Industry news: on April 22, Indonesian President zokovido announced after the cabinet meeting that the export of “all edible oil and edible oil raw materials” in the country will be stopped from April 28, and the recovery time will be determined.
Background: palm oil is the largest vegetable oil in the world, accounting for 36% of its output. It is the largest trading oil in the world, accounting for 58% of its export. Among vegetable oils, industrial use accounts for the highest proportion, reaching 32%. Indonesia is the world’s largest producer of palm oil, accounting for 59%, the world’s largest exporter of palm oil, accounting for 56%, and the world’s largest consumer of palm oil, of which industrial use accounts for 58%. China’s external dependence on palm oil is 100%, making it the third largest importer of palm oil in the world, with edible consumption and industrial consumption accounting for 65:35. Since 2020, the core driver of the continuous rise in global vegetable oil prices is palm oil, followed by rapeseed oil and soybean oil. Sunflower oil has become a new factor due to the conflict between Russia and Ukraine.
Comments: the interruption of Indonesia’s palm oil export and the tightening of Global trade flow are good for prices and have no impact on production. (compare the conflict between Russia and Ukraine).
In terms of policy strength, it can be called the “strictest measure”, because Indonesia’s palm oil plays an important role in global production and Trade: the global monthly trade volume of vegetable oil is about 7 million tons, of which Indonesia’s palm oil accounts for 35%, which is similar to the cut-off of Ukraine’s wheat, corn and sunflower oil exports at the beginning of the Russian Ukrainian conflict. Important buyers such as India and China can only look for Malaysia Supplement palm oil from Thailand and other producing areas, or purchase other oil products to replace it.
In terms of policy continuity, Indonesia has started a series of price regulation actions since the beginning of the year, including the price subsidy DPO of edible oil in China, the price ceiling in China but cancelled it one month later, and the compulsory DMO in the Chinese market (export bound to Chinese sales) but cancelled it one week later and raised export tariffs. Before, the market was guided by volume and price, but the intensity was far less than this time.
Its purpose is to ensure China’s supply and curb price increases. Indonesia is promoting the b40 plan, the road test is expected to end in the middle of the year, and the consumption of palm oil industry will increase significantly this year. In addition, we infer that the tight global vegetable oil production and demand and rising costs caused by the “Russia Ukraine conflict” are also important reasons to stimulate the Indonesian government to protect itself, even though the current inventory of Indonesian palm oil is at a high level in the same period of nearly three years.
Considering that the performance of the Indonesian government has been “changing day and night” since this year, perhaps the policy will not last too long, but we should pay attention to other major producing countries’ imitation and the panic hoarding of major consumer countries, resulting in abnormal price fluctuations.
On Friday, vegetable oil futures prices outside China showed a pattern of near strength and far weakness. The forward price of CBOT soybean oil futures in the United States fell, and the performance of the Chinese market was similar. We believe that China’s demand has been very weak under the isolation brought by such high prices and the epidemic.
Shenzhen Agricultural Products Group Co.Ltd(000061) market time factor is more important. The key time point is repeatedly mentioned from May to June. In addition to the recovery of Malaysian labor, there is also the centralized supply of soybeans in South America and the centralized listing of Chinese rapeseed, which allows the price to “fly freely” before this time. We maintain the judgment of marginal improvement of global vegetable oil supply from May to June, but the uncertainty is increasing.
According to our research, most Chinese vegetable oil enterprises have predicted the price rise and generally conducted hedging operations in the futures market, so the price rise has adverse effects, but the impact is limited (the degree of impact depends on the hedging ratio).
Affected industries: Yihai Kerry Arawana Holdings Co.Ltd(300999) , Xiwang Foodstuffs Co.Ltd(000639) , Hainan Jingliang Holdings Co.Ltd(000505) and other vegetable oil enterprises, Master Kang, Chacha food, Yantian shop, Ganyuan Foods Co.Ltd(002991) and other food processing enterprises.
Risk tip: the recovery of downstream consumption is less than expected; The price of raw materials fluctuates greatly; The implementation of agricultural policies did not meet expectations.
