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Global Oil Supply, Demand and Price Outlook

With Special Emphasis on Palm Oil

POTS Iran on 6 Febr 2017

Thomas Mielke, ISTA Mielke, Oil World,

Global Market Research on Oilseeds, Oils and Meals

Please feel free to contact me for assistance at <[email protected]>


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Monthly Prices from Jan 1973 until Jan 2017 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

0

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Palm oil crudeRape oil

cif Rotterdam in US-$ / MTMonthly Prices of 2 Oils

Palm oil is the Price Leader for Oils and Fats Worldwide


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World Exports 2016 in Mn T: Soya oil 12.0 Palm oil 43.7 Palmkern oil 3.0 Coconut oil 1.6 Today consumers in the world need about 63 Mn T of palm oil per year


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January 2014 until Jan 20171

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S un o i l E U

R ape o i l D u t c h

C P O c i f R ' dam

Monthly Prices of 4 Oils (in US-$/T)

2014 2015 2016

+49%


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C P O , fo b Ind o .P al m s tea rin , fo b M al .

S oya oil , A rg .S un oi l, B la ck Se a

R a pe o il, R ott .P al m k. oil , R o tt .

300

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1300

1500

Oct/Jan 15/16Oct/Jan 16/17

(in US-$ per tonne)PRICES: Changes from a Year Ago

+39%

+14%

-3%+50%

+84%

+19%

Prices from 1 April 2016 until 3 Feb 2017Apr May Jun Jly Aug Sep Oct Nov Dec Jan

220023002400250026002700280029003000310032003300

First position in Malaysian Ringgit/TMALAYSIA: Crude Palm Oil Futures Close


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95/96 98/99 01/02 04/05 07/08 10/11 13/14 16/17F0

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7017 OILS & FATS : World Production (Mn T)

Sun oil

Rape oil

Soya oil

Palm oil

9 Other oils

4 Animal Fats


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01/02 04/05 07/08 10/11 13/14 16/17F0

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50Soy, Rape, Sun Oils4 Animal FatsPalm Oil 9 Other

17 OILS & FATS : World Exports (Mn T)


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95/96 98/99 01/02 04/05 07/08 10/11 13/14 16/17F0

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3017 OILS & FATS: Exports of Major Countries (Mn T)

Indonesia

ArgentinaU.S.A.

Canada Ukraine

Malaysia


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(a) Palm oil, soya oil, sunflower oil & rapeseed oil 02/03

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-3-2-1012345

Palm Oil 4 Oils (a)10y-avg. Palm Oil 10y-avg. 4 Oils

Change from year ago4 Major Oils : World Exports (Mn T)

Below-average growth in palm oil exports means also much below-normal increase in total veg. oil exports


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00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17

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70in % of 8 Veg. Oils

PALM OIL: Market Share in Sel. Countries

Pakistan

EU-28

India

China

WorldBut the supply shortage made it necessary to ration demand. In fact, palm oil usage has declined in several countries.

Palm oil has become the by far most important vegetable oil for consumers in many countries, primarily in -Asia -Africa -C. & S. America


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19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

20122014

2016

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70MalaysiaIndonesiaRest of World

in Major Countries (MnT) Palm Oil Production 1980 - 2017

Effects of El Nino

2016: -7% = -4.3 Mn T 1998: -5% = -0.8 Mn T


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In 2016 the average annual oil yield fell to 19-year low In 2017 yields will recover, but remain below average (more male & less female flours, i.e. still less than normal fruit bunches)

90 92 94 96 98 00 02 04 06 08 10 12 14 16 183

3,2

3,4

3,6

3,8

4

4,2

4,4

4,6

4,8MALAYSIA: Annual Palm Oil Yields (T/ha)

T/ha

January 2011 until December 2016ja n1 1 ja n1 2 ja n1 3 ja n1 4 ja n1 5 ja n1 6

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120in % of 5-year average

Palm Oil Yields in Malaysia


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O c t o b e r / S e p t e m b e r12/13 13/14 14/15 15/16

-4-3-2-101234

Palm Oil Soya OilSun Oil Rape Oil

Change on Year in Mn T

World Production of 4 Major Oils

O c t o b e r / S e p t e m b e r 06/07

07/08 08/09

09/10 10/11

11/1212/13

13/1414/15

15/16-4

-2

0

24

6

8

10

12Production

Change From Year Ago in Mn T8 Veg. OILS: World Production

Unusual setback of production in 2015/16 …

…declines in palm oil & rapeseed oil could not be compensated


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Daily prices from 2 Jan 2015 until 2 Feb 2017Jan 15 June 15 Jan 16 June 16 Jan 17

400

450

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550

600

650700

750

800

850

900Daily Prices of 2 Oils (in US-$/T)

Palm oil, crude fob Indonesia

Soya oil, fob Arg.

