Malaysian Palm Oil Complementing Pakistan’s Oils and Fats

Needs

Tan Sri Datuk Dr. Yusof Basiron

Chief Executive Officer MALAYSIAN PALM OIL COUNCIL (MPOC)

PRESENTATION OUTLINE

1. Global Oils & Fats Scenario 2. The Role Palm Oil 3. Pakistan Oils and Fats 4. Why Buy Malaysia Palm Oil 5. Conclusions

1.Global Oils and Fats Scenario

Oils and Fats Production (1990 – 2012)

Others, 47

Palm Oil, 13

Soyabean Oil, 20

Rapeseed Oil, 10

Sunflower Oil, 10

Others, 27

Palm Oil, 29

Soyabean Oil, 23

Rapeseed Oil,

13

Sunflower Oil,

8

1990 Production : 80.91 million MT

2012 Production : 183.61 million MT

Source: Oil World

• Growth in population , income growth, low per caput consumption level

• Against a backdrop of lack of arable land and reduced supply from competing soft oils, palm oil reliability in supply gives it the added advantage

• Food and industrial demand: an increased application in the production of food and non food (oleo chemicals/bio diesel), especially in countries such China, India, Middle East, EU , America

1990 Exports : 23.1 million MT

2012 Exports :72.34 million MT

Oils and Fats Exports (1990 – 2012)

Source: Oil World

Average Annual Growth in World Vegetable Oil Production (1993 – 2012)

0

10000

20000

30000

40000

50000

60000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Palm Oil Rapeseed Oil Soybean Oil Sunflower Oil Coconut Oil Palm Kernel Oil

‘00

0 M

T

Average Annual Growth (1993 – 2013) Palm Oil (7.03%) Rapeseed Oil (5.2) Soybean Oil (4.6%) Sunflower Oil (4.4%) Coconut Oil (-0.01%) Palm Kernel Oil (6.3%)

Source: Oil World

World’s Growing Dependence on Palm Oil Will Boost Demand Further in the Future (Exports)

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Palm Oil Sunflower, Soybean, Rapeseed Oil

‘00

0 M

T

Source: Oil World

Despite increase in annual production, overall global oils and fats production is showing a declining y-o-y growth trend from 1994 to 2012

Y-o-Y Growth Change of Oils and Fats Production

0

1

2

3

4

5

6

7

8

9

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Volume Change Percent Change Linear (Percent Change)

‘000

MT

%

chan

ge

Source: Oil World

Y-o-Y Agricultural Area Growth Change

-0.4000%

-0.3000%

-0.2000%

-0.1000%

0.0000%

0.1000%

0.2000%

0.3000%

0.4000%

0.5000%

Ch

ange

Pe

rce

nta

ge

Source: FAO

‘00

0 M

T

Linear (Global Oils and Fats Production)

Source: Oil World

Oils and Fats Consumption of Developed VS Developing Countries

Developed Countries,

33,719 t MT,

(42%)

Developing

Countries, 45,743 t MT

(58%)

1993

Developed Countries,

54808 t MT, (30%)

Developing Countries,

127,490 t MT, (70%)

2012

Source: Oil World

Net Importing Countries of Oils and Fats

0

10000

20000

30000

40000

50000

60000

2000 2002 2004 2006 2008 2010 2012

Others Bangladesh Pakistan India EU27 China

‘00

0 M

T

Source: Oil World

Growth in World Population / Food Security

Russia

Philippines

Canada

Ukraine

Brazil

Argentina

Malaysia

Indonesia

Taiwan

Nigeria

South Korea

South Africa

Turkey

Japan

Egypt

Mexico

Iran

Bangladesh

Pakistan

North Africa

India

EU-27

China

-15000 -10000 -5000 0 5000 10000 15000 20000 25000

Net Importers

Net Exporters

FAO estimates that by 2050, rising population and incomes will require 70 percent in crease in global food production

› Net exporters of oils and fats – Asia Pacific (palm oil) & Americas (soybean) › The rest of the countries are net importers

