cpo price outlook - asia business...
TRANSCRIPT
![Page 1: CPO PRICE OUTLOOK - Asia Business Councilasiabusinesscouncil.org/docs/newsletter/ArifRachmat04.18.pdf · CPO PRICE OUTLOOK Arif P. Rachmat CEO, Triputra AgroPersadaGroup INDONESIA’S](https://reader031.vdocuments.mx/reader031/viewer/2022011900/5ee288d2ad6a402d666cf1a2/html5/thumbnails/1.jpg)
A PRACTITIONER’S VIEW OF THE MARKET ANDCPO PRICE OUTLOOK
Arif P. RachmatCEO, Triputra Agro Persada Group
INDONESIA’S POLICIES & IMPLEMENTATIONS
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.
2017Insights on Product ion, Consumption and Price
INDONESIAGovernment & Industry
United as One: from Food & Energy Security to Sustainability
2018Prediction on Global Palm Oil
Supply Demand & Price Outlook
.
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.
.
2017“In the Business World, the Rearview Mirror is Always Clearer than Windshield”
-Warren Buffet-
2018Prediction on Global Palm Oil
Supply Demand & Price Outlook
INDONESIAGovernment & Industry
United as One: from Food & Energy Security to Sustainability
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Actual Average Q42017 : USD 627
So How Accurate was My Prediction?
Was it SCIENCE ….. or Just LUCK ??
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R² = 0.79
450
475
500
525
550
575
600
625
650
675
700
725
4,500,000 5,500,000 6,500,000 7,500,000 8,500,000 9,500,000
Mdex (USD/ Ton)
Major Countries’ Palm Oil Stock (Ton)
Inverse Correlation Between Stock Level & Price
Source : Internal Analysis
AVERAGE USD 627
Inverse Correlation HOLDS TRUE ...
AVERAGE USD 627
7.8 Mil Ton
Actual Dec USD 593(±3%)
End of 2017 Stock
How to BENEFIT ?
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5.5
6.0
6.5
7.0
7.5
8.0
450
500
550
600
650
700
750
Apr '17 May '17 Jun '17 Jul '17 Aug '17 Sep '17 Oct '17 Nov '17 Dec '17
Palm Oil Stock (Ton) CPO Mdex Price (USD/ Ton)
2017 Stock Level of Major Countries vs Mdex Price
Source : Internal Analysis, MPOB
Mio TonUSD/ Ton
Stock Building up
≠Inverse Correlation OPPORTUNITY to HEDGE !
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Zoom-in Day by Day in Sept 2017Inverse Correlat ion withR-square = 0.8
≠Inverse Correlat ion =
Overprice ?
When Market Overprice, BE ALERT AND READY to Lock Forward
Mio Ton USD/ Ton
550
600
650
700
6
7
8
Aug 15 Sep 13 Oct 16 Nov 15 Dec 15
Major Countries' PalmOil StockCPO Mdex Price
Source : Internal Analysis DATES
th th th th th
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Sept 8th was the LAST OPTIMUM TIME to Sell Forward
Future CPO MDEX (4 Months Forward) on Sept 2017
-4.00%
-3.05%
-2.10%
-1.15%
-0.20%
0.75%
Sep '17 Oct '17 Nov '17 Dec '17 Jan '18
INFLECTION POINT
Posit ive Sent iment
Negat ive Sent iment
Fruit Census Predicted Abundant Production in Q4 2017
Source : Internal Analysis
Rumor : Malaysia Stock High (2 Mio Ton )
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USD 660
USD 593 Sep '17 Oct '17 Nov '17 Dec '17
Potent ialProfit
Forward 8 September vs Actual Price
When Market Misprice, Take Advantage. But… SHORT WINDOW !
