FACTORS AFFECT

CPO price fluctuate and is dependent on a lot of factors that are vary
according to time thus creating a high unpredictability in its prices.
One of the common factor that affect the fluctuation the price of crude palm
oil is the economic condition of a country. It is believe that economic condition of a
country will affect the market behaviour. For example a crisis occur like global
economic downtown or recession in India will lead to a decreases in demand for crude
palm oil as this country particularly less likely to spend. Hence, producer countries
like Indonesia and Malaysia will have surplus in supply of palm oil. To avoid wasted
in production, firm will reduce the price in order to increase the demand in the market
or attract more importer such as China, India and Europe which these are the largest
importers. Similarity to a booming or certainty economy, price of CPO will increase
due to demand excess the supply of the market.
Besides, price of CPO also influences by the substitute price of good. For
example, palm oil and soybean oil, both are substitute and are the main vegetable oil
in the market. The relationship between is indicate that as any change in soybean’s
price, the demand of CPO will be affected to change. It can be seen from the country
such as US, a soybean producer country who lower production of soybean due to the
bad weather, will have prices increases in palm oil. Slightly changes in prices in
between will switch manufacturer’s decision in import. Referring to appendix 1, the
price for palm oil is lower than soybean oil hence soybean oil and palm oil are the
most crucial competitor for each other. Given that it is thought that soybean oil is
enjoying a "perceived" better health image over palm oil (see Jamal et. al. 1993) P/s
have been looking all the link I saved yet still cant find which website I copied
hhahaha, the demand for soybean oil will be increace and the excess supply in palm
oil will follow by a reduce in price. However if consumer understand how important
of palm oil in life, then their’s consumption increase demand will also can affect the
prices of CPO. According to Kenanga Research, the current modestly higher CPO
price discount to soybean oil should benefit demand for palm oil, as well as support
CPO prices. So far, the gap between has widened to about US$75 to US$80 per tonne.
http://bepi.mpob.gov.my/news/detail.php?id=23623

The seasonal patterns in crude palm oil production are divided into 3
categories. Low season start from November to February, moderate season is from
March until August and the balance months, September and October are categorised
to peak season. These seasons in ranging from low production to high production. It is
due to tropical countries tend to have heavy rain that could flood the plantation. In
Malaysia, monsoon rains in Peninsular West Malaysia during December 2014,
causing significant flooding and blanketed important palm oil growing (APPENDIX
3). This phenomenon has resulting Malaysia CPO production decline from November
until February (appendix 2). Lowering palm oil production will follow by the changes
in CPO prices. In other means, CPO prices are increasing in monsoon rains due to
exceed demand to supply. However, it is also not impossible for CPO prices in a
declining trend during this season because there are also some other factors
unsupportive to Crude palm oil prices such as decline in production export.
Other than that, price of CPO also dependent on the changing in structure of both export
and import tax duties. According to CPO history, Indonesia, currently the world’s biggest CPO
producer, had revised their export duty structure in October 2011 and this had result crude palm
oil and crude palm kernel oil are relatively cheaper in Indonesia. This changes has affected to
Malaysia and it reduce competitiveness in the world market as its export duty is relatively
higher compare to Indonesia and consumers will opt for cheaper alternative oils. The
concept in a global market is cheaper CPO will encourage demand and the higher export
duty cause higher the price of CPO. Indonesia and Malaysia both are the largest producers
and close rivals in this market thus any changes in one country in term of taxation rate will
impact the other. Therefore, Malaysia has decided to reduce the export duty to the rate imposed
by Indonesia. Although it is indicate that the reduction in export tax on export palm oil product
will lessen the earning as the tax is collected for the purpose of raising government revenue.
However, it should be aware that the reduction of export tax will also bring an upstream
demand on export. A study has showed that an increase in crude palm oil export will decrease
amount of crude palm oil available for downstream processing and production will be
insufficient to cover the sudden shortage. Net decrease in crude palm oil will cause the local
processed palm oil supply to fall and local consumption to decline. Hence, domestic crude
palm oil and processed palm oil price will increase. Crude palm oil has to be imported,
because of the insufficient crude palm oil for local downstream activities. Alternatively,
producers need to focus on ways to increase their productivity by utilizing technological
advancements in the face of limited land availability.(can help change/ rearrange
sentence of this part?)

Impact of cpo export duties on Malaysian palm oil industry (PDF Download Available).
Available from:
https://www.researchgate.net/publication/269635861_Impact_of_cpo_export_duties_
on_Malaysian_palm_oil_industry [accessed Jul 8, 2017].
APPENDIX 1

APPENDIX 2
APPENDIX 3

https://pecad.fas.usda.gov/highlights/2015/03/Malaysia/Index.htm