Global Oil Palm ighiuhIndustry

Market Outlook - Palm Oil

.

ARABIS Agricultural Research & Advisory Bureau

www.arabis.org

Amitabha Guha

SUPPLY DEMAND PRICES MARKETS (INDIA & CHINA)

COMPETITIVENESS OF PALM OIL THE FUTURE & POLICY IMPLICATIONS

Palm Oil in the Oils & Fats Market

Content

2 ARABIS Agricultural Research & Advisory Bureau

SUPPLY

.

3 ARABIS

Supply

World Production & Trade in Oils & Fats

World Production & Trade in Palm Oil

Planted Area of Oil Palm (increasing fast!)

–M'sia

–I'sia

Production & Exports of Palm Oil (increasing fast!)

–M'sia

–I'sia

4 ARABIS

WORLD: Production - Oils & Fats - mill tonnes -

Commodity 1980 1990 1995 2000 2005 2006 2007 2008 2009 2010

VEGETABLE OILS

Palm Oil 4.5 10.9 15.0 21.9 34.0 37.3 38.8 43.3 45.1

Soybean Oil 13.4 16.0 20.2 25.6 33.6 35.2 37.4 36.9 35.8

Rapeseed Oil 3.5 8.1 10.8 14.5 16.3 18.5 18.7 19.9 21.3

Sunflower Oil 5.0 7.8 8.7 9.7 9.7 11.2 10.9 10.9 13.0

Palm Kernel Oil 0.6 1.4 1.9 2.7 4.0 4.4 4.5 5.0 5.2

Cottonseed Oil 3.0 3.7 3.9 3.9 5.0 4.9 5.1 5.0 4.7

Groundnut Oil 2.9 3.9 4.3 4.5 4.5 4.4 4.2 4.2 4.1

Coconut Oil 2.7 3.3 3.3 3.3 3.2 3.1 3.1 3.2 3.2

Olive Oil 1.7 1.8 1.8 2.5 2.9 2.8 2.9 2.9 2.9

Corn Oil 0.9 1.4 1.8 2.0 2.1 2.3 2.3 2.4 2.3

Sesame Oil 0.5 0.6 0.7 0.7 0.9 0.9 0.8 0.8 0.8

Linseed Oil 0.8 0.7 0.7 0.7 0.6 0.7 0.7 0.6 0.6

Castor Oil 0.3 0.4 0.5 0.5 0.5 0.5 0.5 0.6 0.5

Tot Vegetable Oils > 39.8 60.0 73.6 92.4 117.5 126.1 130.0 135.8 139.6

ANIMAL OILS/FATS

Tallow & Grease 6.3 6.7 7.6 8.2 8.4 8.5 8.5 8.4 8.4

Lard 4.7 5.5 5.8 6.7 7.5 7.7 7.6 7.7 7.8

Butter 5.7 6.5 5.8 6.0 6.7 6.7 6.9 7.1 7.1

Fish Oil 1.2 1.4 1.3 1.4 1.0 1.0 1.1 1.0 1.0

Tot Animal Oils/Fats > 17.9 20.1 20.5 22.3 23.6 23.9 24.1 24.3 24.3

GRAND TOTAL >> 57.7 80.1 94.1 114.8 141.1 150.0 154.1 160.0 163.9

Source : Oil World Annual (2000 - 2009) & Oil World Weekly (11 December, 2009) :MPOB - For data on Malaysian palm oil and palm kernel oil

5 ARABIS

Share of Individual Veg Oils in

World Production – 1980, 2000 & 2009

Palm Oil and Palm Kernel Oil accounts for 27% of all production of veg oils in 2000 and 37% by 2009 !

Palm Oil (PO) 12%

Rapeseed 9%

Sunflower 13%

Groundnut 8%

Cotton 8%

Coconut (CNO) 7%

Corn 2%

Linseed 2%

Sesame 1%

Palm Kernel Oil (PKO)

2%

Soybean (SBO) 35%

Castor 1%

Soybean (SBO) 26%

Sunflower 10%

Groundnut 3%

Cotton 3%

Palm Oil (PO)

33%


4%

Rapeseed 16%

Coconut (CNO) 2%

Corn 2%Linseed 0%

Sesame 1%

Castor 0%

1980 2009 2000

Palm Oil (PO) 12%

Rapeseed 9%

Sunflower 13%

Groundnut 8%

Cotton 8%

Coconut (CNO) 7%

Corn 2%

Linseed 2%

Sesame 1%


2%

Soybean (SBO) 35%

Castor 1%

Soybean (SBO) 26%

Sunflower 10%

Groundnut 3%

Cotton 3%

Palm Oil (PO)

33%


4%

Rapeseed 16%

Coconut (CNO) 2%

Corn 2%Linseed 0%

Sesame 1%

Castor 0%

Palm Oil (PO) 12%

Rapeseed 9%

Sunflower 13%

Groundnut 8%

Cotton 8%

Coconut (CNO) 7%

Corn 2%

Linseed 2%

Sesame 1%


2%

Soybean (SBO) 35%

Castor 1%

1980

Soybean (SBO) 26%

Sunflower 10%

Groundnut 3%

Cotton 3%

Palm Oil (PO)

