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Pakistan imported $417 million worth of palm oil in August 2022 – easily the highest ever. The imported unit cost at $1558/ton was 1 percent higher from June 2022, when palm oil spot prices averaged the highest. The palm oil market price in August 2022 was 40 percent lower than June. This is anomaly of biblical proportions.

Since July 2021 – palm oil prices have come full circle – sustaining the high for three months from March 2022 to April 2022. Latest spot prices are at a 14-month low, while the unit cost is only 5 percent lower than the peak. The sharp decline in international markets has not (yet) come to the rescue for Pakistan imports or retail prices.

There is a plausible explanation for retail prices proving hard to come down, as the rupee depreciation has only hastened in the last three months, coinciding with the slide in palm oil rally. A substantial rise in transportation cost adds to the persistently high store prices. There could be some inventories built at peaking rates, as was the case with petroleum products around the same time. That said, the monthly quantity trend does not suggest a massive change – apart from June 2022, when the government made an obvious attempt to discourage all imports.

In September 2022 so far, palm oil prices in the spot market have decreased another 12 percent in 12 trading sessions. The differential of the imported cost vs. spot market has increased substantially in the last three months. Whether there is a case of higher premium as Indonesia has increased control over exports, or just the rub of the green going against the traders in terms of ill-timing the imports, is anyone’s guess, but palm oil will continue to be the single largest contributor to food imports.

While the import bill is expected to come down in September 2022, as prices have come to a multiyear low, a proportionate reduction in retail prices can easily be ruled out.