Source: Oil World

2.Role of Palm Oil in Global Scenario

Scarcity of Arable Land

Year World’s population (bil)

Arable land per capita

(x10-3km2)

Arable land per capita

(ha)

1922 1975 2005 2030 2042

2.0 4.0 6.6 8.0 9.0

7.50 3.75 2.27 1.88 1.67

0.75 0.38 0.23 0.19 0.17

• World population increasing • Arable land resource decreasing

Source: Freeworld Academy & University of Michigan

Need to Use Land Wisely

“The FAO has called upon governments to pay urgent attention to the needs of agriculture and to increase investments in agricultural practices.”Sustainability Team Discussion Paper- March 2010- Dexia Asset Management

Distribution of Agricultural Area

Growth in World Population / Food Security

Nearly all of the population growth will occur in developing countries. Sub-Saharan Africa's population is expected to grow the fastest (up 108 %; 910 million people), and East and South East Asia's the slowest (up 11 %; 228 million people).

Food Security

Region Pop. in $1.25 a

day poverty (millions % in $1.25 a day

poverty Population (millions) Pop. in $1.25 a day

poverty (millions)

East Asia and Pacific 16.8 1,884 316 Latin America and the

Caribbean 8.2 550 45

South Asia 40.4 1,476 596 Sub-Saharan Africa 50.9 763 388

Total Developing

countries 28.8 4673 1345

Europe and Central

Asia 0.04 473 17

Middle East and North

Africa 0.04 305 11

Total 5451 1372 Source: See World Bank PovcalNet "Replicate the World Bank's Regional Aggregation" at

http://iresearch.worldbank.org/PovcalNet/povDuplic.html (accessed May 7, 2010).

Growth in World Population / Food Security

• By 2043, per capita oils & fats consumption will reach = (0.5kg x 32yr) + 24kg = 40kg

• By 2043, world demand for oils & fats = 40kg x 9 billion = 360 million MT

• This is an increase of 184 million MT in 32 years or 5.75 million per annum

Growth in World Population / Food Security

The world population is projected to grow from 7 billion in 2011 to 9 billion by 2043. Food production must meet this rate of increase. This alone is sufficient to exert pressure on commodity prices

If increased demand is to be fulfilled by soybean oil with yield factor of 0.5 MT per hectare, it requires an additional 11.8 million ha of land/year. The world is deforesting 15 million ha per year. If increased demand is to be fulfilled by palm oil with yield factor of 4 MT per hectare, it requires an additional 1.48 million ha of land/year

Land Use Type Total Area (mil ha) As % Area

Total Agricultural Land 4911 100

Oil Seeds 258.03 5.25

Soybean 103.88 2.12

Rapeseed 33.28 0.68

Sunflower 25.83 0.53

Oil Palm 14.14 0.29

Coconut 9.76 0.2

Other Oil Seeds 57.8 1.18

Malaysian Palm Oil 4.32 0.09 Source: FAO (2011), Oil World, MPOB -2012

› 5.25 percent of total land area planted with oil seeds

› Only 0.29 percent of world agricultural land is used for palm oil and Malaysian palm oil only took 0.09 percent

Scarcity of Land – Expansion VS Productivity

Oil Crop Production (Mn T) % of Total

Production Average Oil Yield

(t/ha/year) Total Area (Mn

Ha) % Area

Soybean 41.75 22.54 0.40 103.88 40.26

Sunflower 14.92 8.06 0.58 25.83 10.01

Rapeseed 24.21 13.07 0.73 33.28 12.90

Oil Palm1 66.96 36.15 4.73 14.14 5.48

Total2 160.21 258.03

Soybean Sunflower Rapeseed Oil Palm

0.40 0.58 0.73

4.73

Higher palm oil yields – a solution to

land scarcity

Source: Oil World, Dec 2012

Note: 1 for palm oil and palm kernel oil 2 for 7 major oils (groundnut, coconut, cottonseed and above oils)

