Outlook for World Vegoils

2016
By Dorab E Mistry
Godrej International Limited
 Congratulations
• Congratulations to PEOC and organisers
• Thank you Rasheed
• Congratulations to Pakistan industry for
success despite huge adversities
• May India – Pakistan dialogue flourish
• 2016 promises to be an exciting year
 Background
• 2015 – year of severe El Nino
• Indonesia finally got its Bio Diesel mandate
programme started
• Challenge of very low crude oil price
• China in transition and economy slowing
• Edible oils demand has held up well, with
India in a stellar role
 Palm Production
• 2015 Malaysian production failed to reach
20 mln tonnes
• El Nino has had a profound effect
Triple Whammy of Dry Weather, Biological
Low Cycle and Seasonal Low period.
• Low production can last until July 2016
 Indonesian Bio Diesel Mandate
• Off to a late but good start from mid
November.
• Subsidy required is very high
• Current programme will run at 200,000
tonnes until April 2016
• New Allocations in March 2016?
• Bio Diesel mandate may not be necessary?
 Soya oil
• We expect big crops in Brazil and
Argentina.
• USA Blenders Credit has stabilised soya oil
futures. Oil share is climbing
• Soya oil is gaining market share
• For next 4 months palm and soya
differential will narrow
 Rape oil
• 2015 crops turned out to be much better
than expected – in Canada
• Indian winter crop may be higher
• Upcoming crops in EU and Ukraine may
not be great
• Lot depends on China policy on Reserve
Stock of Rape oil
 Other oils
• Sun oil: 2015 crops are better than earlier
low expectations
• Fingers crossed on 2016 crops
• Premium of sun oil over soya oil
• Lauric oils: Supply is not great but demand
is soft also
 Indian imports
• 15-16 14-15 11-12
• Soya 4,200 2,986 1,080
• Palm 9,750 9,478 7,670
• Sun 1,200 1,542 1,140

• Total 15,600 14,612 10,200

 CHINA
• Big rise in soybean imports
• 2015-16 could be as high as 84 million?
• Consumption of veg oil has plateaued
• Reserve Stock of 6 million tonnes of Rape
oil – MUST release this stock
• Must reduce import of rapeseed & oil
• I remain Bullish on China economy
 World Energy Demand
US EPA bio diesel mandate
• Indonesian Palm Bio Diesel consumption is
critical
• World Energy demand for veg oils will
grow in 2015-16 by more than my earlier
estimate of 1.5 mln mt only
 World Demand
• Food Demand rising at 3.5 mln mt
• Bio fuel demand SHRANK by 1.5 mln mt
in 2014-15.
• We believe bio diesel demand in 2015-16
will recover and expand by more than
earlier estimate of 1.5 mln mt. By how
much?
 Incremental Supply
• 000 tonnes 14-15 15-16
• Soya oil + 2,700 + 3,500
• Rape oil - 300 - 1,500
• Palm oil + 1,600 + 1,000
• Others - 100 + 100
• Total Supply + 3,600 + 3,100
• Total Demand + 2,500 + 5,000
 Palm holds Key to Prices
• Assumptions
• Brent to trade US$ 30 to 50 per barrel
• FED will not raise rates until Second Half
of 2016
• Ringgit, Rupiah, Real and Peso have
bottomed out and US Dollar has peaked
 Price Outlook
• BMD futures will rise quickly to 2600
• May go to 2700 in Q2 2016
• RBD Olein can go to US$ 670 FOB
• So scope for price rises is limited due to bad
macros and low crude oil prices
 Price Outlook
• Soya oil futures to 33 cents.
Soya oil FOB can rise to US$ 700 FOB
• Soybeans – below $9 per bushel
• Sun oil & Rape oil – sideways
• Laurics – CPKO US$ 900 - 1000 cif
Rotterdam. CNO can trade $ 200 higher
 Conclusion
• Prices are rising. Industry is in good shape
• El Nino of 2015 is the Catalyst
• Congrats to PEOC
• Look at what happened in 1997 – last Asian
Financial Crisis – side by side with El Nino
Good Luck and God Bless