In our last report on PRESCO, we highlighted 3 main drivers that are likely to keep CPO prices elevated in 2022 viz a viz: Malaysian supply constraints, Indonesian CPO exports levies and renewed demand for biofuels. In addition to these, recent geopolitical developments have taken CPO price pressures beyond our previous expectations. Specifically, supply constraints in CPO's two main substitutes (sunflower oil and soybean oil), occasioned by the Russia/Ukraine crises and the droughts in South America, resulted in increased demand for CPO. Elsewhere, Indonesia's progressive use of biodiesel in its energy mix continues to grow its local demand, disincentivize exports, and pressure the commodity price.
