Abstract: Although the supply side of international brown oil has changed as scheduled, both India and China have high inventories, poor import profits and weak demand support for horse palm oil. The shortage of domestic oil supply and demand will be further improved. Temporarily, the bottom is in large interval operation.

1. Review

Recently, the trend of edible oil has been weak. The large shock range of soybean oil and palm oil in the early stage has not broken. The pressure on the upper edge of the range has fallen back, and rapeseed oil is relatively strong. Malaysian palm oil pan also fell under pressure. Although the palm oil production area has entered the production reduction season, the recent international demand has turned worse. Domestic soybean oil and vegetable oil will also meet the supply turning point. Due to the lack of benefits, the oil pressure is downward.

2. Indonesia

1) Indonesia's palm oil export levy began. At the end of October, the Indonesian Economic Minister said that the exemption period of the special tax on palm oil exports (levy) would be extended until the end of this year, unless the reference price of crude palm oil exceeded 800 dollars/ton. We mentioned in the report last week that it is not difficult for the reference price of Indonesian fur palm to exceed 800 dollars/ton, and it is likely to be collected in advance before the end of this year.

2) In the middle of last week, the Ministry of Finance of Indonesia announced levy rules for levy when the reference price of fur palm exceeded 800 dollars/ton by the end of December this year. On Friday, the Ministry of Finance of Indonesia released the reference price and export tax standard for fur palm in the second half of November.

3) The Indonesian government set the reference price of crude palm oil at USD 826.58/t in the second half of November. Indonesian crude palm oil (CPO) export tax will increase to 33 dollars/ton from 18 dollars/ton in the first half of November. levy was resumed, and the fur brown levy in the second half of November was 85 dollars/ton. Therefore, the Indonesian gross palm export tax in the second half of November totaled 118 dollars/ton, an increase of 100 dollars/ton compared with 18 dollars/ton in the first half of November. Indonesia resumed levy in November, and its price advantage over Malay palm oil will weaken month on month, making short-term profits.

Judging from the current POGO price difference, Indonesian palm oil firewood is still very profitable. However, if Indonesia plans to implement B40 in 2023, Indonesia Plantation Fund needs more export levy funds.

3. Malaysia

1) Malaysia's palm oil production decreased in November. SPPOMA estimated that the production in the first half of November decreased 5.4% month on month.

2) Malaysia's palm oil export is also good at present. The month on month growth in the first half of November was more than double digits, exceeding expectations. Therefore, it was rumored that India would raise the import tax on fur palm, but soon the official announced that it would not implement it. India's imports are expected to be positive during the import tax hike.

3) At present, the inventory of horse palm in November is expected to be flat on a month on month basis, with little change.

4. China

1) China domestic palm oil storage continued to rise to the highest level in the same period in history, with loose supply and demand. However, after December, the import profit of shipping period turned worse, and the purchase of ships decreased. The inventory in December may fall back at a high level, but it is still at a sufficient level.

2) Domestic soybean and rapeseed imports are small in the early stage, domestic supply and demand are tight, inventories are extremely low, and the basis is high. However, in the middle of November, with the increase of imported soybeans and rapeseed, the squeezing volume will soon rise, and the supply will usher in a turning point. Domestic spot stocks are about to weaken.

3) Rapeseed oil is significantly stronger in the near future. As the estimated arrival of rapeseed in November is slow, the squeezing volume is lower than expected. However, the quantity of rapeseed arriving in Hong Kong in December was very high, and the demand for stacked reserve rapeseed oil tankers was coming in. Before the end of the year, the domestic rapeseed oil inventory was still tight. Recently, Fujian rapeseed oil reported 01+1400 in December, which was still very high. Rapeseed oil 15 price difference rises sharply in the short term, but it is impossible to duplicate the 11-1 price difference. The rotation rhythm and quantity of vegetable oil reserve in the later period are very important for domestic vegetable oil supply from December, 2022 to January, 2023.

5. Conclusion

In the short and medium term, although the supply side of international brown oil has changed as scheduled, both India and China have high inventories, import profits have decreased, and the demand support for horse palm oil has weakened. The shortage of domestic oil supply and demand will be further improved. Temporarily, the bottom is in large interval operation.

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