CPO Prices Collapse 25% Since March 2016

As reported by the Financial Times, near-dated palm oil futures contracts trading on the Bursa Malaysia are now at 2016 lows, as forecasted previously this spring by Chain Reaction Research. Weaker global demand for palm oil and recovering palm oil production post 2015 El Niño are driving palm oil futures down.

Near dated palm oil futures contracts are now trading ranging from 2,172 to 2,270 ringgit per metric ton, down 25%. In fact, July 12, 2016 palm oil spot prices closed at 2,188 ringgit per metric ton. Only three months ago, they traded as high as 2,783 ringgit per metric ton.

There are many reasons for weaker-than-expected demand, but one notable and unexpected issue is opposition to Indonesia’s biodiesel mandate from Indonesian energy interests. Indonesian state power firm Perusahaan Listrik Negara (PLN) stated that the Government of Indonesia’s 30% palm oil biodiesel mandate is not possible as it would “damage generators”.

Peruvian Palm Oil Expansion Advertised in The Jakarta Post

Meanwhile, halfway around the world, palm oil companies are expanding in the Peruvian Amazon. Two companies – Plantaciones de Pucallpa S.A.C. and Plantaciones de Ucayali S.A.C. – transferred 95% of their properties to La Fiduciaria S.A.

Then on June 23, 2016, La Fiduciaria S.A. put a notice in The Jakarta Post to sell these properties to Indonesian investors. These two properties total 11,435 hectares, 80% of which was deforested illegally according to Peruvian law. The auction advertised in The Jakarta Post is open to the public.

But previously, on September 2, 2015, the Peruvian Ministry of Agriculture issued a stop-order against Plantaciones de Pucallpa S.A.C. to cease illegal deforestation activities on 5,263 hectares. United Oils Ltd. SEZC is the primary investor in Plantaciones de Pucallpa S.A.C. United Oils also has an investment in Plantaciones de Ucayali S.A.C.

Finally, the Wall Street Journal has reported that United Cacao Ltd. SEZC has invested in both plantation firms. United Cacao Ltd. SEZ – founded by Denis Melka, who made a fortune in Malaysian palm oil – is targeted for delisting by the London Stock Exchange’s Alternative Investment Market for illegally deforesting Peruvian forest and misleading financial statements.