Indonesia's palm oil export ban heats up vegetable oil market

Yahoo – AFP, Thomas URBAIN, with Manel MENGUELTI in Paris, 30 April 2022 

Indonesia's decision to suspend palm oil exports is designed to bring down prices
and limit shortages domestically, but it comes amid skyrocketing prices of edible
oils and global supply shortages (AFP/Azwar Ipank) (Azwar Ipank)

Indonesia's decision to suspend palm oil exports in the face of domestic shortages has pushed vegetable oil prices to new highs, further tightening a market already on edge due to the war in Ukraine and global warming. 

The prices of palm, soybean, European rapeseed and even its Canadian GMO counterpart, canola oil, have reached historic highs following Indonesia's announcement on Wednesday. 

"We already had problems with soybeans in South America, with canola in Canada," said Philippe Chalmin, an economics professor at Paris-Dauphine University in France, stating that both crops had been severely affected by extended droughts. 

Then came devastation for the "sunflowers in Ukraine" due to Russia's destructive invasion, he added. 

Palm oil is the most consumed vegetable oil in the world, and Indonesia accounts for 35 percent of global exports, according to James Fry, chairman of LMC consulting firm. 

Indonesia's export ban is designed to bring down prices in the country and limit shortages, according to authorities. 

But Chalmin said the move "comes at the worst time." 

"The rise in prices dates back to last year already and it is exacerbated by the Ukrainian conflict," he explained. 

Rich Nelson of the agricultural market research and trading firm Allendale said "the industry believes it'll last maybe for one month, perhaps two." 

But in the meantime, prices are skyrocketing in a market that was "already accelerated," he said. 

Unlike other oilseeds, palm fruit does not keep once picked and has to be processed immediately, Fry said. 

Indonesia's palm oil storage system, which was already holding substantial reserves, is now under further stress, Fry said. 

Vicious cycle 

Even though the price of vegetable oil, in addition to multiple other agricultural commodities, has been rising for months, demand has yet to slow. 

"It's difficult to ration demand for food commodities with higher prices," said Arlan Suderman, chief commodities economist at StoneX Financial. 

Palm oil, which is used heavily in processed food such as instant noodles and baked goods, is also present in other consumer products, such as personal care items and cosmetics. 

"Eventually it will trickle down," said Paul Desert-Cazenave of consulting firm Grainbow, "but it's still too early to measure price increases to consumers." 

In the short term, the only oilseed that might be able to provide some relief on the vegetable oil market is the soybean. 

The United States and Brazil, the world's two top soybean exporters, still have available stock, even though more shipments from the countries would only have a marginal impact on edible oil prices. 

The United States Department of Agriculture (USDA) announced last month that it expects soybean acreage to increase more than 4 percent from last year, while corn would shrink by a comparable amount. 

The world's top rapeseed exporter, Canada, meanwhile said Tuesday that it expected a seven percent decline in acreage devoted to the GMO rapeseeds used in canola oil. 

Analysts and economists say they see a need for public policy concerning the food crisis, since in addition to food, vegetable oils are also widely used in biofuels. 

Based on the current crisis "we're going to see more pressure on countries to reduce their biodiesel blending mandates, and renewable diesel mandates," Suderman said. 

"That's going to take time," he warned, "but that's ultimately where you're going to get your biggest demand destruction." 

Europe passed a directive in 2018 excluding palm oil from renewable energy targets by 2030. Some of the bloc's countries, including France, have already stopped using it. 

Despite the current turmoil, Indonesia and Malaysia, the world's second-largest exporter, have maintained their respective programs blending palm oil in their biofuels. 

To make matters worse, many of the major palm oil importers, mainly Egypt, Bangladesh and Pakistan, have seen their currencies depreciate significantly in recent months, said Michael Zuzolo, president of Global Commodity Analytics and Consulting. 

Some major oilseed exporters such as the United States and Brazil have, meanwhile, experienced the opposite, with the dollar reaching multi-year highs. 

"This is kind of the worst-case scenario starting to develop," said Zuzolo. 

Putting importers in a "negative feedback loop where they're going to have more and more difficulty keeping supplies ample, that's the potential tragedy we're walking ourselves into."