33%


4%

Rapeseed 16%

Coconut (CNO) 2%

Corn 2%Linseed 0%

Sesame 1%

Castor 0%

Palm Oil (PO) 12%

Rapeseed 9%

Sunflower 13%

Groundnut 8%

Cotton 8%

Coconut (CNO) 7%

Corn 2%

Linseed 2%

Sesame 1%


2%

Soybean (SBO) 35%

Castor 1%

Palm Oil (PO) 24%


3%

Soybean (SBO) 28%

Sunflower 11%

Groundnut 5%

Cotton 4%

Rapeseed 16%

Coconut (CNO) 4%

Corn 2%

Linseed 1%Sesame 1%

Castor 1%

2000 1980

Soybean (SBO) 26%

Sunflower 10%

Groundnut 3%

Cotton 3%

Palm Oil (PO)

33%


4%

Rapeseed 16%

Coconut (CNO) 2%

Corn 2%Linseed 0%

Sesame 1%

Castor 0%

Palm Oil (PO) 12%

Rapeseed 9%

Sunflower 13%

Groundnut 8%

Cotton 8%

Coconut (CNO) 7%

Corn 2%

Linseed 2%

Sesame 1%


2%

Soybean (SBO) 35%

Castor 1%

2009 2000 1980

Soybean (SBO) 26%

Sunflower 10%

Groundnut 3%

Cotton 3%

Palm Oil (PO)

