AGRICULTURE : Mr. G Chandrashekhar, Economic Advisor- IMC, Director IMC ERTF

1. IMC-MCX Commodity Market
Fundamentals Forum
January 23, 2020. Mumbai
Market Drivers and Fundamentals of
Palm Oil and Cotton
G. Chandrashekhar
Economic Advisor, IMC

2. Global Commodity Market Drivers
• Economic growth
• Geopolitics (via crude oil)
• Monetary Policy
• Currency
• Weather
• Government Policy

3. Global Vegoil Market Snapshot
(Million Tons)
• Oil 2018 2019 2020
Palm 70.6 73.9 75.2
Soy 55.2 55.7 56.7
Rape 28.1 27.4 27.0
Sun 18.5 19.7 20.6
Others 26.3 26.3 27.5
TOTAL 198.7 203.0 207.0
Use 192.2 200.2 205.0
Stock 22.3 21.2 19.2
• 2020 will be a demand side story for world
vegoil market

4. Palm Oil S-D
(Million Tons)
• Palm 2019/20 2018/19 2017/18
Output 75.2 73.9 70.6
Use 74.7 72.7 66.4
Stock 9.9 11.0 11.0
Indonesia + Malaysia = world’s two
largest producers; Weather, Stocks and
Govt Biodiesel policy impact market;

5. Palm Oil Market
• CPO rallied last 3 months due higher
demand (China), weaker output
growth (haze, weevil, dryness), BioD
program and inventory decline; 2020
growth to slow due lower fertilizer
use, haze, lower sunshine hours
• Expect Indonesia 44 ml t (43 ml t);
Malaysia 20 ml t (same); Others 11.2 ml

6. Indonesia BioDiesel Program
• Year Output Blending %
2017 37.4 2.2 6
2018 41.5 3.3 8
2019 43.0 5.8 14
2020 (f) 44.0 8.3 19
B-30 program; target ambitious; achievement
elusive; hyped targets usually intended to boost
market / confidence; CPO price movement to
hinge on success of blending program
• Malaysian program small (2-3%)

7. Palm Oil Risk Factors
• Facing challenges: attack from
industrialized countries; ‘Palm-free’
food label; Third party (bankers,
investors) pressure;
• Market currently over-bought;
usually takes 3-4 months to correct;
MPOB stocks may not fall too low;
• China ASF; US-China trade deal;

8. COTTON: Global S-D
(Million Tons)
• Year 2019/20 2018/19 2017/18
Output 26.2 25.7 26.9
Use 26.2 26.2 26.7
Stocks 17.3 17.3 17.6
Import 9.5 9.2 8.9
* Growth and Demand +ve correlation
* Market balances slowly tightening
* But stocks still burdensome

9. Cotton Market
• 2019-20 output and use balanced
• Thaw in US-China trade relations has
kindled hopes
• China is key nation for cotton
• US acreage in 2020 may decline
• India faces crop damage + quality
issues; yet output higher than in 2018-19
• Long term challenges for Indian cotton

10. Thank You
•G.Chandrashekhar
Economic Advisor, IMC Chamber &
Director, IMC-ERTF
Member, SEBI-CDAC + SEBI-RAC
Phone: +91 9821147594
email: gchandrashekhar @gmail.com
g.chandrashekhar@imcnet.org