Equity Analysis /
Thailand

Thailand: Agro & Food - Vegetable oils: Indonesia to ban RBD palm olein exports

  • Indonesia to ban only export of RBD palm olein effective Apr 28

  • Ukraine war to escalate tighter global vegetable oil supply in 1H22

  • TVO’s strong SBO margin to be offset by weaker SBM margin

Prasit Sujiravorakul
Prasit Sujiravorakul

Equity Research Analyst

Bualuang Securities
27 April 2022

Besides the prolonged Russia-Ukraine war, Indonesia’s ban on exports of liquid cooking palm oil will exacerbate the current tightening global vegetable oil supply. This will keep global vegetable oil prices high in 1H22 before palm oil output in Indonesia and Malaysia start rising in anticipation of their larger harvest acreage in 2H22. Despite a strong margin for soybean oil (SBO), (representing 35% of TVO’s sales), amid the global SBO price surge, its margin for soybean meal (SBM), (accounting for about 60% of its sales), is likely to weaken and bring down the overall soy margin. We rate TVO a HOLD for a 6% dividend yield.

Indonesia to ban only export of RBD palm olein effective Apr 28

On Apr 22, Indonesian president Joko Widodo announced the suspension on palm oil exports (including all cooking oil and raw material) starting Apr 28, 2022 in order to stymie the soaring domestic price of cooking oil and ensure the availability of domestic cooking oil and food products. This announcement came after a rally in Jakarta where hundreds of people protested the soaring oil and food prices. However, on Apr 25, the government clarified again that the announced ban will include only the bulk and packaged refined, bleached and deodorized (RBD) palm olein (or refined liquid cooking oil) but exports of crude palm oil and RBD palm oil will still be allowed. Note that RBD olein accounts for 35-40% of Indonesia’s total palm oil exports.