33%


4%

Rapeseed 16%

Coconut (CNO) 2%

Corn 2%Linseed 0%

Sesame 1%

Castor 0%

Palm Oil (PO) 12%

Rapeseed 9%

Sunflower 13%

Groundnut 8%

Cotton 8%

Coconut (CNO) 7%

Corn 2%

Linseed 2%

Sesame 1%


2%

Soybean (SBO) 35%

Castor 1%

6 ARABIS

WORLD: Trade - Oils & Fats - mill tonnes -

Commodity 1980 1990 1995 2000 2005 2006 2007 2008 2009 2010

VEGETABLE OILS

Palm Oil 3.8 8.6 10.2 15.2 26.7 29.2 29.5 33.9 35.4

Soybean Oil 3.3 3.8 5.7 6.5 9.6 10.3 11.3 10.7 9.0

Rapeseed Oil 0.7 1.9 1.9 1.8 1.4 2.1 2.2 2.4 2.7

Sunflower Oil 1.1 2.6 3.0 3.0 3.1 4.3 4.4 3.9 5.3

Palm Kernel Oil 0.4 0.9 0.7 1.2 2.1 2.3 2.6 2.7 3.0

Cottonseed Oil 0.5 1.7 0.2 0.2 0.2 0.2 0.1 0.1 0.2

Groundnut Oil 0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2

Coconut Oil 1.2 1.7 1.7 1.9 2.1 2.1 2.0 2.0 1.8

Olive Oil 0.3 0.3 0.4 0.5 0.7 0.7 0.8 0.7 0.7

Corn Oil 0.2 0.4 0.6 0.8 0.8 0.9 0.7 0.7 0.7

Sesame Oil 0.0 0.0 0.0 0.0 0.0 0.0

Linseed Oil 0.3 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1

Castor Oil 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.4 0.3

Tot Vegetable Oils > 12.6 21.7 25.8 31.8 47.4 52.8 54.3 57.7 59.4

ANIMAL OILS/FATS

Tallow & Grease 2.6 2.7 2.6 2.3 2.1 2.2 2.3 2.2 1.9

Lard 0.8 0.5 0.2 0.2 0.1 0.1 0.1 0.1 0.1

Butter 1.2 1.0 0.6 0.6 0.8 0.8 0.7 0.7 0.7

Fish Oil 0.6 0.8 0.9 0.8 0.7 0.7 0.8 0.7 0.8

Tot Animal Oils/Fats > 5.2 5.0 4.2 3.9 3.6 3.8 3.9 3.8 3.6

GRAND TOTAL >> 17.8 26.7 30.0 35.7 51.0 56.5 58.2 61.5 63.0

7 ARABIS

Share of Individual Veg Oils in

World Trade – 1980, 2000 & 2009

Palm Oil (PO) 32%


3%

Soybean (SBO) 27%

Rapeseed 6%

Sunflower 9%

Groundnut 3%

Cotton 4%

Coconut (CNO) 10%

Corn 2%

Linseed 2%

Sesame 0%Castor 2%

Palm Oil (PO) 47%


4%

Soybean (SBO) 22%

Rapeseed 6%

Sunflower 9%

Groundnut 1%

Cotton 1%

Coconut (CNO) 6%Corn 3%

Linseed 0% Sesame 0%

Castor 1%

1980 2000

Palm Oil (PO) 61%


5%

Soybean (SBO) 15%

Rapeseed 5%

Sunflower 9%

Groundnut 0%

Cotton 0%

Coconut (CNO) 3% Corn 1%


Castor 1%

2009

Palm Oil (PO) 32%


3%

Soybean (SBO) 27%

Rapeseed 6%

Sunflower 9%

Groundnut 3%

Cotton 4%

Coconut (CNO) 10%

Corn 2%

Linseed 2%

Sesame 0%Castor 2%

Palm Oil (PO) 47%


4%

Soybean (SBO) 22%

Rapeseed 6%

Sunflower 9%

Groundnut 1%

Cotton 1%



Castor 1%

Palm Oil (PO) 61%


5%

Soybean (SBO) 15%

Rapeseed 5%

Sunflower 9%

Groundnut 0%

Cotton 0%



Castor 1%

Palm Oil (PO) 32%


3%

Soybean (SBO) 27%

Rapeseed 6%

Sunflower 9%

Groundnut 3%

Cotton 4%

Coconut (CNO) 10%

Corn 2%

Linseed 2%

Sesame 0%Castor 2%

Palm Oil (PO) 47%


4%

Soybean (SBO) 22%

Rapeseed 6%

Sunflower 9%

Groundnut 1%

Cotton 1%



Castor 1%

2009

Palm Oil (PO) 61%


5%

Soybean (SBO) 15%

Rapeseed 5%

Sunflower 9%

Groundnut 0%

Cotton 0%



Castor 1%

Palm Oil (PO) 32%


3%

Soybean (SBO) 27%

Rapeseed 6%

Sunflower 9%

Groundnut 3%

Cotton 4%

Coconut (CNO) 10%

Corn 2%

Linseed 2%

Sesame 0%Castor 2%

Palm Oil (PO) 47%


4%

Soybean (SBO) 22%

Rapeseed 6%

Sunflower 9%

Groundnut 1%

Cotton 1%



Castor 1%

2000 2009

Palm Oil (PO) 61%


5%

Soybean (SBO) 15%

Rapeseed 5%

Sunflower 9%

Groundnut 0%

Cotton 0%



Castor 1%

Palm Oil (PO) 32%


3%

Soybean (SBO) 27%

Rapeseed 6%

Sunflower 9%

Groundnut 3%

Cotton 4%

Coconut (CNO) 10%

Corn 2%

Linseed 2%

Sesame 0%Castor 2%

Palm Oil (PO) 47%


4%

Soybean (SBO) 22%

Rapeseed 6%

Sunflower 9%

Groundnut 1%

Cotton 1%



Castor 1%

1980 2000 2009

Palm Oil (PO) 61%


5%

Soybean (SBO) 15%

Rapeseed 5%

Sunflower 9%

Groundnut 0%

Cotton 0%



Castor 1%

Palm Oil (PO) 32%


3%

Soybean (SBO) 27%

Rapeseed 6%

Sunflower 9%

Groundnut 3%

Cotton 4%

Coconut (CNO) 10%

Corn 2%

Linseed 2%

Sesame 0%Castor 2%

Palm Oil (PO) 47%


4%

Soybean (SBO) 22%

Rapeseed 6%

Sunflower 9%

Groundnut 1%

Cotton 1%



Castor 1%

Palm Oil and Palm Kernel Oil accounts for 52% of all trade in veg oils in 2000 and 66% in 2009!

1980 2000 2009

Palm Oil (PO) 61%


5%

Soybean (SBO) 15%

Rapeseed 5%

Sunflower 9%

Groundnut 0%

Cotton 0%



Castor 1%

Palm Oil (PO) 32%


3%

Soybean (SBO) 27%

Rapeseed 6%

Sunflower 9%

Groundnut 3%

Cotton 4%

Coconut (CNO) 10%

Corn 2%

Linseed 2%

Sesame 0%Castor 2%

Palm Oil (PO) 47%


4%

Soybean (SBO) 22%

Rapeseed 6%

Sunflower 9%

Groundnut 1%

Cotton 1%



Castor 1%

8 ARABIS

WORLD: Production - Palm Oil - mill tonnes -

Source: Oil World Annual, MPOB - M'sia, DGE - I'sia

Country 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011

Indonesia 2.4 4.0 7.1 14.1 16.1 17.3 19.2 20.9

Malaysia 6.1 7.8 10.8 15.0 15.9 15.8 17.7 17.6

Thailand 0.2 0.3 0.5 0.7 0.9 1.0 1.3 1.3

Nigeria 0.6 0.6 0.7 0.8 0.8 0.8 0.8 0.9

Colombia 0.2 0.4 0.5 0.7 0.7 0.7 0.8 0.8

Ecuador 0.1 0.2 0.2 0.3 0.4 0.4 0.4 0.4

Papua New Guinea 0.1 0.2 0.3 0.3 0.4 0.4 0.4 0.4

Cote d’Ivoire 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

Honduras 0.1 0.2 0.2 0.2 0.3 0.3

Brazil 0.1 0.2 0.2 0.2 0.2 0.3

Guatemala 0.1 0.1 0.1 0.1 0.2 0.2

Costa Rica 0.1 0.2 0.2 0.2 0.2 0.2

Venezuela 0.1 0.1 0.1 0.1 0.1 0.1

Others 0.3 0.4 0.9 1.1 1.2 1.3 1.3 1.4

TOTAL >> 10.97 15.01 21.87 33.98 37.29 38.83 43.31 45.07

9 ARABIS

WORLD: Trade (Export Origin)

