In this episode, we invited Dr. Sathia Varqa to our office and leveraged on his expertise to shed some light on the recent developments in the Palm Oil and Palm Kernel Oil market.
Power List is an initiative by SourceSage to feature thought leaders in each industry and region to explore critical issues and market trends relating to the industry, drawing lessons from each individual's success, experience, and knowledge.
Dr. Sathia Varqa is the owner and co-founder of Palm Oil Analytics (POA), an online publisher of palm oil daily news, price, data and analysis based in Singapore, serving global commodity markets. He has been in the commodity information business for over 10 years, and owns POA together with a veteran palm oil broker spanning over 30 years’ experience. He holds a Master degree in International Trade (Distinction) and a PhD in political economy from the UK.
Can you give a short description of yourself and Palm Oil Analytics?
So Palm Oil Analytics is a publisher – we publish news, price and data, all on Palm Oil. So We have been in the market for about 18 months and it is run by 5 of us. We have reporters, we have sales people, we have admin.
The mission of Palm Oil Analytics is really to be the essential provider of palm oil news, price and data in the global commodity space. So anyone who’s in the palm oil business whether it is trading brokerage, producers, refiner, shipping or even as a policy maker, or (in) the space of sustainer, palm oil analytics is a must have, if you like, whether for it’s for data analysis or it’s for market commentary and that is how we position ourselves.
And we are very happy to say that we have a growing list of subscribers, and prospect who are constantly engaging with us on the content, and referring to us, (asking us) what is the new things coming out in the market, whether if it is the prices or whether it is the application and so on.
What are some of the traditional ways your company finds new customers?
So it is a challenge for any business, right – where do you get the leads from? So we have the website, which is an (evolutionary) way of getting leads, people come, read, click, chat, they like they hang around it and we try to track all these.
But there are also ways in which we depend on social media which is our main marketing tool – in linkedin, on twitter. We have about coming close to two thousand followers on twitter in the space of 18 months. We have five thousand followers on Linkedin and in addition, within Linkedin, we have a group called ‘Palm Oil Analytics’ and we have about four hundred plus followers in that space. So we are constantly feeding new content, exciting content which is driving the traffic and people who may see us once twice come back – there are people who see this (content) once – say, “Hey, we want a free trial.”, “Hey, we want to try to speak to you, we want to see what is it that you do.” So we have a lot of trial requests that come in from website and we depend on social media. Now with SourceSage we also get engagement through that channel.
So because we are in the business of publishing content on a daily basis, we try to be out in the market everyday; new content, new content, new content. So how do we make the content exciting – whether it is for the subscribers or whether it is for the general market out there and there are segments in edible oil, there are segments in biodiesel, there are segments in sustainability, there is also the policy makers, the government. So all these people have different interest in the palm oil, and so we try to create those content to generate (those) leads. That is how we try to keep it going everyday.
How do you think technology will fundamentally change the way your company or the research industry in general works?
Palm oil like many other commodities, whether it is steel or iron ore, has always been dominated by old methods of doing (things) – whether it is through phone call, or face to face. So with technology, you get to see more computing power, whether it is artificial intelligence, whether it is big data, or whether it is the using of analytics, whether it is the traffic flow onto the website. Technology has a crucial role to play in trying to understand what is it that the users are looking for, what is it that the users are trying to refine, what is the value that the users are trying to get to. So I think technology will have a crucial role to play in getting to understand the user behaviour and we like that because that will inform us that which products we should create, and whatever we are doing is it the right thing. So technology will provide us with the ability to get that feedback constantly so it is a loop. Before it used to be a one-way (feedback), if you would like, with a limited segment of customers. Now it is constantly growing, developing, refining and technology has really made this easier.
But (having) said that, technology has also reduced the barrier so you can get competitor the next day and competitors are good. Competitors keep us on our toes and make us work hard.
I mean, we at Palm Oil Analytics are a big fan of technology, we try to engage with people in the technology business and that’s why we are speaking with SourceSage. And there are also a lot of these tools which are developed and ready in the market so we don’t have to do it ourselves – we can just come, plug in and play it and try to ask the right questions so that those who are good at it can refine and develop it so that the whole community will benefit.
And we are still looking at what’s the best payment system for example, what’s the best way to analyse how the PDF is used, what’s the best way to use app for example – should you develop a phone app or should you plug into an app that is existing already so that it already does the thing that it is good at.