11%
USD 659Forward 08 Sept 2017
Source : Internal Analysis
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RECOVERY QUICKER than Expected. Indonesia Productions Exceeded 2015
Indonesia and Malaysia CPO Production
Source : Internal Analysis, MPOB
17
18
19
20
2015 2016 2017
Malaysia Production
30
32
34
36
2015 2016 2017
Indonesia ProductionMio Ton Mio Ton
~14%~15%
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THE EQUATOR
Production 2016 vs 2017
0 – 10%
>10%
EQUATOR
N
23%
18%
28%30%
35%
36%
7%
17%
Production 2016 vs 2017
UN-UNIFORM Recovery but EXCEEDED Expectation
Based on Sampling
WATER DEFICIT IMPACTFROM ‘15 & ‘16
6%1%
6%
Low SevereMed
8%
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Indonesian Biodiesel Serves as BALANCING FACTOR
Variances of Actual vs Forecast
HIGHER EXPECTEDSUPPLY
HIGHER EXPECTEDDEMAND
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Do Government and Industry have AGILITY to ADJUST VOLUME ?
Indonesia Biodiesel Consumption
Source :- Internal Analysis- CPO Fund
Mio KL
7
5
6
4
2
3
1
2015 2016
~3.5
~1.2
2017
~2,8
2017 Available Balance of Fund
USD 850 Mio
2018
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.
.
2017“In the Business World, the Rearview Mirror is Always Clearer than Windshield”
-Warren Buffet-
2018Prediction on Global Palm Oil
Supply Demand & Price Outlook
INDONESIAGovernment & Industry
United as One: from Food & Energy Security to Sustainability
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Core National Interest : LARGEST EXPORT at Record USD 23 Bio in 2017
Indonesia United as One• Strong Government Mandate under Coordinating
Ministry of Economic Affairs… 2 Years in Operations• Competent Leaders• Ample Balance of Funds
• The Indonesian Oil Palm Estate Fund (CPO Fund/ BPDP-KS)
• Council of Palm Oil Producing Countries (CPOPC)
• Strong Mandate from Indo Malay Government• In Talks on B5 Biodiesel with China (6 Mio KL), India
(2.3 Mio KL), B-7 with Malaysia (1 Mio KL)• Harmonization of Sustainability Standard to UN SDGs
“EU Should End Discriminat ion Against Indonesia’s Palm Oil”
President Jokowi at ASEAN-EU Commemorative Summit, ManilaNovember 14, 2017
FotoDarmin
Nasution
FotoDeputyCPOPC
Dono BoestamiDarmin Nasution
Mahendra Siregar M. Jaaffar Ahmad
Source : State Secretary Republic of Indonesia
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3.9
2.6
-
2.5
5.0
Corporate Smallholders
Oil Yield / Ha
(33 %)Potential Additional CPO from Smallholders :
1.3 Ton x 4.6 Mio Ha 6 Mio Ton
Replanting Target :4.6 Mio Ha
25 Year6.8
4.6
-
4.0
8.0
Corporate Smallholders
Planted Area(Mio Ha)
3Ps : People-Profit-Planet ALL BENEFIT
Sustainability Solution : Smallholders’ Replanting
Source: Directorate General of Estate Crops (2016)
185 K Ha/ Year
~
~
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~80% of REPLANTING AREA Lies in Sumatra (Older Plantations)
Indonesia’s Potential Smallholders Replanting Areas
32%
10%
10%
10%
8% 5%
4%
4%
4%3%
3%
3%
2%1%
1%
Target of Replant ing2.4 Mio Ha
Source: - Directorate General of Estate Crops (2016)- Internal Analysis
Riau
78% 19% 3%
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Target 185 K/Year ACHIEVABLE, Granted these 3 Elements
Replanting with Holistic Ecosystem
Access to Off-takers
IndependentSmallholders
Access to Funding
Massive Land Certification Program (5 Million Certificates, 2017 > Previous 5 Years Combined)
Access to Funding : Gov, CPO Fund & SOEs CPO Fund Allocation Over USD 340 Mio in 2018
Commitment by 26 Off-takers as Guarantors of Entire Value Chain
Key Success Factors
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Use Satellite to PREVENT WILDFIRE by Monitoring Hotspots
Indonesia Inc. Made Great Stride in Mitigating Fires
Sources : - Ministry of Environmental and Forestry Republic of Indonesia- California Department of Forestry and Fire Protection (Cal Fire)
2015 2016 2017
0.3
0.2
0.5
2.6
0.4
0.1
0.5
1.5
2.5
Mio Ha
Wildfire
USA
INDONESIA
21,929
3,915 2,339
-
5,000
10,000
15,000
20,000
25,000
2015 2016 2017
Hotspots in Indonesia-NOAA Satellite
Sources : https:/ / data.worldbank.org/ indicator/ AG.LND.FRST.ZSData 2017
No. ofHotspots
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EFFECTIVE METHODOLOGY and COMMITMENT Mitigate Wildfire Risks
Why has it Worked ?
