Yoga Rusmana & Eko Listiyorini
Palm-oil shipments from Indonesia, the world’s largest producer, may rise 9.5 percent in June on sustained demand before the Muslim fasting month of Ramadan.
Exports are set to climb to 1.5 million tons from 1.37 million tons in May, while output will probably be little changed at 2.1 million tons, according to the median of five plantation and refining company executives in a Bloomberg News survey. Inventory will also be little changed at 1.85 million tons, two of the respondents said.
Futures lost 17 percent from a 13-month high in April as the debt crisis in Europe and the slowing economy in China, the largest cooking-oil user, reduced demand, potentially limiting costs for Nestle, the world’s largest foodmaker, and curbing revenues at Astra Agro Lestari and Golden Agri-Resources, the second-biggest grower.
“Global demand, either from India or other countries, will usually increase by 15 percent to 20 percent during the festive seasons,” said Derom Bangun, a deputy chairman at the Indonesian Palm Oil Board, a group of growers and refiners.
“This will support prices even as the pressure from the European crisis is still quite strong.”
The holy month of Ramadan, starting this year in late July, is a time when consumption of cooking oil usually climbs as followers break daylong fasts with communal meals. The Idul Fitri festival marks the end of fasting.
Indonesia exported 1.37 million tons of palm oil last month, a 1.4 percent drop from April, according data from the Indonesia Palm Oil Association. That was lower than the median estimate of 1.63 million tons from four companies in a Bloomberg survey published on May 31.
Palm oil lost 12 percent this quarter and is set for its worst performance since the period ended March last year. September-delivery futures gained 0.7 percent to RM3,020 ($952) a metric ton on the Malaysia Derivatives Exchange on Friday. Soybean oil has declined 5 percent this quarter.
Prices are expected to stay at about RM2,800 to RM3,000 until July, as demand from China and India remains strong, said Susanto, head of marketing at the palm oil association.
Cooking-oil imports by India, the second-largest consumer, climbed for a fourth month in May, surging 35 percent to 896,921 tons from 664,133 tons a year earlier, the Solvent Extractors Association of India said. That was higher than the median estimate of 850,000 tons in a Bloomberg survey of five processors and brokers.
Imports of crude palm oil climbed 11 percent to 520,451 tons in May, and refined palm-oil purchases more than doubled to 165,426 tons, the group said.
“The food industry is still the main market for palm oil, so I’m not too worried about any potential decline in demand,” said Sahat Sinaga, executive director of the Indonesian Confederation of Vegetable Oil Industries. “As long as people still need cooking oil and they still like to use palm oil as the main ingredient, demand will never run out.”
The country’s export-tax structure is making its products more attractive compared with Malaysia, the second-largest producer, Sinaga said. He expects refined-palm oil exports will represent 51 percent of total shipments this year, up from 40 percent last year.
Indonesia cut the tax rate for exports of crude palm oil in July to 15 percent, a level last seen in January, from 19.5 percent this month, said Deddy Saleh, director general of foreign trade at the Ministry of Trade.
The government reviews the tax rates and base export prices every month, based on average rates in Kuala Lumpur, Rotterdam and Jakarta.
Exporters may delay some shipments to July to benefit from the lower tax, said Joko Supriyono, secretary general at the palm oil association.