ao link


Linked In

ANALYSIS: Malaysia offers triumph over Covid-19 hysteria


Yesterday it looked as though work at Malaysia’s palm oil plantations was to be suspended until the end of March, following the government’s decision to restrict internal movement.


Palm oil futures in on the Malaysia derivatives exchange rose by as much as 5.42%.


Today, the commodities’ minister says that palm oil plantations are exempt from the restricted movement order, according to Nageeb Wahab, the chief executive of the Malaysian Palm Oil Association.


Today the same June-delivery palm oil contract closed down by 0.44% at the equivalent of $512.76 per tonne.


Self-interest and commonsense


We should give ’three cheers’ to this rational decision by Malaysia’s commodities’ minister.


Obviously, it is a self-interested move - a suspension of palm oil plantation work could have sliced as much as 700,000 tonnes from Malaysia’s production. The country’s stocks of palm oil have declined to 1.68m tonnes, the lowest since mid-2017.


But it is also a significant triumph over hysteria.


The fall-outs from the Covid-19 virus are proving to be potentially more life-threatening, on a society-wide scale, than the virus itself. As of today, Malaysia has had 790 cases of Covid-19 infection and two deaths.


Avoided supply shock


India will be relieved at Malaysia’s decision to keep its palm oil plantations open - especially now that relations between the countries seem to be recovering.


India consumes around 1.5m tonnes of edible vegetable oil a month, more than 80% of that imported. Last year it imported almost 10m tonnes of palm oil.


Malaysia is the world’s second-biggest palm oil producer. The biggest, Indonesia, has not yet made public any decision on what it intends doing regarding its plantations, but given that Malaysia has already cut its export tax on palm oil from 6% in March to 5% for April, the betting must be that Indonesia keeps its plantations open for work too.


As crude oil prices sustain their slide - Goldman Sachs is now estimating an average second quarter price for Brent crude of $20 per barrel - biodiesel (of which palm oil is in many places, not least Malaysia, a key ingredient) prices will suffer too.


The global demand shocks are coming thick and fast - the world needs to avoid supply shocks wherever possible.

Related Stories

ANALYSIS: Are China's wheat imports about to get the corn treatment?

Competitive pricing is driving Chinese livestock feeders to use more grain in their rations. That could see wheat imports far exceed current forecasts

Cotton, wheat futures gain as USDA stocks downgrades top forecasts

A cut in the Wasde to the forecast for world wheat stocks proves a particular "surprise". But exuberance is capped by downbeat soybean data revisions

Weekly grain and oilseeds market view from Europe, April 9

UK to return to wheat export surplus in 2021-22?... Wheat cheaper than corn... "Significant" European rapeseed import needs...

Morning markets: Weather revives as threat to crops, on many fronts

Weather concerns are expanding from Brazilian dryness for safrinha corn to EU frost, northern US dryness - and even worries already over US summer heat
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2021 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069