Macro Monday 53 - Indonesia – Palm Oil Capital of the WorldMacro Monday 53
Indonesia – Palm Oil Capital of the World
This week we are looking at all the reasons why Indonesia is one of the fastest growing economies in world and projected sustain this growth well into the future. We will learn how it is incredibly diverse this group of islands are in produce, exports, people and even in palm tree variety.
Let’s look at a few reasons you need to keep your investor googles looking towards sunny South East Asia, and specifically Indonesia:
1.Indonesia, a sovereign archipelago in Southeast Asia, boasts over 270 million people, making it the 4th most populous country globally after India, China and the United States. People never talk about 4th place but this quite the claim on the world stage.
2.Indonesia hosts the most populous Island in the world called Java. Java, which is on one of the Greater Sunda Islands in Indonesia, it is home to approx. 156.4 million people (of the 270 million people in Indonesia). Remarkably, this makes Java the most populous island in the world, accounting for almost 60% of Indonesia’s total population. The capital city, Jakarta is on the west coast of the island.
3.Indonesia is the world’s leading producer and exporter of palm oil, producing 60% of global palm oil in 2022. Together with Malaysia, they account for more than 83% of the world’s palm oil production today. Unlike Malaysia, which exported the majority of the palm oil it produced, Indonesia is also one of the world’s largest consumers of palm oil, using it as edible oil, in cosmetics and in biofuels. This means Indonesia, is the largest producer, exporter and consumer of palm oil, making it, the Palm Oil Capital of the world. Palm oil (a vegetable oil) is becoming increasingly popular internationally in food and its highly likely if you ate something out of a wrapper recently, it likely had palm oil from one of these regions in it.
The main destination of Palm Oil exports from Indonesia are: India ($5.4B), China ($3.61B), Pakistan ($3.21B), United States ($1.89B), and Bangladesh ($1.48B).
4.In 2022, Indonesia held the distinction of being the world’s largest exporter in several other key categories also:
A.Palm Oil: Indonesia exported $28.7 billion worth of palm oil, as noted this makes it the top global exporter in this category.
B.Ferroalloys: With exports valued at $13.7 billion, Indonesia led the world in ferroalloy exports.
C.Lignite: Indonesia’s lignite exports reached $8.29 billion, securing its position as the largest exporter.
D.Stearic Acid: Exports of stearic acid from Indonesia amounted to $6.84 billion, ranking it first globally. This is derived from palm oil and palm oil derivatives.
E.Nickel Mattes: Indonesia exported nickel mattes worth $6.27 billion, making it the world’s leading exporter in this category
http://F.Gold: Indonesia plays a notable role on the global gold mining stage. It contributes about 4% of the world’s gold production. One of its standout operations is the Grasberg mine in Papua, which ranks among the largest gold mines worldwide. In 2022 Indonesia produced 85 metric tons of gold worth $2.4 Billion.
5. According to the World Banks forecast, they project an average annual growth rate of 5.1% for the coming 2024 to 2026 period. Additionally, Indonesia aims for a robust 5.2% economic growth rate in 2024, despite challenges such as declining commodity prices and economic conditions in China, which is a key trade partner.
6. The median age in Indonesia is approximately 30.2 years, with 42.4% of the population falling between 25 and 54 years old. Additionally, the 0-14 age group constitutes slightly over 25% of the country’s population, indicating a significant youth demographic that will eventually join the workforce as the current workers age.
7. The country’s diverse demographics include more than 300 distinct ethnic and linguistic groups, with the Javanese being the largest and most politically dominant, constituting over 40% of the population. If you want an interesting read, look into the Javanese people and culture, they are a very interesting and widespread culture.
8.The Palm Tree Varieties In Indonesia, palm trees have a long history and are an integral part of the landscape. Here are some key points related to palm trees in Indonesia:
A.Coconut Palms: Coconut palms (Cocos nucifera) are widespread across Indonesia. They provide essential resources such as coconut water, coconut milk, and coconut oil. The versatile coconut tree is used for food, shelter, and various products.
B.Areca Nut Palm: The areca nut palm (Areca catechu) is native to Indonesia and other parts of Southeast Asia. Its seeds (betel nuts) are chewed with betel leaves and other ingredients in cultural practices.
C.Oil Palm Plantations: Oil palm (Elaeis guineensis) is a significant commercial crop in Indonesia. The country is one of the largest producers of palm oil globally. Oil palm plantations cover vast areas, especially in Sumatra and Kalimantan.
D.Sago Palm: The sago palm (Metroxylon sagu) is native to Indonesia and Papua New Guinea. Its starchy pith is processed into sago flour, a staple food in some regions.
E.Borassus Palm: The Borassus palm (Borassus flabellifer), also known as the talipot palm, grows in parts of Indonesia. Its leaves are used for thatching roofs, and its sap is fermented into toddy.
These varieties of palm species contribute to Indonesia’s culture, economy, and daily life. The trees grow particularly well due to three vital factors: the tropical humid and wet climate, the rich volcanic soil(unique to the islands), and the equatorial location (abundant sunlight).
9. Indonesia held the G20 presidency in 2022. This was handed to India who will hold the position until 30 November 2023, after which it passes to Brazil.
10. A Brief History
The Dutch significantly colonized Indonesia during their imperial expansion. The Dutch East Indies, also known as the Netherlands East Indies, was a Dutch colony that mainly comprised the modern state of Indonesia. The Dutch East Indies contributed to Dutch global prominence in spice trade during the 19th century. Spices like cloves, nutmeg, and cinnamon were highly valued in Europe at the time and grown abundantly in Indonesia. During this colonization period major infrastructure projects helped modernize Indonesia. The Dutch ruled this territory from 1816 to 1941, until the Japanese occupation during World War II. Indonesia declared its independence on August 17, 1945, following the Indonesian War of Independence. Afterward, Indonesia and the Netherlands made peace in 1949.
The Charts
The FTSE Indonesia Index (In Rupiah)
The FTSE Indonesia Index represents the performance of large and mid-cap Indonesian companies that are constituents of the FTSE All-World Index.
▫️ Since 2010 this chart has been moving up and to the right.
▫️ Currently rising above the 200 day moving average and may be forming an ascending triangle.
▫️ At present I would not trade this but a trade is there to be taken with a stop below the diagonal trend line. ▫️ Ideally I would like a break out above the overhead resistance line before I make an entry so this chart is a watch and see.
▫️ There is a currency risk in the trade as this chart is in Indonesian Rupiah which has been in a downtrend for over a decade.
iShares MSCI Indonesia ETF (in USD)
▫️ Again, not an ideal chart however we have a definitive diagonal resistance line and POC to observe and break above, both of which would signal long term trend shifts.
▫️ There is currently a trade that can be played here, we have the DSS Bressert crossing and we appear to have made a higher low. A trade entry could use the most recent higher low as a stop. You could exit at the diagonal resistance line for a 20% trade or hold onto your handle bars in hope for a long term break of trend.
Crude Palm Oil Futures - $FCPO1
▫️ A compressing pennant pending decision. There is not a lot else to say here outside of the another likely DSS Bressert Cross.
Palm oil is a major contributor to the Indonesian economy. It contributes between 9 and 17 per cent of GDP. The sub-sector employs 8 million people, or 3.5 % of the country's workforce. Oil palm cultivation contributes significantly to household incomes, particularly in rural areas.
All these charts are available on my TradingView Page and you can go to them at any stage over the next few years press play and you'll get the chart updated with the easy visual guide to see how these Indonesian indexes and or palm oil has performed. I hope it’s helpful.
PUKA