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samir sardana Sep 21, 2022 10:29pm
MATRIX OF THE CRISIS SCENARIOS IN CPO IMPORTS IN PAKISTAN.dindooohindoo 1- USD RISES,CPO & NYMEX FALL, RINGITT FALLS (AS USD RISES) & PKR FALLS 2- USD RISES,CPO & NYMEX FALL, RINGITT FALLS (AS USD RISES) & PKR FALLS (BUT MORE THAN RINGITT 3- USD RISES,CPO RISES (LIKE IN COVID - SHORTAGE OF PLANTATION LABOUR) NYMEX FALLS, BUT RINGITT DOES NOT FALL (ALTHOUGH USD RISES) & PKR FALLS 4- USD RISES,CPO RISES (LIKE IN COVID - SHORTAGE OF PLANTATION LABOUR) NYMEX FALLS, BUT RINGITT FALLS (AS USD RISES) & PKR RISES (DUE TO CRASH IN OIL & GAS RATES & IMF INFLOWS) 5.- USD FALLS,CPO & NYMEX RISE, RINGITT RISES (AS USD FALLS) & PKR STRENGTHENS 6- USD FALLS,CPO & NYMEX RISE, RINGITT RISES (AS USD FALLS) & PKR FALLS (AS SBP ALLOWS CURRENCY EXPORTS & SO SHORTAGES IN OPEN MARKET, BANGS THE IBR) CASE 6= DISASTER FOR PAKISTAN IMPORTS CASE 1 TO 4 = PAKISTAN CONSUMERS ,MAY NEVER GET THE BENEFIT OF CPO PRICE FALLS THEREFORE PAKISTAN NEEDS AN INTEGRATED CPO.NYMEX/USD INDEX & PKR-USD STRATEGY
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samir sardana Sep 22, 2022 09:37pm
SOLUTION OPTION 1 PAKISTAN CPO IMPORTERS HAVE TO TAKE A 40 DAY VIEW ON USD (5 DAYS TO PLACE PO+ 5 DAYS TO LOAD SHIP + 17 DAYS TRANSIT TIME TO QASIM + 10 DAYS TO REFINE + 7 DAYS TO SEND THE REFINED OIL TO STOCKISTS + 5 DAYS TO SEND REFINED OIL TO RETAILERS) ASSUME THAT PAKISTAN CPO IMPORTERS EXPECT USD TO APPRECIATE AND SO,ALL THINGS CONSTANT,IN TODAY'S MARKET - CPO RATES TO REDUCE.SO THE CPO ORDER IS PLACED TODAY WITH A CLAUSETHAT THE CPO WILL BE PRICED,BASED ON WEEKLY AVERAGE PRICE ON BMD ,IN LAST WEEK OF OCTOBER ( 40 DAYS HENCE FORTH) OR AN UNKNOWN SPOT RATE IN LAST WEEK OF OCTOBER THUS,THE IMPORT LC WILL MADE ON A PROVISIONAL BASIS,WITH ADJUSTMENTS TO BE MADE LATER. SO WHEN THE CPO IS CONSUMED IN PAKISTAN,IT WILL BE "PRICED IN", AT THE LOWER RATES OF CPO IN BMD ---AND --- SINCE US$ IS RISING - THE PKR WILL FALL AND THE IMPORTS OF CPO,WILL BE AT DEPRECIATED PKR - BUT THE BENEFIT OF THE LOWER CPO RATES ON BMD,WILL BE CAPTURED - WHICH WAS NOT THE CASE, EARLIER.dindooohindoo
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samir sardana Sep 22, 2022 10:16pm
SOLUTION OPTION 2 SOME CPO SUPPLIERS IN OPTION 1 - WILL NOT ACCEPT A PROVISIONAL LC AS THE STATE WILL ASSUME THAT IT IS " TAX AVOIDANCE TOOL" AND THERE WILL BE COMPLICATIONS IN PAKISTAN CUSTOM DUTY ALSO SO ,THE PAKISTAN CPO IMPORTERS WILL PRICE IN THE CPO ON DATE OF ORDER AND SINCE,THE AIM IS TO GET THE GAIN OF THE CPO PRICE FALL (WITH USD STRENGTH), THEY WILL SHORT THE 30 DAY CPO BMD FUTURES.(ASSUMING NO PUT OPTIONS ARE POSSIBLE) ON 30TH DAY,AS CPO FALLS,THE CPO SHORT FUTURE WILL BE SQUARED UP AT PROFIT AND ON 30TH DAY,THE PKR MAY BE FLAT OR RISE - AND SO THERE WILL BE A GAIN ON PKR AND CPO (ASSUMING THAT THE CPO IS IMPORTED ON A 30 DA LC ) OR PKR MAY ALSO FALL - AS USD RISES - ON WHICH CASE, AT LEAST THE CPO PRICE FALL IS CAPTURED BUT THEN THE CPO IMPORTERS CAN ALSO DO LONG USD FUTURES AND TRADES FROM SOME LONDON BROKER
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samir sardana Sep 22, 2022 10:56pm
SOLUTION OPTION 3 THE THREAT TO PAKISTAN IS RISING USD.SO IF GOP TAKES A LONG USD PUNT (VIA SOME LONDON BROKERS) AND USD RISES - GOP WILL GAIN ON THE USD TRADE --- AND ----WITH LONG USD (ID.EST., USD STRENGTH) - PALM,/BRENT/GAS/METALS SHOULD NORMALLY DECLINE.( AS OF NOW) SO THAT WILL GIVE A DOUBLE BENEFIT 2 PAKISTAN(AS PAKISTAN IS AN IMPORTER) IF THE USD DEPRECIATES,THE USD OPTION WILL EXPIRE, AND THE LOSS OF PKR DEPRECIATION, AT THE TIME OF IMPORT PAYMENT, WILL BE OFFSET AND THERE WILL BE A WINDFALL GAIN.ON PAKISTAN EXPORTS SO THE USD OPTIONS CAN BE INTEGRATED,WITH THE CPO FUTURES,AND THE CPO "PRICE IN" MODES THERE ARE MANY LONDON COMEX BROKERS WHO WILL SELL BMD CPO FUTURES/OPTIONS IN USD (AND NOT RINGITT),AND ALSO, OFFER INTEGRATED CPO AND USD INDEX OPTIONS/FUTURES (AT A NET LOWER PRICE AND MARGIN)
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samir sardana Sep 22, 2022 11:32pm
OPTION 4 END OF JUNE CPO WAS 4900 RINGITT/T & TODAY = 3200 END OF JUNE BRENT WAS 112 USD/T & TODAY = 83 USD BOTH HAVE FALLEN 30% - PERFECT CORRELATION & THE EURODOLLAR,FELL BY 7% ! AS I SAID "https://www.brecorder.com/news/40166811",APR 13, 2022 02:40AM "BMD CPO & Crude Oil,have a perfect correlation" THE PARADIGM OF THOUGHT : GOP TAKES A VIEW ON CRUDE OIL,& IF IT IS BULLISH - GOP BUYS NYMEX OIL FUTURES OF, SAY 50% ,OF IMPORTS. IF CRUDE DIP= LOSS ON THE FUTURES BUT - A GAIN ON THE BALANCE 50% UNHEDGED PORTION BUT ------ IF CRUDE OIL FALLS,CPO SHOULD ALSO FALL & SO,GOP WILL SAVE ON CRO PRICING IN THE ABOVE CASE,THE CRUDE OIL FUTURES CAN BE REPLACED BY CALLS - & THE CALL PREMIUMS CAN BE PLANNED BY THE GAIN ON EXPECTED CPO PRICE FALLS - IN CASE THE CRUDE OIL RATES FALL SO CPO CAN BE HEDGED BY CRUDE OIL, & INTEGRATED WITH USD OPTIONS, WHICH IS EASY, AS OIL IS TRADED IN USD ),THE GAINS TO PAKISTAN, FROM FALLS IN CPO/CRUDE, SHOULD NOT, BE OFFSET, BY PKR DIPS.
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