- Palm Oil - mill tonnes -

Source: Oil World Annual, MPOB - M'sia, DGE - I'sia

Country 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011

Malaysia 5.7 6.5 9.1 13.4 14.4 13.7 15.4 15.9

Indonesia 1.2 1.8 4.1 10.4 12.5 12.7 14.6 15.9

Papua New Guinea 0.1 0.2 0.3 0.3 0.4 0.4 0.4 0.4

Cote d’Ivoire 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Colombia 0.1 0.2 0.2 0.3 0.3 0.2

Singapore* 0.7 0.3 0.2 0.2 0.2 0.2 0.2 0.2

Hong Kong* 0.2 0.0 0.0 0.0 0.0 0.0

Others 0.2 0.8 0.9 1.7 2.1 2.5 2.7 2.4

TOTAL >> 8.64 10.18 15.02 26.50 30.00 29.87 33.75 35.15

10 ARABIS

Palm Oil: % Share of World Production by Country

Source: calculated

Country 1980-85 1985-90 1990 1995 2000 2005 2006 2007 2008 2009 2010

Indonesia 52.6 54.4 21.9 26.6 32.2 41.5 43.0 44.5 44.3 46.4

Malaysia 15.4 17.5 55.6 52.0 49.6 44.0 42.6 40.7 41.0 39.0

Papua New Guinea 1.2 1.4 0.9 1.3 1.5 0.9 1.0 1.0 1.0 1.0

Others 30.8 26.7 15.5 14.7 16.6 13.6 13.4 13.8 13.7 13.7

11 ARABIS

M'sia: Oil Palm Planted Area

- Hectares (Ha) -

Source: DOS (1970-80), MPOB (from 1990 onwards), M'sia.

Year P. Malaysia Sabah Sarawak Total

1970 260,903 28,947 1,117 290,967

1980 906,590 93,967 22,749 1,023,306

1990 1,698,498 276,171 54,795 2,029,464

1995 1,903,171 518,133 118,783 2,540,087

2000 2,045,500 1,000,777 330,387 3,376,664

2001 2,096,856 1,027,328 374,828 3,499,012

2002 2,187,010 1,068,973 414,260 3,670,243

2003 2,202,166 1,135,100 464,774 3,802,040

2004 2,201,606 1,165,412 508,309 3,875,327

2005 2,298,608 1,209,368 543,398 4,051,374

2006 2,334,247 1,239,497 591,471 4,165,215

2007 2,362,057 1,278,244 664,612 4,304,913

2008 2,410,019 1,333,566 744,372 4,487,957

2009 2,489,814 1,361,598 839,748 4,691,160

2010

12 ARABIS

M'sia: OP Planted Area

max 5 mill Ha

in M'sia

P. M'sia & Sabah / Sarawak

- in '000 Ha -

13 ARABIS

I'sia: Oil Palm Planted Area

- Hectares (Ha) -

Source: Agric Department, I'sia.

Year Sumatera Kalimantan Sulawesi Others Total

1970 133,298

1980 294,560

1990 1,126,677

1995 2,024,986

2000 4,158,077

2001 4,713,435

2002 5,067,058

2003 5,283,557

2004 5,284,723

2005 5,453,817

2006 6,594,914

2007 6,766,836

2008 7,363,847

2009* 7,508,023

2010

14 ARABIS

OP Planted Area: M'sia vs. I'sia

max 5 mill Ha

in M'sia

M'sia & I'sia

- in Ha -

Source: MPOB -M'sia, Deptan - I’sia 15 ARABIS

Production & Export: CPO & PKO (tons)

- M'sia

Source: Dept of Statistic Malaysia: 1975-1989

MPOB : 1990 - 2009

CPO PKO CPO PKO

1975 1,257,573 255,221 1,172,926 109,153

1980 2,573,173 549,956 2,271,222 218,937

1985 4,134,463 1,211,887 3,434,025 437,115

1990 6,094,622 1,844,737 5,727,451 689,727

1995 7,810,546 2,395,587 6,512,956 391,258

2000 10,842,095 3,162,760 9,081,553 520,280

2001 11,803,788 3,367,710 10,624,830 668,606

2002 11,909,298 3,268,635 10,886,259 698,445

2003 13,354,769 3,627,235 12,266,064 868,658

2004 13,976,182 3,661,456 12,581,792 780,375

2005 14,961,654 3,964,031 13,445,511 850,790

2006 15,880,786 4,125,124 14,423,168 930,676

2007 15,823,745 4,096,989 13,746,823 1,060,713

2008 17,734,441 4,577,500 15,412,512 1,047,418

2009 17,564,937 4,500,683 15,880,744 1,117,478

2010

Year Production Export

16 ARABIS

Production & Export: CPO & PKO (tons)