Fire Free Village Program
3-Part ies Collaborat ion Model
Clustering SystemHotspot Early Warning System
Prevention•Init iate Fire Free Village Program
•Apply Hotspot Early Warning System and Fire Danger Rating System
Received by Community
Training, Engagement & Incentive
Scaling-up the Model
Ring 3 ( > 3 Km from concession )Ring 2 ( 3 Km from concession )Ring 1 ( inside concession)
“Fire free village program” is the core component of clustering systemGOVERNMENT
CORPORATE COMMUNITY
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63149
226
3460.55
1.05
1.35
2.04
0.0
0.5
1.0
1.5
2.0
2.5
0
100
200
300
400
2014 2015 2016 2017
PlantedMio HaCompany
Company Area (Ha)
HARMONIZATION with CPOPC Standard Certification and UN SDGs
Astounding Progress on ISPO
Source: ISPO Commission (2017)
ISPO cert if ied as of 2017:346 companies 2 Mio Ha
CAGR 55%
0.0
0.5
1.0
1.5
2015 2016 2017
Indonesian Deforestat ion Rate 2015 - 2017 Periods
Source: Ministry of Environment and Forestry (2017)
Mio Ha
8.7 Mio Ton CPO
ISPO Cert if icat ion
"Indonesia has reduced deforestat ion mainly due to improvement ingovernment policy in forest management”Minister Sit i Nurbaya at Indonesian Forest & Deforestat ion Workshop, Jakarta,January 29, 2018
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.
.
2017“In the Business World, the Rearview Mirror is Always Clearer than Windshield”
-Warren Buffet-
2018“Prophesy is a Good Line of
Business, but it is Full of Risks”-Mark Twain-
INDONESIAGovernment & Industry
United as One: from Food & Energy Security to Sustainability
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Do These Extreme Temperatures Increase the Chance of EL NINO/LA NINA
2018 … “America in Deep Freeze as Australia Fries”
New Hampshire Sydney
Financial Times, January 8, 2018
120°C
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If the Pattern Repeats itself, Expect MODERATING Weather
Source : NOAA, Ganling 2017-10
JAN JULAPR OCT JAN JULAPR OCT JAN JULAPR OCT JAN JULAPR OCT
2015 2016 2017 2018Prediction
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
‘97 – ’98 El-Nino ‘15 – ’16 El-Nino
El Nino Area
La Nina Area
Neutral
°C (ONI)
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Indonesia and Malaysia CPO Production
Source : Internal Analysis, MPOB
16
18
20
22
2015 2016 2017 2018 (F)
Malaysia ProductionMio Ton
30
32
34
36
38
40
2015 2016 2017 2018 (F)
Indonesia ProductionMio Ton
~8%~3%
Indonesia and Malaysia Production Increase around 3.6 MIO TON
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EQUATOR
Production 2017 vs 2018 (F)
Based on Sampling
The Last 24 Months, Less Impact of Water Deficit… STRONG PRODUCTION
6%
17%
27%19%
35%
25%
38%
11%
21%
5%10%
N
THE EQUATOR
Production 2017 vs 2018
0 – 10%
>10%
WATER DEFICIT IMPACTFROM ‘16 & ‘17
Low SevereMed
8%
8%
9%
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EU Palm Oil Import or ?