3.Pakistan Oils and Fats Scenario

Total Disappearance of Oils and Fats

2008 2009 2010 2011 2012

Oil from Local Oilseed Crops

833,000 778,000 662,000 696,000 636,000

Imported Oils & Fats

1,631,094 1,924,697 2,058,252 2,125,427 2,073,212

Oil available from Imported Oilseeds

180,000 390,433 453,301 376,324 287,746

Butterfat* 80,000 80,000 80,000 80,000 100,000

TOTAL 2,724,094 3,173,130 3,253,553 3,277,751 3,096,958

Source: Economic Survey & Port Data from Shipping Agents

Total Disappearance of Oils and Fats

Source: Economic Survey & Port Data from Shipping Agents

Indigenous Oilseed Production

2007-08 2008-09 2009-10 2010-11 2011-12

Cottonseed 428,000 362,000 389,000 352,000 385,000

Rapeseed 58,000 62,000 51,000 50,000 61,000

Sunflower 264,000 227,000 195,000 244,000 179,000

Canola 83,000 33,000 27,000 50,000 11,000

TOTAL (MT) 833,000 684,000 662,000 696,000 636,000

Source: Economic Survey of Pakistan

Imports of Oils & Fats

2009 2010 2011 2012

CPO 453,926 491,899 749,000 428,353

RBD Palm Oil 733,085 184,202 263,444 749,513

RBD Palm Olein 556,214 1,211,368 970,746 752,603

Palm Fats * 93,851 62,889 65,260 69,652

Soybean oil 48,596 55,762 51,200 40,500

Tallow 29,720 52,133 25,178 32,591

Total (MT) 1,915,391 2,058,252 2,125,427 2,073,212

Source: Port Data from Shipping Agents

Imports of Oils & Fats

Import of CPO decreased by -43%

Import of RBD Palm Olien decreased

by -22% Growth in the Import

of RBD Palm Oil 185% Market share of RBD

Palm Oil increased from 12% to 36%

Source: Port Data from Shipping Agents

Malaysia – Indonesia Market Share Analysis Chart year 2008 – 2012

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2008 2009 2010 2011 2012

MPO – IPO market share from 2008 – 2012

Malaysia

Indonesia

Source: Port Data from Shipping Agents

Commodity

Jan -

October

2012

Jan -

October

2013

Changes

Vol. (Tones)

Changes

%

Crude Palm Oil 359,771 270,618 (89,153) (24.78)

Palm Oil 695,314 867,821 172,507 24.81

Palm Olein 689,000 901,220 212,220 30.80

Palm Fats 63,653 65,693 2,039 3.20

Soybean oil 40,500 30,664 (9,836) (24.29)

Tallow 32,591 15,264 (17,326) (53.16)

Total 1,880,829 2,151,280 270,452 14.38

Pakistan Year to Date Import vis-à-vis 2012

Source: Shipping Agents’ Vessel Reports

Month

Malaysia Indonesia

Malaysian

Share RBD Palm

Oil

RBD Palm

Olein

Crude

Palm Oil Others

RBD Palm

Oil

RBD Palm

Olein

Crude Palm

Oil Others

January 11,950 105,876 50,499 0 53,000 1,000 15,500 5,949 69.05% February 4,499 63,647 23,600 500 74,579 12,000 27,990 6,192 43.31% March 8,999 65,477 52,331 0 139,368 2,000 10,500 5,348 44.65% April 9,500 37,499 14,999 500 8,000 0 0 0 88.65% May 23,994 61,584 3,000 0 15,750 0 0 6,900 79.64% June 10,999 84,555 15,000 4,001 38,248 9,249 0 8,249 67.27% July 44,749 98,229 11,000 0 71,699 0 0 0 68.23% August 38,994 63,501 23,000 1,500 49,507 1,000 0 10,814 67.44%

September 29,750 57,987 0 2,349 35,937 20,999 0 5,794 58.95%

October 26,743 117,384 17,000 0 65,574 8,750 0 2,543 67.70%

November 7,297 88,493 6,200 1 98,685 1,990 0 5,055 49.10%

December

TOTAL 1,287,186 818,167 61.14%

Malaysian/Indonesian Import Comparison 2013

Source: Shipping Agents’ Vessel Reports

IMPORT OF PALM OIL INTO PAKISTAN (Tonnes) Imported From Malaysia Total Palm Oil Import

(MPOB Data) (Oil World)

Jan- Nov 2012 Jan-Nov 2013 Jan-Nov 2012 Jan-Nov 2013

1,186,280 1,362,678 1,848,000 2,096,000

4.Why Malaysian Palm Oil

Why MPO?

