The price of Palm Oil rose due to Malaysian CPO export data for March 1st – March 31st 2018 increased to 1,394,973 metric ton compared to February 1st – February 28th 2018 at 1,167,908 metric ton.
Trade war between the United States and China escalated. Last week, China published 106 new products that will be subjected to import tariffs of 25.00%. Some of the products become the main commodity of Indonesian import from US, such as soybean oil, cotton, propane and butane liquid. Soybean oil is a substitute product of Crude Palm Oil. Based on the data released by the US Department of Agriculture (USDA) in March 2018, US soybean production expected to increase by 2.20% in 2018 to the amount of 119.52 million tons per year. While trade wars occur and exports to China are closed, there is a possibility that the export of US’s products to Indonesia will increase. The impact of the rise of import tariffs for the US products is that President Donald Trump plans to impose additional import tariffs on China’s products.
Malaysia Zero Export Duty Extended to the End-April
Previous statement at March 22 by the Royal Malaysian Customs Department that export duties will be raised to 5% and applied at April 1 are postponed to End-April or when the CPO inventories fall below 1.6 million mt. This policy keeps supporting producer to export their products. Mind this extension of zero export duty will be contra-productive to current U.S-China trade war sentiment that supressed the CPO product substitution price – soybean oil, on high Chinese import duty from U.S.
CPO Inventories Toward Ramadhan
According to an analyst of Public Investment Bank, the CPO inventories is likely to drop towards the Holy Month of Ramadhan. Consumption of palm oil in Ramadhan Holy Month usually picks up as Muslims, especially countries in Middle Eastern, break their daily fast in the evening with lavish spread. Will this expectation of lower inventories and higher consumption in Ramadhan Holy Month support the CPO price?