- I'sia

Source: Oil World Annual 2000 - 2009

Production Export

CPO/PKO CPO/PKO

1975 397,253

1980 721,172

1985 1,243,430

1990 2,412,612

1995 4,479,670

2000 7,050,000 4,139,000

2001 8,080,000 4,940,000

2002 9,370,000 6,490,000

2003 10,600,000 7,370,000

2004 12,380,000 8,996,000

2005 14,100,000 10,436,000

2006 16,050,000 12,540,000

2007 17,270,000 12,650,000

2008 19,200,000 14,612,000

2009 20,900,000 15,910,000

2010

Year

17 ARABIS

M'sia - Development of Oil Palm

0

5

10

15

20

25

Mill

ion

Ha

/ to

nn

es

1975 1980 1985 1990 1995 2000 2005 2009

Year

Development of Oil Palm in M'sia

Area Planted & Oil Produced

mill Ha planted mill Tonnes produced

18 ARABIS

Age Profile of M'sian Oil Palm Planted Hectarage (2008)

Source: MPOB

State Immature Ha Mature Ha Total Area Ha

P. Malaysia 2,149,444 260,575 2,410,019

Sabah 1,197,284 136,282 1,333,566

Sarawak 569,196 175,176 744,372

Total Malaysia (Ha): 3,915,924 572,033 4,487,957

19 ARABIS

World Palm Oil Production

0

5

10

15

20

25

mil

l to

nn

es

pa

lm o

il

1995 97 99 1 3 5 7 9

Year

World Palm Oil Production Trend

- mill tonnes palm oil -

M'sia

I'sia

Others

El Nino

drought

effect

20 ARABIS

Land availability: significant amount of land potentially suitable for Soybeans vs. Oil Palm

21 ARABIS

Actual Land Availability …

Actual land availability is limited ... competition among food crops, pasture uses, wood uses and other,

new uses (energy crops, crops with low carbon footprint)

growing urban, industrial, infrastructural uses

only part of the land has high or at least good yield potential

considerable part of land consists of forest - conversion carries significant social/environmental costs

22 ARABIS

Map

DEMAND

.

23 ARABIS

Demand

World Oils & Fats Consumption

–Consumption per capita

–Consumption differences - Rich vs Poor countries

–Consumption Trends

24 ARABIS

Oils & Fats: Consumption (kg per capita)

- 2000

Source: Oil World.

Pop Consumpt Pop Consumpt

(mill) per capita (kg) (mill)per capita

(kg)

N. America 375 43 India 1,010 12

S. America 12 Bangladesh 120 5

Pakistan 140 17

Europe 300 32 Srilanka

M. East 18 China 1,222 11

Taiwan 22 40

Korea 45 19

Japan 125 20

Africa 12

Australia & 20 30

NZ I'sia & M'sia 215

Country /

RegionCountry / Region

25 ARABIS

Consumption: Oils & Fats (1996)

- Rich vs Poor

World Av Consumption:

–17 kg/caput or 90 mill tons (1996)

–18.75 kg/caput or 113 mill tons (2000)

–20+ kg/caput or 140+ mill tons (2010)

Country Population kg/capita Tot Consumptn ton/yr

N. America 375,000,000 43.10 16,162,500

Europe 300,000,000 42.68 12,804,000

Total > 675,000,000 28,966,500

Country Population kg/capita Tot Consumptn ton/yr

China 1,222,200,000 11.90 14,544,180

India 944,580,000 9.3. 8,784,594

Total > 2,166,780,000 23,328,774

26

ARABIS

World Consumption Trend for Edible Oils & Fats

Source: Oil World

World

DisappearanceWorld Population Consumption

mill tonnes billion kg/capita

1990 80.43 5.27 15.26

1995 92.86 5.67 16.38

2000 113.43 6.09 18.63

2001 117.99 6.17 19.12

2002 121.38 6.24 19.45

2003 125.78 6.32 19.90

2004 131.59 6.39 20.59

2005 139.38 6.47 21.54

2006 147.80 6.55 22.56

2007 153.61 6.62 23.20

2008 159.84 6.7 23.86

2009 163.89 6.78 24.17

2010

Year

27 ARABIS

The Future (long term) ?

Demand for palm oil is continually increasing at

a high rate w/

–explosive population growth i.e. market expansion

particularly in LDC’s - Asia (China & India) & Africa

–substitution of other edible oils w/ palm oil i.e. market

substitution

as palm oil cultivation and production is more efficient (cheaper)

and more profitable than it is for other oil crops - palm oil's direct cost

of production is abt US$ 250/ton, compared to US$ 331/ton for soybean oil

- and is much lower than any other vegetable oil.

as palm oil production is less volatile i.e. more dependable supply

28 ARABIS

World Population Growth exploding world population ... Population 2000 = 6 billion !

Population Growth

- million -

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1960 2000 2025

Year

Pop

ula

tion

World

Aust / NZ

N. America

USSR

S. America

Africa

Europe

Asia

Most of this explosive population growth has and will come from Asia and Africa. Population 2000 = 6 billion !

Population in 2010 is 7+billion and expected to reach 9 billion by about 2030+!

29 ARABIS

World Population Growth …

ARABIS 30

0

1

2

3

4

5

6

7

8

9

10

1800 1850 1900 1950 2000 2050 2100

Po

pu

lati

on

(b

n)

Year

World Population (billion)

DC's LDC's Total Pop (bn)

Population 2000 = 6 billion.

Population in 2010 touched 7+billion

and expected to reach 9 billion by about

2030+!