Daily prices from 2 Jan 2016 until 2 Feb 2017Ja16 Feb Mar Apr May Jun Jly Aug Sep Oct Nov DecJa17

500

550

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650

700

750

800

850

900

Sunflower oil, fob N.W. Eur.Crude palm oil, cif Rotterdam

Daily Prices of 2 Oils in Europe (US-$/T)

Price competitiveness versus other veg oils deteriorated


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01/02

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7

8

ArgentinaUkra ine

Russia

SUNFLOWER OIL: Exports of Key Countries (Mn T)

Major supply boost mainly in Oct/March 2016/17 Growing demand for high-oleic sunflower oil

01/02

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2000SUN OIL : Imports of Key Countries

China

India1000 T

EU-28


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Monthly prices from Jan 2003 until Jan 2017

Ja03 Ja05 Ja07 Ja09 Ja11 Ja13 Ja15 Ja170

150

300

450

600

750

900

1050

1200

1350

Crude mineral oilPalm oil, crude

Monthly Prices of Palm Oil & Crude Mineral Oil (US-$/T)

Annual average premiums/discounts from 2003 until 2016

20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16

-100-50

050

100150200250300350400450

nearest forward shipment

Annual Price Premiums Palm Oil vs Crude Mineral Oil (US-$/T)

Palm oil developed large premium versus energy prices


© www.oilworld.de ..

O c t o b e r / S e p t e m b e r12/13 13/14 14/15 15/16 16/17

-4

-2

0

2

4

6

Palm Oil Soya OilSun Oil Rape Oil

Change on Year in Mn T

World Production of 4 Major Oils


07/08 08/09

09/10 10/11

11/1212/13

13/1414/15

15/1616/17

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6

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12Produc tion

Change From Year Ago in Mn T8 Veg. OILS: World Production

Steep increase in production in 2016/17…

… extremely low stocks (-5.4 Mn) decisively curb supply and demand growth in 2016/17


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Outlook for 2016/17:

Very big increase in world production by 10-11 Mn T in 2016/17 of which: Palm oil . . . +5.7 Mn (vs -3.9) Lauric oils +0.7 (vs -0.75) Soya oil . . . +2.4 Mn (vs +2.6) Rapeseed oil - 0.8 (vs -1.4) Sunfl. oil . . +1.56 Groundn. oil +0.5 Cotton oil . +0.07

World supplies of oils & fats will remain tight in Oct/March 2016/17. Higher prices.

8 VEGETABLE OILS: World Supply & Usage ( Mn T )O c t / S e p t

16/17F Change 15/16 14/15 Op’g stocks 23.3* -5.4 28.7 26.7 Production 177.3* +10.5 166.8 170.4 Supplies 200.6* +5.1 195.5 197.1 Consumption 177.0* +4.0 173.0 167.6

8 VEGETABLE OILS: World Supply & Usage ( Mn T )O c t / S e p t

16/17F Change 15/16 14/15 Op’g stocks 23.3* -5.4 28.7 26.7 Production 177.3* +10.5 166.8 170.4 Supplies 200.6* +5.1 195.5 197.1 Consumption 177.0* +4.0 173.0 167.6


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2013/14 2014/15 2015/16 2016 /17

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-2

-1

0

1

2

3Quarterly, Change on year in Mn T

PALM OIL : World Production Changes

Oct/Dec 2013 until July/Sept 2017


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Outlook Jan/Mar 2017: With palm oil stocks down about 3.8 Mn T from a year earlier in early Jan 2017, the prospective year-on-year production growth by 1.3-1.4 Mn T will be more than offset, resulting in a further decline of world supplies by 2.4-2.5 Mn T in Jan/Mar 2017 versus a year earlier

