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R.E.A Holdings PLC

In 2016-17 some 85 million tonnes of oils and fats were exported worldwide. Within this total, palm oil and palm kernel oil accounted for the largest individual export total at over 50 million tonnes, significantly ahead of soybean oil, the second largest at just over 12 million tonnes. Palm and palm kernel oil also had the highest ratio of export to production at 70%, again materially higher than for any of the other oils or fats.

Significant price movements have always been a feature for the leading oils and fats traded on world markets. Monthly average palm oil prices, CIF Rotterdam, reached a high of $705 per tonne in 1998, then falling to a low of $234 per tonne in 2001 before recovering to trade more steadily in a range of $400 to $500 per tonne for the next four years. In the second half of 2006, prices started to rise steeply and reached levels of US$1,249 in March 2008. Prices remained high until July 2008 when, in line with other commodities and as a result of the developing world financial crisis, prices started to fall materially, reaching a low point of around $500 per tonne at the end of that year. Prices have since recovered progressively, reaching levels above $1,000 per tonne in 2011 and 2012 and remaining relatively steady for most of 2013 trading in a range of between $800 and $900 per tonne. The average CPO price, CIF Rotterdam, for the ten year period 2007 - 2017 has been $837 per tonne.

The 1997/98 El Niño drought had a detrimental effect on the 1998 FFB crop and thus CPO output; this, coupled with the reduction in export supplies from Indonesia, following the imposition by the Indonesian Government of an export ban that was subsequently replaced by an export tax on CPO, lead to a marked decrease in world supply and resulted in downward pressure on worldwide palm oil stocks. As a result, international export prices for palm oil were at historically high levels during 1998.

Starting in 1999, however, prices fell significantly, reflecting a surge in the production of CPO in both Malaysia and Indonesia as post El Niño production recovered to more normal levels. The market also reflected the increasing prospect of Indonesian producers returning to the export markets as the Indonesian government progressively reduced export tax.

Following the El Niño event in 1997/98, the world stocks of oils and fats fell to a low of 12 million tonnes in September 1998 (1.4 months consumption). Stock levels then increased through the three year period to September 2001, reaching almost 15 million tonnes (1.5 months consumption) at that date before falling to 12.7 million tonnes (1.2 months consumption) at September 2003. End September stock levels have subsequently increased in every year except 2007 and stood at a level of 28 million tonnes (1.5 months consumption) in 2016.

Palm oil has followed the general trend of prices within the oils and fats complex as a consequence of its interchangeablility with other members of the complex.