Oil & Fats Consumption

- increasing very fast! Actual & Projected Consumption of Oils & Fats

(1995 - 2025)

80

100

120

140

160

180

200

1990 1995 2000 2005 2010 2015 2020 2025

0

10

20

30

40

Pop (bill) - R

Oil Consumptn - mill tons

consump/cap (kg) - R

Source: Oil World

31 ARABIS

PRICES

.

32 ARABIS

Prices

Prices of Vegetable Oils

–prices of vegetable oils generally track each other w/ palm oil

generally being traded at a slight discount to the other oils (as it

is the most competitive oil in the market with the lowest cost of

production).

33 ARABIS

Prices: Vegetable Oils - US$/tonne cif Rotterdam

Year CPO PKO Soybean Rapeseed Coconut

1980 586 669 598 571 674

1985 501 551 572 540 590

1990 290 334 447 422 337

1995 628 677 625 614 670

2000 310 444 338 347 450

2001 286 308 354 402 318

2002 390 416 454 485 421

2003 443 459 554 600 467

2004 471 648 616 685 661

2005 422 627 545 669 617

2006 478 581 599 794 607

2007 780 889 881 969 919

2008 949 1,130 1,258 1,329 1,224

2009 683 702 849 859 725

2010

Source: Oil World 34 ARABIS

Prices: Vegetable Oils US$/tonne

Av. Prices of Veg Oils - US$/tonneNote: veg oil prices generally track each other (highly substitutable in end uses)

0

200

400

600

800

1000

1200

1980 81 82 83 84

1985 86 87 88 89

1990 91 92 93 94

1995 96 97 98 99

2000 1 2 3 4

2005 6 7 8 9

2010

Year

Pric

e -

U

S$ /

ton

ne

CPO

Soybean

Rapeseed

Coconut

PKO

All Prices cif NW Europe (Rotterdam)

COP - Palm Oil

35 ARABIS

World Oils & Fats S-D Balance

Indicator Year >

- million tonnes 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Production

Oils & Fats 101 102.6 109.1 114.2 117.6 120.7 125.6 132.4 141.1 150.0 154.1 160.0 163.9

Palm Oil 17.9 16.7 20.5 21.6 24.0 25.4 28.3 31.2 34.0 37.3 38.8 43.3 45.1

- M'sia 9 8.3 10.5 10.8 11.8 11.9 13.4 14.0 15.0 15.9 15.8 17.7 17.6

- I'sia 5.4 5 6.2 6.9 8.1 9.4 10.6 12.4 14.1 16.1 17.3 19.2 20.9

Op Stocks

Oils & Fats 13 13.3 13 14.3 15.7 15.5 14.9 14.4 14.7 16.3 17.5 17.9 18.8

Palm Oil 3.1 3.2 2.8 3.7 4.1 4.2 4.0 4.0 4.8 5.3 5.5 6.0 6.7

- M'sia 0.8 1 0.8 1.2

- I'sia 0.9 0.5 0.7 0.7

Export

Oils & Fats 33 32.7 34.3 35.6 38.0 40.6 44.3 47.4 51.2 57.5 58.3 60.8 63.1

Palm Oil 12.4 11 13.8 14.9 17.6 19.4 21.9 24.2 26.5 30.0 29.9 33.7 35.2

- M'sia 7.7 7.7 8.9 9 10.6 10.9 12.3 12.6 13.4 14.4 13.7 15.4 15.9

- I'sia 3 2 3.3 4.1 4.9 6.5 7.4 9.0 10.4 12.5 12.7 14.6 15.9

Total Availability

Oils & Fats 114 116 122 128

Palm Oil 21 20 23 25

Price > US$/mt 546 671 480 350 286 390 443 471 422 478 780 949 683

36 ARABIS

MARKETS

India & China

37 ARABIS

India: Vegetable Oil Imports

India: Vegetable Oil Imports ('000 tonnes)

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

Palm Oil - PO 2,899 3,650 5,015 6,867 7,200 8,200

Palm Kernel Oil - PKO 103 141 141 185 250 250

Rapeseed Oil - RSO 1 42 23 23

Soybean Oil - SBO 1,727 1,447 733 1,060 1,500 1,190

Sunflower Oil - SFO 113 203 18 583 550 600

Total Imports : 4,842 5,442 5,907 8,737 9,523 10,263

Source: USDA

38 ARABIS

India: Vegetable Oil Imports vs. Consumption

India: Vegetable Oil Imports and Consumption ('000 tonnes)

2006/07 2007/08 2008/09 2009/10 2010/11

Imports 5.443 5.926 8.757 9.538 10.278

Consumption 11.910 12.949 14.761 16.247 17.101

Source: USDA

39 ARABIS

India’s Population (2010): 1.3+ billion. Per cap Consumption = 13 kg (World Av. = 20 kg)

India: Oilseed Production

India: Oilseed Production ('000 tonnes)

2006/07 2007/08 2008/09 2009/10 2010/11

Cottonseed 9.13 10.40 9.60 10.10 10.60

Peanuts 5.39 6.80 6.25 4.90 6.40

Rapeseed 5.80 5.45 6.70 6.40 7.00

Soybean 7.69 9.47 9.10 8.75 8.80

Sunflower seed 1.28 1.12 1.00 0.82 0.90

Total Production : 29.29 33.24 32.65 30.97 33.70

Source: USDA

40 ARABIS

India: Edible Oil Balance Sheet

India: Edible Oil Balance Sheet ('000 tonnes)

2009/10 e 2010/11 f

Beginning Stocks 1.15 1.21

Domestic Production 6.57 7.24

Imports 8.62 8.66

Total Supply 16.34 17.11

- Domestic Demand 15.13 15.96

= Ending Stocks 1.21 1.15

Source: Transgraph Consult Svcs.