1. Well established supply chain facilities in Pakistan

1a. Well-established supply chain facilities

MAPAK QASIM BULKERS (PVT.) LTD HANDLING AND STORAGE TERMINAL (A FELDA/KLKEPONG-WESTBURY VENTURE)

1b. Well-established supply chain facilities

MAPAK EDIBLE OILS (PVT.) LTD EDIBLE OIL REFINERY (A FELDA/KLK/IOI-WESTBURY VENTURE)

1c. Well-established supply chain facilities

FWQ ENTERPRISES (PVT.) LIMITED LIQUID CARGO TERMINAL DEDICATED EDIBLE OIL JETTY

(A FELDA-WESTBURY VENTURE)

Why MPO?

2. Global Expansion and Well-Established Networking by Malaysian

Companies

Malaysian plantation companies like Sime Darby, IOI, FELDA, KLK, and KOG are now venturing further afield to Indonesia, Thailand, Cambodia, Papua New Guinea and increasingly to West Africa

Why MPO?

3. Diversified Activities and Application for Long Term Supply

Assurance

Malaysia Experiences in Global Marketing - Opportunities and Applications

Upstream Midstream Downstream

Processing Consumer Products

ACTIVITIES

• Seed production • Nursery • Cultivation • Harvesting • Milling

• Trading • Crude palm oil bulking

• Refining • Fractionation • Oleochemical • Esterification • Refined product storage

• Packaging and branding • Food products • Non – food products

PRODUCTS

• DxP seeds • Fresh fruit bunches • Crude palm oil • Palm kernel • Biomass (Empty Fruit Bunches, kernel shell, fronds) • Palm oil mill effluent

• DxP seeds • Fresh fruit bunches • Crude palm oil • Palm kernel • Biomass (Empty Fruit Bunches, kernel shell, fronds) • Palm oil mill effluent

• RBD Palm Oil • Palm Fatty Acid Distillate • RBD Palm Olein • RBD Palm Stearin • RBD PK Olein • RBD PK Stearin • Cocoa Butter Equivalent • Cocoa Butter Substitute • Cocoa Butter Replacers • Fatty acid, alcohols, amines, amides • Glycerines • Palm methyl esters • Tocotrienol

•Cooking oil, frying fats • Margarine • Shortening • Vanaspati • Ice cream, non-dairy creamers • Candles, soap • Emulsifiers • Vitamin E supplements • Confectionery • Bakery fats • Biodiesel • Energy generation • Animal feed • Organic fertiliser from biomass

These days, palm oil and derived products are channeled into worldwide industrial and commercial activities to churn out food products as well as non-food applications Source: MPOC Publications & USDA Database

1. Source of food (global food security ): 80%

2. Oleochemicals: 15%

3. Biofuel : 2%

4. Renewable energy source: Potential Remains Largely Untapped through Palm Biomass

3. Diversified Activities and Application for Long Term Supply Assurance

Diversification of Palm Oil Applications

1.Upstream 2.Midstream 3.Downstream 4.Consumer Products: Food and Non Food

Usage 5.Product Innovations – Vitamin E, Red Palm Oil

and Smart Balance, Biomass , Biofuel/Oil

Versatility of Palm Oil in Food Applications

• Traditional Foods

• Cooking oil

• Industrial Frying Fats

• Margarine

• Shortening

• Vegetable Ghee

• Confectionery Fats

• Ice Cream

• Filled Milk

• Non-Dairy Food Products (Cheese analogue, Creamer)

• As a source of pro Vitamin A and E

Versatility of Palm Oil in Non Food Applications

Personal Care Products

Powder & Liquid Detergent for Fabric Cleaning

Fabric Softener Using Palm-Based Esterquat

Cosmetics and personal care products can be formulated using palm-based oleo chemicals such as glycerin, fatty acids , fatty alcohols and their esters. The amount of palm based materials in the formulations ranges from 45% to 98%.

