• Dorab Mistry is positive on CPO prices. He said that one cannot be bearish on commodities as global economic growth is expected to be strong. As such, he is predicting that the three-month CPO futures would rise from RM2,500/tonne to RM2,700/tonne by June 2018.

• He believes that palm stockpiles in Indonesia are tight currently. By July 2018, palm inventory in Malaysia and Indonesia would be below 4.5mil tonnes. Palm inventory in Malaysia stood at 2.55mil tonnes as at end-January 2018. Overall, he forecasts CPO production in Malaysia to rise by 2.9% from 19.92mil tonnes in 2017 to 20.5mil tonnes in 2018F. CPO output in Indonesia is estimated to increase by 2.7% from 36.5mil tonnes in 2017 to 37.5mil tonnes in 2018F.

• Mistry is of the view that India's recent hike in import duties on palm products is motivated by the upcoming state elections. The import duties were raised to gain favour with farmers in two states, which would be holding elections this year. Mistry believes that India would be reducing the import duties by May 2018. As such, he has forecast that India's imports of palm products would increase from 9.5mil tonnes in 2016/2017 to 9.95mil tonnes in 2017/2018F.

• An industry expert from the EU shed light on the legislative process in the region. For the proposed ban on palm biodiesel to be implemented, it has to be approved by the EU Parliament and EU Council. The EU Parliament represents the voice of the people while the EU Council represents the voice of the member states. The proposed ban has to receive votes from 55% of the member states and 65% of the population in EU.

• Presently, discussions are ongoing among the EU Commission, EU Parliament and EU Council on the proposed ban. There is no indication as to when the EU Parliament and EU Council would be voting on the proposed ban on palm biodiesel.

• The speaker added that there are two main challenges facing palm oil in the EU. First, palm biodiesel may be banned in the EU from year 2021F onwards. Second, the ban or negative perception on palm oil may spread to the food industry. In the past five years, demand for palm oil from the food industry in the EU has dropped by 30% to 40% due to environmental and health issues. As a result, consumers have been switching from palm oil to coconut oil or sunflower oil. The speaker urged the palm industry in Malaysia and Indonesia to fight back against the anti-palm oil lobbyists in the EU.

• United Plantations said that it is not true that palm oil is the main cause of deforestation. Out of the 113mil hectares of the loss in forest linked to commodities, about 55% or 63mil hectares were attributed to the cattle industry. Soybean cultivation accounted for 13mil or 11.5% of the forest loss. Palm oil made up only about 6mil hectares or 5.3% of the loss in forest linked to commodities.

Source: AmInvest Research - 7 Mar 2018