2013/14 2014/15 2015/16 2016/17

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0

1

2

3Quarterly, Change on year in Mn T

PALM OIL : World Supply Changes

Oct/Dec 2013 untilJuly/Sept 2017


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World China India Indonesia Malaysia-6

-4

-2

0

2

413/14 14/15 15/16 16/17

PALM OIL Stocks, Annual Change (in Mn T)

World China India Indonesia Malaysia-6

-4

-2

0

2

413/14 14/15 15/16 16/17

17 OILS/FATS Stocks, Annual Change (in Mn T)

The Legacy of a Severe Production Deficit…

…Major Reduction in Stocks of Palm Oil, Rapeseed Oil and Others.


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-4.3 Mn T +6.5 Mn T

World production seen up by 6.5 Mn T in 2017. World stocks of palm oil very low and down by 3.8 Mn T from year ago as of 1 Jan 2017.


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Impacts from soybeans and other oilseeds


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Soybeans 62%

Rapeseed 11%

Sunseed 9%

Cottonseed 7%

Groundnuts 6%

Copra & Palmkernels 4%

Other 3 Oilseeds 2%

2016/17 -- 540.7 Mn T

Other ctries 14%

EU 6%

C.I.S. 7%

Canada & U.S.A. 28%

Brazil 20%

Argentina 11%China 8%

India 7%

10 Oilseeds - - 540.7 Mn T

Global Production of 10 Oilseeds

10 years earlier India accounted for 9% of world oilseed production and China for 13%

In 2016/17: Soybeans: World 333 Mn T (up 21 Mn) USA 117 Mn T (up 10 Mn)


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SOYBEANS Record yield and soybean output in the USA in 2016 But global dependence on US soybeans and products increasing in 2016/17 In Sept/Feb 2016/17 US soybean exports soaring to 46.3 Mn T (up 6 Mn T), thus 73% of world exports

U.S.A. : Soybean Supply & Demand ( Mn T ) S e p t e m b e r / A u g u s t

16/17F 15/16 14/15 13/14 12/13 Op. stocks . . . 5.35 5.19 2.50 3.83 4.61 Crop. . . . . . . . 117.21 106.86 106.88 91.39 82.79 Imports . . . . . .78* .66 .93 2.10 1.01

Exports . . . . . 57.80* 52.74 50.20 44.65 36.17 Crushings . . . 52.70* 51.33 51.16 47.38 45.97 Other use 3.32* 3.28 3.77 2.77 2.45

End. stocks . . 9.52* 5.35 5.19 2.50 3.83

Stocks/usage 8.4% 5.0% 4.9% 2.6% 4.5%

U.S.A. : Soybean Supply & Demand ( Mn T ) S e p t e m b e r / A u g u s t

16/17F 15/16 14/15 13/14 12/13 Op. stocks . . . 5.35 5.19 2.50 3.83 4.61 Crop. . . . . . . . 117.21 106.86 106.88 91.39 82.79 Imports . . . . . .78* .66 .93 2.10 1.01

Exports . . . . . 57.80* 52.74 50.20 44.65 36.17 Crushings . . . 52.70* 51.33 51.16 47.38 45.97 Other use 3.32* 3.28 3.77 2.77 2.45

End. stocks . . 9.52* 5.35 5.19 2.50 3.83

Stocks/usage 8.4% 5.0% 4.9% 2.6% 4.5%


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07/08

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3,5Argentina Brazil

Soybean Area - change on year (Mn ha)


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FLOODED as of 18 Jan 2017 (in 1 000 ha ) BUENOS AIRES 1063 SANTA FE 821 CORDOBA 483 2367 THEREOF (estimated): SOYA 1000 CORN 1000 OTHER 367


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75/76 81/82 87/88 93/94 99/00 04/05 10/11 16/17F0

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80

100

120

140

160

180Soybean Crop Trend Since 74/75 (Mn T)

U.S.A.

Argentina, Brazil & Paraguay


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1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017F0

20

40

60

80

100Soybeans: W orld Stocks as of end-August (Mn T)We still anticipate a re-

covery in world soybean stocks in 2016/17. Production to exceed consumption, despite recent downward revisions in the USA and Argentina Or will the losses in Argentina be greater? A shortage in soybeans may arise in 2017/18, if the excellent 2016 yields in the US cannot be repeated.


