A worsening smog cloud over Singapore and Indonesia caused by illegal forest fires has helped palm oil accelerate its outperformance relative to its main vegetable oil competition. Palm rallied 13% from 24 August to its mid-September peak, relative to a shallow decline in a US bean oil market still responding to a healthy domestic crush. Asian markets are fretting over the potential impact of the dense particulate haze in terms of reduced fruit sizes if photosynthetic growth stimulus is significantly impacted, with unhealthily high air particulate levels also likely to reduce plantation harvesting efforts.
Ironically, prices were already up substantially when India’s government announced a hike in domestic vegetable oil import taxes in response to a mounting outcry from domestic producers over lost market share to cheap overseas production. Indian taxes on crude palm and soybean oil imports have been raised from 7.5% to 12.5%, while imports on refined products made from the world’s two main sources of vegoil have gone up from 15% to 20%. The move will complicate Malaysia and Indonesia’s efforts to drain their palm oil stockpiles into their largest export market as Chinese buying continues to suffer from record soybean imports.
Indonesian palm oil exports remained strong till the end of August against a still struggling domestic demand pool hampered by Indonesia’s floundering biodiesel mandate, keeping overseas sales well above year-ago levels. The country’s exports of palm and kernel oils were essentially flat MoM in August at 2.1mn t, with exports to India down 17% MoM. Exports to India have declined MoM since peaking at 631,000t in April, with exports to China down every month since peaking in June at 429,000t. YtD Indonesia palm oil exports were still up 24% in the eight months to the end of August at 16.559mn t.