in Malaysia. A trader said that Indonesian palm oil is available at steep discounts, some as much as US$40 to US$50/tonne below Malaysian palm and the offers have been quite aggressive going into India.

• Bloomberg reported that Unilever is working with an Indonesian palm oil supplier accused of land rights abuses and environmental harm to try to fix the problems highlighted by campaign groups and address grievances of local communities. Unilever’s decision not to eject Astra Agro Lestari from its supply chain reflects differing approaches to rooting out unethical behaviour in complex supply chains. Procter & Gamble, Danone and Nestle have vowed to cut ties with Astra Agro. Colgate-Palmolive Co has asked its suppliers, Wilmar International and Cargill Inc to ensure that palm oil from Astra Agro does not enter its supply chain.

• Bloomberg cited Oil World as saying that annual palm oil production growth is expected to slow down to 2.3mil tonnes to 2.5mil tonnes by 2030F from an average growth of 2.9mil tonnes in the previous decade. Palm oil has lost its growth dynamics due to declining yields, lack of new plantings and a shortage of workers. Global palm oil output is seen at 80.2mil tonnes in the current marketing year, starting from October, compared with 77.2mil tonnes in 2021/2022E. CPO production in Indonesia is estimated to rise by 2.2mil tonnes in 2022E/2023F and just 0.4mil tonnes in Malaysia.

• Euractiv.com reported that the European yeast producers have been warned that the classification of molasses as a renewable, carbon-free feedstock for biofuel will hamper the production of yeast. The EU yeast producers are calling on lawmakers to ensure that a biofuel cap is placed on the use of molasses.

• An official with Cofalec, a trade body for yeast producers said that all of the sugar co-product, which is the raw material, would be at stake. She added that the re-classification of molasses could see Europe losing its position as the world leader of yeast production. If molasses were used in significant quantities by the biofuel industry, the EU food industry would become more reliant on China and the US to meet demand for yeast.

• The Borneo Post reported that Joseph Tek, the CEO of MPOA, has proposed that the price threshold of the sales tax in Sabah and Sarawak be reviewed due to the current high cost of CPO production. He also called for the federal government’s windfall profit levy imposed on companies in East Malaysia to be reverted to 1.5% to 3%.

• As for the impact of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on the palm oil sector, PWC said that the sector may gain less opportunities as China and India are not members. Instead, the palm oil sector is expected to be affected by the labour provisions in CPTPP.

• Bloomberg reported that sugar makers in India are signing deals with traders and exporters on optimism that the government will soon announce overseas sales quotas for the season that starts this month. Mills have so far contracted to export about 1.2mil tonnes and aim to ship as much as 8mil tonnes in 2022E/2023F. India was the top sugar exporter after Brazil in 2020/2021 with Indonesia, Bangladesh, Malaysia and Dubai among its customers.

Source: AmInvest Research - 25 Oct 2022