41 ARABIS

China

China had an Import Quota of 1 mill tons for

palm oil < 2001

–relaxed in 2001 when it imported 1.7 mill tons

–Import Quota was gradually removed thru higher

allocations till 2005 as per China’s WTO

obligations (signed in end 2001)

in 2002, import quota raised to 2.4 mill tons

Import Quota abolished in 2005

42 ARABIS

China: Vegetable Oil Consumption

ARABIS 43

China: Vegetable Oil Consumption ('000 tonnes)

2006/07 2007/08 2008/09 2009/10 2010/11+

Palm Oil - PO 5,138 5,222 5,618 5,930

Peanut Oil 2,007 2,016 2,184 2,227

Rapeseed Oil - RSO 4,343 4,139 4,853 5,641

Soybean Oil - SBO 8,670 9,693 9,486 10,435

Sunflower Oil - SFO 329 129 439 432

Others 2,072 2,144 2,158 2,188

Total Consumption : 22,559 23,343 24,738 26,853 29,300

China’s Population (2010): 1.5+ billion. Per cap Consumption = 18 kg (World Av. = 20 kg)

China: Imports of Vegetable Oils

ARABIS 44

China (1.5+ billion pop) in 2009/10 imported almost one-

third of its vegetable oil requirements of 26.8 mill tonnes (i.e.

about 9 million tonnes in 2009/10) to meet its ever growing

demand

- and about 2/3rd of this was Palm Oil.

CHINA

Veg Oil Imports

Import Share

% 2009/10

Palm Oil 64.0 from M’sia

Soybean Oil 17.0 from Argentina

Rapeseed Oil 8.7 from Canada

Others 10.3

TOTAL: 100.0

COMPETITIVENESS OF

PALM OIL

.

45 ARABIS

Comparative Crop Yields of Oil

Crop Product

% Oil

Content

(av)

% Oil

Content

(pot)

Av. Crop

Product

Yield

(tonnes/Ha)

Calc. Oil Yield

(tonnes/Ha)

Oil Palm palm oil 18.7 25 18.91 3.50

Oil Palm palm kernel oil 43.4 49 0.95 0.41

Soybeans seed 18.5 20 2.11 0.39

Groundnut seed 47.5 80 0.94 0.45

Cotton Seed seed 19.0 20 1.01 0.19

Rapeseed seed 42.5 45 1.39 0.59

Sunflower seed 62.5 45 1.22 0.52

Coconut copra 66.5 68 0.57 0.38

46 ARABIS

Comparative Oil Yields by crop

ARABIS 47

Oil Palm is the most efficient oil crop (yields upto 5 t/ha/year), and is a cheap and

versatile vegetable oil … •Perennial crop - 25 productive cycle years

•Accounts for more than a third of total world vegetable oil output and surpassed soy oil

•Wide-range of use and enjoys fast growing demand in food and non-food industries

Profitability of Oil Palm production...

INCOME / Output RM/Ha/yr

Growth / Output (Root, Girth, Height, LAI* & O2*)

Yield * 20 t FFB/Ha

Price @ RM 2500/t CPO RM 500/tFFB

Total -> RM 10,000 / Ha

COST / Input %

Solar En* & CO2 * RM 0 /Ha 0

Water * rainfed RM 0 /Ha 0

Fertilizer * @ 8 kg/palm RM 1000 / Ha 36

Labour RM 500 / Ha 14

Other Field Costs … RM 300 / Ha 8

Processing (non field) @ RM 45/t FFB RM 900 / Ha 32

Admin / Overheads … RM 300 / Ha 10

Total -> RM 3,000 / Ha 100

Direct Cost of Production: RM 150 / t FFB US $ 1.00 = RM 3.05 (2010) 48 ARABIS

Palm Oil:

M’sia - Cost of Production vs. Market Price …

Direct Estate COP: RM 150/t FFB

HQ O/heads: RM 25/t FFB

Govt Taxes, Cess etc. RM 50/t FFB

Total COP: RM 225/t FFB

(or RM 1125/ t CPO)

Market Price: RM 480 /t FFB

long term avg (or RM 2400 / t CPO)

ARABIS 49

Source: MPOB Survey of Plantation Companies (2010).

Oil Palm Share of Plantation Area - M'sia (increasing fast!)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 1996 2005

Cocoa

Rubber

Oil Palm

50 ARABIS

THE FUTURE &

POLICY IMPLICATIONS

.