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D ai ly future s fro m 5 A pr 2 016 unt il 2 Feb 2 017

Apr M ay Jun Jly Aug Sep Oct N ov D ec Ja17 Feb

8 50

9 00

9 50

1 00 0

1 05 0

1 10 0

1 15 0

M a rc h 2 0 1 7 p o sit io n

5 0 -d a y m o vin g a ve ra g e

CBOT: Daily Soybean Futures (c/bu)


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O c t o b e r / S e p t e m b e r94/95

95/9696/97

97/9898/99

99/00 00 /01

01 /02 02 /03

03 /04 04 /05

05 /06 06 /07

07 /08 08 /09

09 /1010/11

11/1212/13

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15/1616/17

0102030

405060

708090

100ChinaRest of world

Imports of Soybeans (Mn T)In Jan/Dec 2016 China imported: 83.7 Mn T of soybeans 3.8 Mn T of rapeseed


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98/99 01/02 04/05 07/08 10/11 13/14 16/17F20

30

4050

60

7080

90100

110

120Production (Mn T)Crushings (Mn T)

CHINA: Oilseed Output & Crushings


© www.oilworld.de


01/02 02/03

03/04 04/05

05/06 06/07

07/08 08/09

09/1010/11

11/12 12/13

13/1414/15

15/1616/17F

80100120140160180200220240260280300

10 Oilseeds : World Crushings (Mn T)

9 other seeds

Soybeans

Further boost in world soybean crushings required in 2016/17, because 1) rising demand 2) still insufficient palm oil supplies 3) tightness of oth seeds 4) low stocks of veg oils This is creating a surplus in oilmeals, and has raised the oil share


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Soya Oil 25,0%Palm Oil 29,9%

Rape Oil 11,5%

Sun Oil 8,3%

PKO&CNO 4,6%Others/An.Fats 20,8%

2016/17F - - 213.5 Mn T

Soya Oil 20,1%

Palm Oil 14,2%

Rape Oil 11,4%

Sun Oil 9,9%

PKO&CNO 5,2%

Others/An.Fats 39,3%

1991/92 - - 83.5 Mn TWorld Production of 17 Oils & FatsUp 156%

in 25 years Average annual increase of 5.2 Mn T Palm oil account for 40% of the increase (+2.1 Mn p.a.)


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Impacts from biodiesel


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89/90 92/93 95/96 98/99 01/02 04/05 07/08 10/11 13/14 16/17F

020406080

100120140160180200220

biofuel food and other

Total Usage in Mn T17 Oils & Fats : World Consumption

Average demand growth in past 5 seasons: Total +6.4 Mn T per year Biofuel +1.6 Mn T Food/other +4.8 Mn T

Substantial Growth in World Demand of Oils/Fats ! !


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Policy Measures Boosting Use of Soya Oil & Palm Oil for Biodiesel Production in 2016

2012 2013 2014 2015 2016 20170

1

2

3

4

5

6

7

8

9 MalaysiaThailandIndonesiaEU-28

Palm Oil Use for Biodiesel (Mn T)

+1.7 Mn T

2012 2013 2014 2015 2016 20170

1

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5

6

7

8

9U.S.A.ArgentinaBrazil

Soya Oil Use for Biodiesel (Mn T)

+1.2 Mn T


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2005 2007 2009 2011 2013 2015 2017F0

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15

20

25

30

35World Production of Biodiesel (Mn T)BIODIESEL: World Production by Country ( Mn T )

J a n u a r y / D e c e m b e r2017F 2016 2015 2014 2013

EU-28 12.40* 12.35* 12.37 12.20* 10.65 U.S.A. 6.20* 5.85* 4.90 4.80 4.72 Argentina 2.55* 2.63* 1.81 2.58 2.00 Brazil 3.80* 3.36* 3.46 3.00 2.56 Colombia .49* .45* .51 .52 .50 Singapore .88* .86* .82 .76 .79 Indonesia 3.20* 3.00* 1.16 2.92 2.60 Malaysia .60* .50* .67 .60 .47 Thailand. 1.10* .98* 1.03 .99 .93 Oth. ctries. 3.00* 2.94* 2.89 2.94* 2.65*Total 34.22* 32.92* 29.62 31.30 27.87

