Palm Oil Background
About half of the worlds palm oil is produced in Indonesia. The 2013 the output was approximately 22 Million Tonnes, produced from approximately 6 Million Hectares of productive plantations. The Indonesian government has stated a target output of 40 Million Tonnes from 10 Million Hectares by 2020. Current estimates of the increase in area from tracking the growth of new plantations and the age of the oil palms within them are poor, as the industry is unregulated. Therefore, the volume of palm oil coming to market for the 2015 period is unclear. The spot price of palm oil is driven by the rising global demand and available supply. Futures prices are based on the current understanding of the supply/demand situation at the future settlement date.
Our insights deliver accurate measurement of the new plantations areas and plant age thus providing an accurate forecast of the likely volume of palm oil coming to market at various points in the 2015 season. Our clients, with this understanding of supply and the wider knowledge of world demand, therefore trade futures for their 2014 requirements, or the spot price, whichever they deem to be the lower.
The savings can be considerable as the current futures contract prices for July 2016 a re currently $488.75 (a current low point for the last 12 months trading, and down some -31.8% from the 52 week high of $716.75. Come mid 2014 with a possible oversupply of palm oil (the reality of which our insights deliver) and reduction in market need, prices could again drop to nearer $700, a saving of $90 per tonne on the current futures price. If our client buys nearly 1 Million tonnes per year this could be a saving of $90 million dollars. Our insights help the client to better control the risk when making this decision, to help secure the best trading strategy and lowest prices for palm oil.
Indonesia and Malaysia
- Plantation areas
- Age of oil palms
- Health of oil palms
- Potential yield of oil palms
- Harvest progress
- Refinery operations and shipping
Palm Oil – Indonesia and Malaysia
Key variables to monitor:
- Crop area
- Crop density
- Crop age
- Crop health
- Weather impact (drought etc.)
Palm Oil – Methodology
Geospatial Insight has developed a proprietary technique to identify and measure Oil Palm acreage, estimate crop age and derive estimated yield.
Use highly cost-effective Landsat/Planet Labs/Urthecast MRC data to derive plantation type, boundaries, and palm crop density and age
Use Landsat/Rapideye/DMC across the year to monitor crop evolution, including crop health, dependant upon drought/disease etc.
Use MODIS and weather data inputs to provide weekly NDVI-based yield forecasts, including measuring impact of any severe weather events
Palm Oil Acreage Definition, Indonesia