So that’s the way we see technology.
How do you think SourceSage technology will benefit companies like Palm Oil Analytics in both short and long term?
I think it is a channel through which our content can be delivered but I would like to see (it) more as a content delivery mechanism. So SourceSage is, obviously, a startup like us. They are refining and developing new features so we want to be able to be engaged in that type of conversation. One (type) of the features we are looking for – there are features we like to see that will help us to understand how the newsletter, the data, the prices are been used, right, so there is that engagement part that we want to work with on SourceSage, which we like.
Then there is also the ability for us to engage with customers so that it is not just a channel for us to distribute but also a way in which we are always getting feedbacks from customers, in addition to emails or phone calls.
We see SourceSage as a portal that the palm oil community gravitates to – so we are trying to tap into that market and we can only tap into that market if the technology is top notch. And we believe that SourceSage is making the right investment for us to be able to tap into that space.
What caused the PKO price to climb so sharply recently?
Palm kernel oil, PKO, is in the lauric oil space, which many people see as a mysterious market.
So I think one main reason – the palm kernel oil market does not have an exchange so the price discovery is always not transparent so if you have an exchange like crude palm oil or palm olein like on the Dalian exchange then the price discovery becomes easier, the discussion is a bit more open, people know what’s going on. But in the palm kernel oil and crude coconut oil which are substitutes, such a mechanism does not exist. So if you ask what caused the price to shoot up, the production was an issue in the beginning of the year, production was tight, stocks were low – whether you are comparing the month-on-month or year-on-year. So in January the palm kernel oil price shot up to about 500 ringgit per picul. The prices went up underpinned by the shortage of production and the low stocks but in March and in the second quarter prices started coming off. Today (end of August) the prices are about 300 to 312 Ringgit per picul. Why have the prices come down? August, September, October are peak production period in Malaysia and Indonesian, so as the production rises, obviously the prices will start easing. But (having) said that, August production has not been fantastic for Malaysia so prices came down to a low of about 200 ringgit per picul but they have come up now, shooting up to about 300.
And if you ask where the prices would be heading to in the next quarter or towards the end of the year: so because we saw a low level production in August, September production is going to be better, I think. One, because the base we are comparing it to is low, so obviously September compared (with August) will be higher. Also, yields have been improving in Malaysia and Indonesia so September production will rise which would put pressure on prices to go lower than (what) the current level is at. The current level is at 300 ringgit per picul. So prices would ease towards September, from mid-week of September onwards as we start to see more production and export numbers.
Lastly, what do you foresee to be the main areas of innovation in Palm Oil commodity space in the future? And where do you see the highest growth opportunities?
Well, I mean there are a lot investments going on in technology, in palm oil and in satellite mapping. There is a lot been done, whether it is using drones for mapping, whether it is the technology in improvement of yields in palm oil. There is also the technology of forecasting of the yield levels. I think palm oil, interestingly, is an area where a lot of technological investment has gone into mapping. This was really because of problems of forest fires in Indonesia which made a lot of people to think, “How do you understand where the fires are happening, where can we pinpoint that?” With palm oil, it is more advanced than other factors in using of satellite mapping. Then, obviously there is other issues with that – do we use one map, is there one unified map, is the map accurate and so on. So I think there is a lot more satellite mapping software technology that will be deployed. Technology to detect hotspots where fires can occur. So software technology, in terms of mapping, would be big I think.
And then there are also areas in which (technology) is more on the pricing side. So a lot of the pricing benchmark in crude palm oil, in palm oil in general is based on the future’s market in Bursa Malaysia – Bursa Malaysia’s more active contract is the FCPO, or the futures of crude palm oil. But there has not been much technology to bring the broker and the trading community (together) on a technological basis. Trading is still done actively during the window between about 5.30 to 6 o’clock with a lot of phone calling. I think there is a space – there is a need for this interface or an app for example where trading is done, not only on a phone but on an interface, whether with bid and offers which essentially show up on a screen and (users) can trade that. So there are regulatory issues on that but I think with the exciting news that there is going to be another exchange in Singapore which is going to be starting on the palm oil futures contract I think there is such a space which we will probably see happening very soon on the pricing, on the palm oil contracts.
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