Why MPO?

4. Reliability in Providing After Sales Services and

Quality Assurance Checks at Port of Loading

5. Quality Assurance to ensure transhipment via Pakistan

to neighboring countries such as Afghanistan are in

good conditions (quality and quantity)

6. Vanaspati and Blended Oil Marketing and Branding can

be assisted by MPOC and MPOB for better consumer

acceptance.

(MPOC Prime Grant, MPOB R&D facilities)

Why MPO? 7. Marketing of Palm Olein in Opaque bottles can be facilitated like what was done in Romania and

Saudi Arabia

Why MPO?

8. Trans-free vanaspati formulation

can be facilitated in collaboration

with MPO Service Providers

Why MPO?

9. Health Issues will be addressed

appropriately with MPO

Why MPO?

10. A complementary Case Study Conducted by MPOC on Consumption of Palm Oil by Malaysian Population can be the source of reference for Nutritional Acceptance Assuarance for Pakistani Consumers

Areas of Opportunities for Malaysian Palm Oil – A MALAYSIAN PRODUCT INNOVATION

Trans fat (TFA) GRAS Status Removal! FDA is currently mandating GRAS Status removal of TFA

• Food industry may no longer hide behind “less than 0.5g TFA per serving size”.

• Most Western countries are fully prepared through reformulated products, mostly with palm oil as the solution

• UNFORTUNATE SCENARIO IN THE DEVELOPING WORLD

Most developing countries including PAKISTAN are still unprepared and continue to consume TFA based fats and foods

• REMINDER: Even 1% TFA in your diet increases risk for coronary

heart disease (Walter Willett, Harvard Medical School, 1998)

In Pakistan TFA are still incorporated in Vegetable Ghee based products. We have proven technology to reformulate with palm as an ingredient to achieve Zero TFA

Oxidized fat consumption has been associated with: • increased free radical activity, which are disease triggers • with potential increased risk of certain types of cancer • interrupts endothelial functions and could lead to coronary events

Do Not Choose to Fry With Polyunsaturated Oils – Oxidized Fats Are Equally Unhealthy as Trans Fats

7

8

16

7

7

13

14

15

27

43

51

72

87

26

62

62

15

28

23

18

47

38

18

4

55

26

21

71

57

54

54

9

10

2

3

3.5

10

1

1

8

1

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Natreon Canola AOM 42

Natreon Sun AOM 53

Low lin Soy AOM 20

Low Lin canolca (C5) AOM 30

Canola AOM 18

Sunflower AOM 14

Com AOM 25

Soybean AOM 15

Cotton AOM 25

Lard AOM 25

Palm AOM 50

Sats Oleic 18:1 Linoleic 18:2 Linolenic 18:3

Oxidative Stability Measurement (AOM) of Common Oils and Fats

•A variety of commercially available oils were evaluated for their oxidative stability. Palm olein is the oil with the highest oxidative stability (AOM 50). Most other fats have AOM values halve that of palm. High oleic oils such as Nateron Canola are GMO derived and costly. Supply mainly confined to North America

Deterioration during Frying

Oil hours FFA % Smoke point ˚C

Viscosity (CP)

Polymers % Foam Index *

Peanut Oil

0 0.02 235 50 0.2

82 0.28 229 102 12.6 10.2

Palm olein

0 0.03 222 49 0.4

82 0.32 182 72 6.3 9.4

Longer shelf life of fried food with no rancid or off flavors produced for longer period as compared to other oils. Fried Packaged Products: Minimum of 6 to 12 months shelf life, therefore can stay much longer on the shelf as compared to foods fried in other oils.