Local King Koil Assembler Upbeat About Consumer Purchasing Power, Eyes Expansion to E. Indonesia

Jakarta Globe, Muhamad Al Azhari, November 25, 2017

Duta Abadi Primantara, a local company that holds licenses for some international
mattress brands, is upbeat about its future business due to expected growth of
consumer buying power in years to come. The company is also eyeing a major
expansion to the eastern part of Indonesia. (Photo courtesy of Duta Abadi Primantara)

Jakarta. Duta Abadi Primantara, a local company that holds licenses for some international mattress brands, is upbeat about its future business due to the expected growth of consumer buying power in years to come. The company is also eyeing a major expansion to the eastern part of Indonesia.

The company, first established in the 1990s, currently has four factories and 13 assemble point facilities in Sumatra, Java, Sulawesi, Bali and Kalimantan.

DAP holds licenses to locally assemble high-end mattresses for brands based in the United States, including Aireloom, King Koil, Serta and Tempur. The company has its own locally-manufactured mattress brand, called Florence, that targets medium- to low- income customers.

King Koil and Serta are the leaders in the premium segment of the mattress industry in Indonesia.

Anthony Setiawan, the vice president director of Duta Abadi, said the company has seen a healthy single digit revenue growth over the past few years and is bullish about future businesses.

"There has been a slowdown [in economic growth], we felt it too, but buying power is predicted to increase in the future, a lot research has shown. Also, we noted an interesting fact that people in Indonesia are now more aware that quality sleep is important. If you look at the statistics, people spend a third of their time sleeping. It is very important that they sleep well," said Anthony, who is the second generation of the family who founded and owns DAP.

Indonesia’s economy expanded at a slower pace in the third quarter this year compared to market expectations, a disappointing outcome for the country as a slowdown in private consumption dragged overall growth.

The economy expanded 5.06 percent year-on-year in the third quarter, just slightly higher than a 5.01 percent year-on-year growth in the previous quarter. The third quarter figure is lower than the median estimate from polling by Reuters and Bloomberg, which showed figures of 5.13 percent and 5.2 percent growth respectively.

Despite the fact that Indonesia’s economy expanded at around 5 percent on average over the last five years, government officials and economists generally remain upbeat over growth outlook in the near term, thanks to new infrastructure development, an expected rebound in commodity prices and more investment in the country.

Anthony said about 80 percent of his company's products are sold to end-customers, while the remainder are bought by hospitality industries like hotels and healthcare operators like hospitals.

"We started the business in the 1990s with Florence mattress. This is our first brand,  which we manufactured and distributed. Then, in 1996, we acquired the exclusive license for King Koil in the United States," Anthony told the Jakarta Globe on the sidelines of Hotel Week, a three-day exhibition and conference that gathers players in hospitality industry.

He said DAP then expanded to acquire exclusive licenses to assemble mattresses for Serta, Tempur and Aireloom.

Anthony said the company imports raw materials for its premium mattress brands but assembles them in Indonesia. DAP currently has a comprehensive distribution network in Indonesia that covers Java, Sumatra, Sulawesi, Bali, East Nusa Tenggara and Kalimantan.

He said the next stage of expansion will be targeted to the eastern part of the country to capture the higher purchasing power of people and benefits from expansions of hotel operators in the region.

"The hospitality industry is very important for us. When we started marketing King Koil, our first customer was the Mulia hotel in Senayan. From this, we started being acknowledged among five-star hotels. This continues until now as hotel owners and operators are getting more aware that mattress are one of the most important factors in their hospitality services," Anthony said.

"For customers, when they stay at a particular hotel, when they feel they have a good sleep and rest, they will look at the brand of the mattress, usually they may be encouraged to buy the same at home."

DAP has also started to tap into the hospital market due to more attention in the sector from the government.

"There is a specific requirement if we want to tap into the hospital bed mattress, for electronic-adjustable bed, there is a certain certification that a manufacturer and supplier must secure, currently we cooperate with a certain supplier [of hospital beds], but we are working on the way of making our own [electronic-adjustable mattress]," Anthony added.

DAP currently holds the exclusive license to assemble and distribute King Koil products in Indonesia and China and distribute Serta products in Indonesia, Singapore, Malaysia, Vietnam and the Philippines.

China to implement bank deposit insurance from May

Want China Times, Xinhua 2015-04-01

The People's Bank of China in Beijing. (File photo/CNS)

The Chinese government announced on Tuesday that it will implement the long-awaited bank deposit insurance scheme in May, taking a key step in the country's financial reform.

From May, financial institutions will be required to pay insurance premiums into a fund that will be managed by an agency appointed by the State Council, according to a statement posted on the government website.

The scheme is designed to return bank clients' deposits if their bank suffers insolvency or bankruptcy. The reimbursement will be drawn from the new fund in the case of the deposit being 500,000 yuan (US$81,400) or less, which applies to 99.63% of Chinese depositors, said the statement.