51 ARABIS

Prices were / expected to be:

–1998-2001/02: steady upto mid 1999 due to depressed palm oil yields / production as a result of the 1997/98

El Nino drought event affecting production upto 3 yrs after the drought. Increased palm oil

production in end 2000 and 2001 weakened prices to record lows. Consumption grew only

moderately in China / India from 2000 due to moderate economic growth – prices also

depressed w/ higher or new import tariffs / quotas. New oil palm plantings has also stopped in

I'sia during 1998/99 due to the country's credit crunch / econ crisis.

Also, Soybean output in N & S America crashed prices further. Its high output from Brazil /

Argentina (in devalued currencies) in 1999-00/01 kept prices very depressed.

Prices: < US$ 400/ton pre 2000. < US$ 300/ton post 2000.

–2003-2005: Prices firmed due to increased market demand by increasingly affluent populations in Asia

(India & China). China gradually removes import quota restrictions (on joining WTO) and India

doesn't keep import tariffs much above 15%.

Prices: > US$ 350 - 400 /ton. from 2003 onwards

Prices ...

52 ARABIS

cont'd ...

–2006-2010 and beyond:

Prices continued to firm to record highs in 2008 with growing population in China and India

demanding more edible oils (esp palm oil) - that grows efficiently only in the tropical belt.

M'sia, I'sia, PNG, S & C. America & Africa will be the main source of meeting this demand.

2010/11 – prices still very firm due to crop failures of annual oilseeds globally and … high

fossil fuel prices!

NOTE:

As palm oil begins to be the dominant traded oil and captures even greater market shares, the prices of

all oils and fats will be increasingly sensitive to the supply and stock levels of palm oil.

At some point, the value capturing of palm oil and its derivative products will also shift down the supply

chain - first to the refiners / end product manufacturers and later to the distributors and retailers.

Hence the need for M’sia to now start setting up it’s own refineries w/ integrated food mfg ops in major

importing countries and also begin controlling the distribution and retail sectors there.

Forecasting Prices ...

53 ARABIS

Policy Implications ...

Since Demand growth will be mainly drive oil palm production for at least the

next 2 decades (ie the limiting factor is production), policies should prioritize /

stress:

expansion of oil palm areas / hectarages

increase in productivity / yields

H/ever, emphasis should also be placed on marketing the commodity (branding,

setting up distribution channels, refining CPO at target market site for specialty uses /

niche markets etc.) (After 2015-20, increasingly more attention should be paid to

marketing aspects as palm oil would account for a very major share of trade in oils

and fats - w/ swings in palm oil supply impacting sharply on prices).

Also after 2015-20, the downstream would start to capture more of the product value

- hence the need to get vertically integrated &/or value add at the upstream.

54 ARABIS

Policy Implications (cont'd) ...

Expansion of Area

–Govt's of M'sia (& I'sia) should enter into bilateral agmnts w/ Govt's of

countries w/ large tracts / areas of suitable OP land to lease land

parcels for 60-99 years

–The Govt of M'sia / I'sia can then sub-lease these lands to cash rich

plantatn co.'s of their own countries

Advantages: G-to-G investment guarantee built-in, bureaucratic requirements

minimized, less time wasted etc. - both investing and recipient country benefit !

Increase Productivity / Yields

–step up investments in breeding / plant material improvement

programmes (to be overseen directly by the financially contributing

plantatn co.‘s)

–step up extension inputs, improve distribution channels for fertilizers to

more rural estates, optimize use of inputs etc.

55 ARABIS

Policy Implications (cont'd) ...

Current Demand side Limitations to Oil Palm uptake ...

–h/ever, market opening actions to get better access for SE Asian palm oil into

India / China needs to be vigorously pursued now - at the G-to-G level.

India's import of M'sian palm oil in 1999 has more than doubled in one year by just

dropping the import tariff (from 60% to 16.5%) ! But tariffs for CPO has been raised

again to 65% - and 27.5% for refined oils in 2000. And in 2001, it was raised to over

85%CPO - 92% Olein!

M'sia needs to buy/build refineries in India (as it did in China in early 1990's) to get

around this restriction and to encourage Indian consumers to continue taking up more

M'sian palm oil (by blending w/ local veg. oils, localized food mfg ?, branding ?).

China has in 2002 increased the import cap (quota) on palm oil to 2.4 mill tons - after

joining WTO. Complete liberalization achieved wef 2005.

56 ARABIS

The worlds main agri / food producers - Argentina/ Brazil, US / Canada,

EU, Aust / NZ and M'sia (I'sia) - mostly have slow growing populations but

expanding food production capabilities

World food production still outpacing population growth, w/ global trends as

follows ...

–N&S America - main protein source for animal feed / human food consumption

–SE Asia - main edible oil (fatty acid) source for animal feed / human food consumption

–World (all parts) - can produce sufficient carbohydrates (Rice in Asia and Wheat in the

West / America’s)

–Note:

global industrial tariffs - average 4%

global agri tariffs - average 40%

The Global Perspective ...

57 ARABIS

Thank you !

For more info ...

visit ARABIS's web site ... www.arabis.org

or Email us ... [email protected]

58 ARABIS

Documents

Global Oil Palm ighiuhIndustry