Palm Olein is Superior To Peanut Oil For Deep Frying

Palm Oil Fractions With Different Iodine Values For Vegetable Ghee or Frying Fat Formulation

Palm Oil IV 51 - 53

Olein IV 57 - 59

Super Olein IV 64 - 66

Top Olein IV 70 - 72

Soft PMF IV 42 - 48

Hard PMF IV 32 - 36

Hard Stearin IV 32 - 36

Soft Stearin IV 40 - 42

Super Stearin IV 17 - 21

Various tailor made fractions from palm are ideal for direct applications or as blended products throughout the food and frying industries.

What Happens When A Population Is Exposed to Palm Oil As The Primary Dietary Fat Consumed Over 20 years

Results from an on-going Collaborative Population Study (Unpublished, 2013)

National University of Malaysia and MPOC

Sundram et al. 2013

Through our own experiences with palm oil consumption in Malaysia, we are prepared to assure beneficial nutritional outcomes from palm oil for the Pakistani consumers as well!

Subject Characteristics

Subjects characteristics

Females (n=133) Males (n=73)

Mean ± SD Mean ± SD

Age (yr) 41.35 ± 12.31 39.70 ± 12.676

Weight (kg) 58.76 ± 10.59 68.70 ± 13.39

Height (cm) 156.32 ± 6.1 165.57± 20.0

BMI (kg/m2)

24.36 ± 5.08 24.17 ± 4.19

Waist Circumference (cm) 79.4 ± 11.17 84.60 ±12.99

Body Fat (%) 32.89 ± 6.13 24.68±6.12

Sundram et al. 2013

% Distribution and use of cooking oil in daily diet

Canola, 0.6 Corn, 3.6 Olive, 0.6

Palm, 81.7%

Rice Bran Oil, 0.6

Sunflower, soya, etc. , 13%

Canola

Corn

Olive

Palm

Rice Bran Oil

Sunflower

Sundram et al. 2013

LDL particle size is a crucial determinant of CVD risk. Small LDL particles are the most atherogenic How diet influences LDL size is an active on-going research question, largely still unexplored but we have emerging data for palm oil!

Lipoprotein Particle Size unit Palm Oil Group

Other PUFA Oils P value

Total LDL nmol/L 1131 374 1116 416 NS

Large LDL nmol/L 181 87 181 121 NS

Medium LDL nmol/L 542 249 577 249 NS

Small LDL nmol/L 407 340 357 363 NS

Total HDL µmol/L 31 5 29 3 p=0.04

Small HDL µmol/L 16 5 13 4 p=0.01

The long term (>20 years) consumption of palm oil has similar effects as PUFA oils on LDL particles but on HDL particles, palm oil has a beneficial outcome not seen with PUFA oils.

Sundram et al. 2013

r-value p-value

Total LDL 0.206 0.025

Large LDL 0.056 0.547

Medium LDL -0.171 0.062 Small LDL 0.314 0.001

Correlations: Carbohydrate intake and Lipoprotein Particle Size

Sundram et al. 2013

In the Malaysian diet, it is the carbohydrate content rather than fats that trigger adverse outcomes for LDL particles and coronary heart disease .

Total LDL 0.053 NS

Large LDL -0.044 NS

Medium LDL -0.185 NS

Small LDL 0.188 NS

Correlations: Fat intake (Primarily Palm Oil) and LDL Particle Size

Sundram et al. 2013

Fat consumption in the form of palm oil had no adverse outcomes on LDL particles after >20 years consumption

While Malaysians generally consume nearly 80% of their daily fat intake as palm oil, Pakistanis are likely to have much lower consumption of palm oil. No adverse nutritional events are therefore likely, to be attributable to palm oil consumption in Pakistan.

Conclusion

• Rising global demand for oils & fats will not be easily met with limited arable land. Possible solution is to rely on high yielding crop like oil palm and identifying the developing country with best potential

• Dominance of Palm Oil Increasing: Palm Oil continues to be an attractive long term commodity for producers and consumers

Conclusion (cont.)

• Solution Provider: Consumers get strategic solutions from Malaysian palm oil: food security, trans free products and competitive prices

Conclusion

• Malaysian Palm Oil: Your Perfect Partner for Progress

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