Malaysian growers benefit from Indonesia’s new export ruling

Indonesia’s new export ruling that came into effect on Jan 27, 2022, has widened the domestic CPO price gap between Malaysia and Indonesia by RM246 per tonne to RM1,378 per tonne on Feb 3, from RM1,132 per tonne on Jan 27, it said in a research note yesterday.

KUALA LUMPUR: Malaysian oil palm growers are benefitting from Indonesia’s new export policy through higher crude palm oil (CPO) prices, says Maybank Investment Bank (Maybank IB).

Indonesia’s new export ruling that came into effect on Jan 27, 2022, has widened the domestic CPO price gap between Malaysia and Indonesia by RM246 per tonne to RM1,378 per tonne on Feb 3, from RM1,132 per tonne on Jan 27, it said in a research note yesterday.

On Jan 27, Indonesia’s Trade Minister Muhammad Lutfi said exporters must set aside 20% of their shipments for domestic market obligation to ensure sufficient cooking oil supply in the local market at affordable prices.

“Since the announcement of Indonesia’s new policy, one-month crude palm oil futures on Bursa Malaysia Derivatives rose 1.8% week-on-week (w-o-w) to RM5,714 per tonne on Feb 3 but off its record high price of RM5,803 per tonne on Jan 28 on concerns over lesser availability of palm oil in the export market.

“While CPO price trended higher in Malaysia, domestic CPO price in Indonesia fell 2.8% w-o-w to 14,930 rupiah (RM4.34) per kg on Feb 3,” it said.

The bank said this implies that the Indonesian growers are sharing the burden of subsidising the domestic cooking oil prices.

“The overall impact was considerably smaller than Maybank IB’s estimates, as we had expected Indonesia’s CPO prices to theoretically adjust down to 14,000 rupiah per kg last week.

“We suspect the Indonesian refiners are sacrificing some of their refining margins too,” it said.

It noted that the relatively more Malaysia-centric growers such as IOI Corp Bhd, Sarawak Oil Palm Bhd, Boustead Plantations Bhd, Ta Ann Holdings Bhd, TH Plantation Bhd, Hap Seng Plantations Bhd and FGV Holdings Bhd are clear beneficiaries of the policy.

As such, the research house remains positive on the sector and maintained its “buy” call on Kuala Lumpur Kepong Bhd, Sarawak Oil Palm and Boustead Plantations, with a target price of RM30.70, RM5.60 and RM0.93 per unit, respectively. — Bernama