Asean as a region accounts for 52.5 million tonnes of production of oil palm or about 85% of world production and represents more than 90% of global exports. Indonesia accounts for 52.2% of world exports, with Malaysian exports totaling 37.9%.
The biggest consumers of palm oil are India, the EU, and China, with the three representing nearly half of world exports. The EU has overtaken China to become Malaysia's second-largest export market for palm oil, importing 2.06 million tonnes in 2017, according to the Malaysian Palm Oil Board. Meanwhile India remained Malaysia's top palm oil buyer at 2.83 million tonnes last year. China was the third.
As the economies of emerging markets such as China and India rise, the demand for palm oil has also seen an increase over the past five years at an average of 5% per annum supported by expanding demand from the food industry and as an alternative energy source.
In November 2017, the Indian government doubled the import duty on Malaysian CPO to 30% from 15% previously and increased import tax duty on refined palm oil imports to 40% from 25% in order to support its local refiners. Malaysian Palm Oil Association chief executive officer Datuk Mohamad Nageeb Wahab, meanwhile, said export volumes had dropped since the tariffs were increased in November.
Starting from 8 January 2018, Malaysia, the world’s second-largest palm oil producer, will suspend export taxes on crude palm oil for a three-month period to boost prices and reduce high stockpiles, according to Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong.
On January 26, The Prime Minister of Malaysia, Datuk Seri Najib Tun Razak is visiting India for ASEAN-India Summit. He brought up the high import duty on palm oil issues during his visit. The Prime Minister of India, Narendra Modi told the Malaysian Media, "he will give serious consideration to the request and will consider reviewing its high import duty on Malaysia Crude Palm Oil".
Earlier this year, the EU Parliament passed two resolutions – to impose a single certified sustainable palm oil (CSPO) scheme for Europe-bound palm oil exports after 2020 and to phase out palm oil from the EU biofuel programme by 2020. The resolutions would threaten the livelihoods of 650,000 smallholders and over 3.2 million Malaysians who rely on the palm oil industry, according to industry group the Malaysian Palm Oil Council.
The Federal Land Development Authority (Felda) will send a petition with about 100,000 settlers’ signatures to the embassies of European Union (EU) members here on January 16 to protest the bloc’s plan to ban palm oil from entering its market.
Defence Minister Datuk Seri Hishammuddin Tun Hussein on 27 January 2018 said that he would raise the issue involving European Union (EU) resolutions on palm oil during his meeting with his French counterpart on 29 January 2018. He said even though the issue had nothing to do with the national defence industry, the good relationship between Malaysia and France in the defence industry and investment should be put to maximum use to get France's clarification and stand on the issue.
In short, Felda Settlers contributed UMNO/ BN 54 seats, either the government need to do something to help the felda settlers, or they throw BN away. Following months, there will be a lot of news on Malaysia Palm oil as the General Election is coming nearer, FGV is a must counter that in your portfolio.
*Disclaimer: Not a buy or sell call, it is just for educational purpose. Buy or sell at your own risk.
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