11. Palm oil has been oversupplied. How long before this is worked off?
A fall in demand from China and India, and a low oil price, have merged to create an oversupplied palm oil market, though HSBC sees crude palm oil (CPO) prices reversing. Indeed, CPO prices are up 21 per cent for the year to date after El Niño in 2015 took its toll on production.
Despite languishing demand in 2015, the bank expects Indonesian demand to increase, thanks to the implementation of a policy in 2014 – the establishment of a plantation fund, which is collecting levies on palm oil exports to subsidise biodiesel uptake in the country.
Chinese demand will also increase, after a surge in soy demand displaced palm oil. HSBC believes China is at saturation point with soy and will return back to palm.
Indian demand has recovered since the elections in mid-2014. India is palm oil's biggest market and the bank sees no reason for its appetite to diminish.
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