The reimbursement shall be paid within seven working days, according to the deposit insurance scheme's regulations.

Banks will pay also indemnity with their own assets to those who have deposited more than 500,000 yuan.

The scheme will cover both RMB deposits and foreign currency deposits from individuals as well as companies. Both the principal and interest are under protection by the scheme.

A separate statement quoted an unnamed official as saying, "The scheme will help build public confidence in the financial market, straighten the relationship between government and the market... and maintain financial stability."

Deposit insurance schemes are an important part of any financial safety net. More than 110 countries and regions have established such schemes. The scheme has long been considered a precondition for China to free up deposit rates — the last step in interest rate liberalization.

Guo Tianyong, a professor at Beijing's Central University of Finance and Economics, stressed the importance of the scheme to broader economic reform. "Whether it is full liberalization of deposit rates or more approvals of private banks that China will push forward in the future, the country first needs a safety net in the shape of a deposit insurance scheme."

Guo said the scheme will help the development of small banks as it will make depositors more confident in them.

Chen Hufei, an analyst at Bank of Communications, said the scheme has to some extent reminded depositors of the potential risks of saving all their money as bank deposits, and will likely encourage them to diversify asset allocations via multiple investment channels, such as pension insurance, wealth management products, stocks, securities, and precious metals.

Apple's Tim Cook says 'I'm sorry' to Chinese customers

BBC News, 1 April 2013

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Apple boss Tim Cook has apologised to Chinese consumers after state media accused the firm of arrogance and greed and of "throwing its weight around".

A two-week long Chinese media campaign had focused on Apple repair policies.

A statement on Apple's China website said "misunderstandings" may have led to the perception "Apple's attitude was arrogant" towards Chinese customers.

Mr Cook promised to improve the repair policy on the iPhone 4 and iPhone 4S, and to improve warranty information.

"We are aware that a lack of communications... led to the perception Apple's attitude was arrogant and that we do not care and attach importance to consumer feedback," Mr Cook wrote. "We express our sincere apologies for any concerns or misunderstandings this gave consumers."

Apple said it would enhance communication with Chinese consumers and strengthen oversight of authorised resellers.

State broadcaster CCTV and the state's flagship newspaper, People's Daily, had portrayed Apple as the latest Western company to exploit Chinese citizens.

Last week the paper ran an editorial headlined: "Strike down Apple's incomparable arrogance."

China is Apple's third largest market, with more than 17,000 outlets selling its products in mainland China, including 11 Apple stores and 400 premium resellers.

Earlier this year Mr Cook said he expected China to replace North America as its largest source of revenue.

Will Influential Asia Shape the World?

Jakarta Globe, Shoeb K. Zainuddin, September 29, 2012

Customers talk to a salesperson at a Lenovo shop in Shanghai in this
February 17,  2011 file photo. Experts urged the West not to underestimate
China. (Reuters Photo/Aly Song)

            

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New York. Fueled by rising incomes and a half billion new consumers by 2020, Asia will dominate the global economy over the next few decades, forcing the world’s financial and security architecture to reflect the rise of emerging nations.

This point, made by Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy, at the 12th annual Leadership Forum in New York, was countered by billionaire investor George Soros, who said that many emerging powers do not have strong internal systems, such as democratic institutions, to play a leading role on the global stage.

The forum — titled “Defining the Future: How Emerging Powers Will Shape The World Order” and co-sponsored by Strategic Review, an Indonesian journal of leadership, policy and world affairs — brought together Mahbubani, Soros and Lakhdar Brahimi, the United Nations Special Representative for Syria.

Indonesian President Susilo Bambang Yudhoyono, who delivered the keynote address, laid the groundwork for the debate when he said the seismic power shifts now underway would continue to have an impact as the Cold War gives way to “Warm Peace.”

“One of the challenges of the Warm Peace is how to accommodate the rise of emerging powers such as Brazil, Argentina, India, Indonesia, China, Turkey and Saudi Arabia,” he said. “Economic growth is what makes a country strong, and it determines a country’s influence in the community of nations.”

The emerging powers, he added, are even more influential today given the gloomy economic outlook in the developed world. “As a result, emerging powers are not just hard to ignore but they are new partners in reshaping the global landscape,” the president said.

This point was picked up by Mahbubani, who argued that despite uncertainty in the short term, the long-term outlook appeared bright as growing numbers of people from emerging powers join the ranks of the middle class.

