May 26, 2022

Indonesia lifts palm oil export ban, USDA outlook forecasts increased production

1 RM (Malaysian Ringgit) = 0.23 USD
1 USD = 0.76 GBP

Crude Palm Oil

Average March Palm Oil Export Prices

• Indonesia
  $1,747/tonne (-$42/tonne)

• Malaysia
  $1,690/tonne (-$92/tonne)

Source: USDA Foreign Agricultural Service

Malaysia palm market
As reported in the Volac Wilmar Feed Ingredient March Palm Update, Malaysia’s Crude Palm Oil (CPO) settlement price saw a decrease of 1,445 RM/tonne ($341.57) from March 9 to March 18, finishing off the remainder of the month at an average of 5,947 RM/tonne ($1,405.74).

The sudden price drop is attributed to a combination of weak March exports and the fall of Malaysian palm oil futures from China’s COVID-19 lockdown in Shanghai. The lockdown brought major transportation infrastructure to a halt, decreasing fuel demands. Also attributing to the market shift has been a recent move by Indonesia’s government to raise its maximum palm export levy.

CPO settlement price made gains throughout April, starting the month off at 5,566 RM/tonne ($1,315.68) on April 1, steadily increasing to 6,136 RM/tonne (1,450.42) by April 13. Recovering prices are being driven by India as its palm oil imports have increased from the country securing sunflower oil alternatives, reports Reuters. The Solvent Extractor’s Association of India says imports for March were 539,793 tonnes of palm oil, up from 454,794 tonnes in February.

The CPO market is tied to the global vegetable oil market, which has seen an increase in prices from tight supplies due to drought impacting South America’s soybean crop and losses in Ukrainian sunflower oil.

Malaysia palm prices CPO Settlement Price RM

Soybean oil

March 2022 Soybean Oil Export Prices $/tonne

Top soybean producing countries Argentina, Brazil and the US all had saw monthly average prices hit multi-decade hights. According the USDA, lingering impacts of the drought in South America plus events in the Black Sea region were the primary drivers. Prices peaked in mid-March and declined as markets adjusted to weakening demand due to higher prices and slowing soybean crush in China. Through the first half of 2021/22, soaring feed costs and low meat prices led to reduced soybean crush levels in China, nearly to levels seen during the African Swine Fever outbreak in 2018/19.

Rapeseed oil
Average Rapeseed Rotterdam (Canola) Oil Prices 

Sunflower oil
Average Sunflower Seed Oil Prices 

Shipping update

Shanghai port sees 80% recovery in container throughput despite epidemic drag

As Shanghai went into a city-wide COVID-19 lockdown at the end of March, hundreds of cargo ships were backlogged due to port congestion throughout China. In reporting by Global Times, Shanghai port has seen container throughput in April at 80 percent of last year’s levels. Shanghai is the world’s largest container port, with congestion causing supply chain issues on a global level.

“While the port operation is experiencing a recovery, driven by the contingency measures such as diversifying transportation tools from trucks to ships and port wide closed loop management, port efficiency has rebounded with the congestion index holding at a fairly low level even as trade orders pick up after more factories resumed production in the region,” says Global Times. “Latest data from the Shanghai Shipping Exchange shows that in April, the average berthing time was 1.07 days, basically the same as in March, and was better than the berthing time of ships across 11 major foreign ports, including some in the US.”

The full report can be read here.

San Pedro Bay ports likely to implement container dwell fee soon, warns Maersk
After months of delaying fees for long-dwelling cargo ships in congested California ports announced by the Biden Administration in October, Maersk is warning customers that the “likelihood of the Administration implementing the fee has risen significantly this month.” The original policy that was to go into effect on November 1, would charge container ships dwelling for nine days or more $100 per container, increasing by $100 increments per container per day. If arriving by rail, containers would begin to be charged on day three. This brought a lot of concern to the shipping industry with shippers not able to control congestion and costs expected to be passed on to customers.

The full report can be read here.

Perspective: Supply chains are never returning to ‘normal’
In an in-depth perspective piece, FreightWaves CEO Craig Fuller says the shipping industry has been permanently changed in the last couple of years and will not be returning to ‘normal.’ Key challenges outlined include:

Key ocean freight takeaways:

• Supply chains will remain under constant threat of disruption for the next decade Supply chains operate best when the world is peaceful and stable A smoothly running supply chain requires “buffer stock,” which is challenging with declining population demographics There is a conflict between environmental, social and governance (ESG) goals and supply chains optimized for cost and speed. If we prioritize ESG, we will need to contend with supply chain risks Supply chain technology will become the big venture capital category winner as companies continue to make investments in technologies that can help them mitigate their supply chain challenges

Read the article in full here.

Disclaimer: The information in this document has been obtained from or based upon sources believed to be reliable and accurate at the time of writing. The document should be for information purposes only and is not guaranteed to be accurate or complete.