2
4
6
8
2013 2014 2015 2016 2017 2018 (F) 2019 (F) 2020 (F) 2021 (F)
Palm BiodieselEffect ively Banned ?
Mio Ton
Expect the Demand Remain BUOYANT in 2018
Source : Oil World2021 (F)
“European Move to Ban Palm Oil From Biofuels is 'CropApartheid' – Malaysia”KUALA LUMPUR, Jan 18 (Reuters) - The plan includes a ban on the use of palmoil in motor fuels from 2021.
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China Palm Oil Import Remain Flat
0
5
10
15
20
2011 2012 2013 2014 2015 2016 2017 2018 (F)
China Palm Oil Import China Soy Oil Import & Production
CAGR 6.82%
Potential Additional Demand for Biodiesel around 6 MIO TON (B5)
Mio Ton
Source : Internal Analysis
CAGR -2%
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India Palm Oil Import
Despite Multiple Hikes of Import Duty, DEMAND Continue to GROW
5
6
7
8
9
10
2010 2011 2012 2013 2014 2015 2016 2017 2018 (F)
Mio Ton
1x Hike Duty
1x Hike Duty
1x Hike Duty
2x Hike DutySource : Internal Analysis
CAGR 5.6%
1x Hike Duty
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25
30
35
40
45
50
55
60
65
70
12,900
13,100
13,300
13,500
13,700
13,900
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18
USD vs IDR Crude Oil (Brent)
Forex USD vs Commodity Price
USD/ bblUSD vs IDR
“Obviously a weaker dollar is good for us as it
relates to trade & opportunities”
Despite Weak Dollar Rhetoric, Commodity Price ALREADY PRICED-IN
Source : Bloomberg
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Narrower Spread CPO vs Oil Price Leads to LESS FUND Requirement for Biodiesel
Crude Oil & CPO Prices
X
Hypothetical Case :Switching Point from Food to Energy
Oil Price as Floor
USD/ Ton
200
300
400
500
600
700
800
642
482
Feb ‘17
Brent Crude Oil
CPO MDEX
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Biodiesel as STABILIZING FACTOR to CPO Price
Indonesia Biodiesel Consumption Projection
Source :- Internal Analysis- CPO Fund
Mio KL
7
5
6
4
2
3
1
2015 2016
~3.5
~1.2
2017
~2,8
2018Total Projected Fund
USD 1,8 Bio*
~5.7
~3.5Target
2018 (F)*Assumptions 2018 : Brent Crude Oil : USD 60 / Barrel Domestic CPO : USD 650 / Ton
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=
Growth Rate
SUPPLY(TON)
DEMAND(TON)
2016-17 2017-18
SUPPLY – DEMANDΣ
Source : Internal Analysis (± 0.5 M)= Note
Indonesia +4.5 M +3.0 M
Malaysia +2.6 M +0.6 M
Others +1.3 M +0.5 M
Indonesia +0.3 M +0.9 M
Malaysia +0.2 M +0.2 M
China +0.5 M +0.0 M
India +1.1 M +0.6 M
Europe Union +0.5 M +0.3 M
Others +2.4 M +1.3 M
+3.4 M +0.8 M
Price Would Be USD 600 – 650 in Q3 2018
CPO Supply and Demand Forecast 2018
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THANK YOU
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Regression Palm Oil Stock vs Mdex Price
R² = 0.75
450
500
550
600
650
700
4,500,000 5,500,000 6,500,000 7,500,000 8,500,000 9,500,000
Major Countries’ Palm Oil Stock (Ton)
MODERATE Correlation
Mdex (USD/ Ton)
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0
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120
-
200
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1,000
1,200
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (F)
Global Soybean Ending Stock Soy Oil Price
Soybean Stock and Price
Mio TonUSD/ Ton
Soybean Stock Projected to be FLAT thus Price will be STABLE
Source : USDA, CBOT