“Indonesia is part of the larger story and the key word is confidence, which is incredibly high within the emerging countries,” he said.

“But how do we restructure the global order to reflect this significant change? The UN Security Council must change as the current permanent members are dictators as they cannot be voted out.”

Soros, however, was not convinced, saying that the collapse of the Soviet Union and other past emerging powers proved that democracy and freedom of expression are vital components of a nation’s power.

“We must consider this when we talk about the emerging powers and the West, especially so for China. Will it become an open society? That is the single most important development for the world to consider,” he said.

Mahbubani countered by urging bystanders to not underestimate China, because that would be dangerous.

“The Chinese Communist Party of today is very different from the past. More than 70 million Chinese travel every year and they can see how the rest of the world is developing,” he said, adding that the Western mindset is a black-and-white one and cannot comprehend the complexity of China.

Another region of the world that is poorly understood is the Middle East, Brahimi said. The region, he noted, has had many false starts but the Arab Spring has given people a new voice and they are not going to be silenced.

The West, he added, is too preoccupied with Iranian President Mahmoud Ahmadinejad, who will soon leave office.

“But Iran is an ancient civilization that has been around for a long time and will continue to be around in the future.”

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Peer-to-peer lending via the internet hits £250m

BBC News, By Simon Gompertz, Personal finance correspondent, 8 June 2012

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Lynne Martin's money is spread
 among hundreds of borrowers, thus
reducing risk

Lending via three websites that link savers with borrowers - bypassing the banking system - has topped £250m.

The "new age" finance carries no protection for deposits, but is being tipped as a serious threat to traditional banks.

The peer-to-peer sites are led by Zopa, which has lent more than £200m since it started in 2005.

Funding Circle, specialising in business loans, has topped £34m, and RateSetter has reached £24m.

Last month the government said it would lend these sort of firms £100m to help expand their own lending to businesses.

"It's a marketplace, the eBay for money," says Lynne Martin from Hertfordshire, a foot technician in her late 50s who has been using Zopa to build up a nest egg for retirement.

Higher returns

Lynne was fed up with the returns she was getting from banks and pension plans.

So she has lent a substantial part of her savings via the website, spreading it between hundreds of borrowers and by-passing the banking system.

The interest from the latest £5,000 is 7.4% a year before tax but after taking into account Zopa's 1% charge.

That is substantially more than is available on a typical savings account at a bank.

On the other side of the ledger, Jamie Hirst from Chippenham in Wiltshire has borrowed £4,500 through Zopa to cover the cost of a revamp of his kitchen and bathroom.

The 8.4% APR he is paying is 5% less than he was quoted by his bank.

"I thought it was brilliant," he told the BBC's Your Money.

"The fact that there wasn't some fat cat taking the profits, just some guy investing 50 or a hundred quid to get a little return and doing something good for someone else."

The drawbacks

There is a significant drawback for savers: the lack of any guarantee that you will get your money back.

Peer-to-peer lending, as it is known, does not qualify for protection from the Financial Services Compensation Scheme (FSCS), which provides security up to £85,000 per bank, for each saver.

The peer-to-peer sites put their loan applicants through credit checks and Zopa says it divides people's savings into £10 chunks which are spread between borrowers, to minimise any risk.

On average, so far, its lenders have lost 0.5% of their money as a result of borrowers defaulting.

But Lynne Martin predicts the concept is bound to catch on more widely.

"Necessity is the mother of invention," she says.

"This is a new asset class. It's not a share and it's not a bank account."

Official support?

Lynne has support from a director of the Bank of England, Andy Haldane, who suggested in March that peer-to-peer lenders could replace High Street banks. 

Jamie Hirst has been able to borrow
 money at a cheaper rate than from
his bank

"There is no reason why end-savers and end-investors cannot connect directly," he explained.

"The banking middle men may in time become the surplus links in the chain."

Lynne is hoping the interest she is earning will help pay for her to retire to the West Country, a hope which highlights an interesting feature of peer-to-peer lending.

Much of the money has been moving across generations, from older people looking for a decent income to younger borrowers setting up in life and desperate to keep down the cost of taking a loan.

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"The New Paradigm of Reality" Part I/II – Feb 12, 2011 (Kryon channelled by Lee Carroll) (Subjects: Egypt Uprising, Iran/Persia Uprising, Peace in Middle East without Israel actively involved, Muhammad, "Conceptual" Youth Revolution, "Conceptual" (without a manager hierarchy) managed Businesses, Internet, Social Media, News Media, Google, Bankers, Global Unity,..... etc.)