Change in +1.30* +3.30* -1.68 +3.43 +3.29

BIODIESEL: World Production by Country ( Mn T )J a n u a r y / D e c e m b e r

2017F 2016 2015 2014 2013 EU-28 12.40* 12.35* 12.37 12.20* 10.65 U.S.A. 6.20* 5.85* 4.90 4.80 4.72 Argentina 2.55* 2.63* 1.81 2.58 2.00 Brazil 3.80* 3.36* 3.46 3.00 2.56 Colombia .49* .45* .51 .52 .50 Singapore .88* .86* .82 .76 .79 Indonesia 3.20* 3.00* 1.16 2.92 2.60 Malaysia .60* .50* .67 .60 .47 Thailand. 1.10* .98* 1.03 .99 .93 Oth. ctries. 3.00* 2.94* 2.89 2.94* 2.65*Total 34.22* 32.92* 29.62 31.30 27.87

Change in +1.30* +3.30* -1.68 +3.43 +3.29


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At the end of the season2003 2005 2007 2009 2011 2013 2015 2017F8

10

12

14

16

18

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22

17 oils & fa ts

10 oilseeds

World Stocks in Percent of Annual Usage (%)In 2016/17 oils & fats stocks still drop relative to annual consumption. A second year (2017/18) without severe weather problems is required to bring oils & fats stocks to more comfortable levels. Oilseeds would tighten in case of an Argentine soya crop of close to 50 Mn T

Concluding Statements


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I expect a further rally in Jan/March 2017, with crude palm oil in Rotterdam likely to peak soon near US-$ 840 Crude palm oil (fob Indon) may peak at US-$ 800 Arg soy oil to peak at 840 Prices seen declining from March or April onward. The weakness should be limited at first but then be enforced in 2nd half 2017 and accelerate in 2018

Weekly prices from 1 Jan 2015 unti l 2 Feb 2017Ja15 Mar May Jly Sep Nov Ja16 Mar May Jly Sep Nov Ja'17

450

500

550

600

650

700

750

800

850Palm stearin RBD, Mal,cif Rott

Palm oil crude, cif N.W. Eur

Weekly Prices of Palm Stearin & Oil (US-$/T)


© www.oilworld.de


Price decline ahead. In Apr/June 2017 average prices of soya oil and palm oil may fall $ 40-50 below the Jan/Mar 2017 average Apr/June 2017 forecasts: RBD palmolein 715 (Ja19: 768) Arg soyaoil fob 760 (Ja19: 819) Average 2018 vs 2017 vs 2016: Palmolein 650 vs 710 vs 674 But the price low in 2018 could be US $ 600 or slightly less, reducing the crude PO futures at the BMD to or below 2400 Ringgit Weekly prices from 1 Jan 2015 unti l 2 Feb 2017

Ja15 Mar May Jly Sep Nov Ja16 Mar May Jly Sep Nov Ja'17450

500

550

600

650

700

750

800

850Palm stearin RBD, Mal,cif Rott

Palm oil crude, cif N.W. Eur

Weekly Prices of Palm Stearin & Oil (US-$/T)


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Lauric oil prices set to decline in the next 12 months on account of recovering production relatively inelastic demand

Premiums of lauric oil prices versus palm oil are set to narrow in 2017

Monthly prices from Jan 2011 until Jan 2017Jan'11 Jan'12 Jan'13 Jan'14 Jan'15 Jan'16 Jan'17

400600800

10001200140016001800200022002400

Palm oil crude, cif N.W. EurPalm olein RBD, Mal, fobPalmkern oil,Mal/Indo,cif RottCoconut oil,Phil/Indo,cif Rott

Monthly Prices of 4 Veg. Oils (US-$/T)


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Thank You for Your Kind Attention !

© Copyright 2017 ISTA Mielke GmbH. This information is destined for internal use only. Any copying, reproduction and/or redistribution of the proprietary content without the prior written consent of ISTA Mielke GmbH is prohibited. Any violation of our copyright will be PROSECUTED. The information and analyses given in this service are considered to be reliable. Every care is taken to ensure the accuracy and completeness of the contents. We cannot, however, accept any responsibility for them nor for the accuracy of our forecasts and opinions or any liability for the subscriber’s use. Kindly visit us on www.oilworld.de For further information you may call +49 40 76105021

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