Commodities Bulletin #8

• MALAYSIA: While remaining at high levels, Malaysian exports suffered from low Indian demand due to the increased competitiveness of other vegetable oils. Unusually discounted sunflower oil over palm oil and a weak Malaysian Ringgit contributed to lower prices. Malaysian stocks declined sharply as a result high exports and unusually low production affected by lower than average yields. Added to this dynamic was the news of the European Parliament's approval of the law banning imports into the EU of raw materials grown on deforested land after 2020.

• INDONESIA: Export restrictions imposed by the Indonesian government have contributed to higher prices, making sunflower oil and soybean oil more attractive to several importing countries and prompting some Indian buyers to reduce palm oil imports. In China, on the other hand, expectations of a growth in palm oil imports remain, stimulated by the decision of the Chinese Ministry of Agriculture to limit dependence on soya imports. Total export volumes declined slightly, under the sharp drop in Indian demand partly offset by the increase in Chinese imports. On the other hand, consumption was slightly up, driven by demand from the food and biodiesel industries, keeping Indonesian stocks low, down 48% from last year.

The main bullish risk factor from June onwards is the development of El Niño, which could cause widespread drought in South-East Asia, jeopardising expected production growth, and undermining the expected price decline.