The International Oils and Fats MarketsThe International Oils and Fats Markets

John Goodwin, John Goodwin, President, International Association of Seed Crushers (IASC)President, International Association of Seed Crushers (IASC)

Australian Oilseeds Federation Australian Oilseeds Federation

Melbourne Melbourne -- 6/7October 20046/7October 2004

SUPPLY DEMAND

STIMULANTS

SUPPRESSORS

SIDE SHOW S

STIMULANTS

SUPPRESSORS

SIDE SHOW S

FUNDAMENTALS

PRICE

SUPPLY DEMAND

STIMULANTS

SUPPRESSORS

SIDE SHOW S

SUPPLY

FUNDAMENTALS

•Agronomic progress

•G M O

•Trade Policy

•Environmental/Sustainability

•Softsvs Hard oils

•Qualitative issues

•Land area

•Climate

SUPPLY DEMAND

STIMULANTS

SUPPRESSORS

SIDE SHOW S

DEMA ND

FUNDAMENTALS

•Per capita consumption

•Economic development

•Trade Policy

•Health issues

•Biodiesel

•Health issues

•Population

Population growth China, India

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

bil

lio

ns

ChinaIndia

1950 2000 2050

Per capita oils and fats consumption

10

12

14

16

18

20

22

kg

s

World

China

India

1999 2001 2004

China - oilseed imports

0

5

10

15

20

25

1 2 3 4 5 6 7

mill

ion

to

nn

es

1990 1992 1994 1996 1998 2000 2002 2004

CHINA CRUSH

10

20

30

40

50

60

1990 - 2004

mill

ion

tonn

es

World population growth

0

2

4

6

8

10

bill

ion

s

1950 2004 2050

Tonnes

(mio)

268

205

130

A Question of Health

Food related issues of consumer interest

• Obesity

• Fat

• Saturates

• Hydrogenation (trans fatty acids)

• Salt

• Sugar

• Carbohydrate

Health

A confusing picture

Fat is bad, but some fats are good

Tofu prevents disease, tofu aids growth of certain tumours

Eggs promote cholesterol, eggs pack a nutritional punch

The barrage of conflicting reports as left consumers confused

and with a mistrust of nutritional information.

Daily Mail – 5th July 2003

Sunday Times – 6th July 2003

‘Hydrogenated vegetable fat and oil –also known as trans fatty acids (TFA’s)’

Influence of Fatty Acids on Blood Cholesterol

Fatty Acid TypeTotal Serum Cholesterol

HDL Level (Good

Cholesterol)

LDL Level (Bad

Cholesterol)

Saturated RAISE NO EFFECT RAISE

M onounsaturated LOW ER RAISE LOW ER

Polyunsaturated LOW ER LOW ER LOW ER

Trans Fatty Acids RAISE LOW ER RAISE

Nutritional Profile(% content)

-

15

-

-

-

Trans

104050Palm

126310Part Hard Rape

18747High Oleic Rape

25587Rapeseed

652312Sunflower

PolyMonoSats

Trans Fats – Current SituationUSA Labelling requirements from 2006

Trend towards volountarylabelling now

Danish law passed @ 1% or less TFA !!!

No current European labelling requirement for TFA

EFSA recommend 2% or less –but is not law!

UK ( and Europe) @ 1.2% now!!!

No current European labelling requirement for TFA

Increasing NGO and Media pressure?!!

American Anti-palm Campaign?

“We are aware of the short-term attractiveness of using tropical fats, which do not require partial hydrogenation. However, we urge you to carefully consider the consequences of raising the level of heart-unhealthy fats as a solution to the trans fats issue”

John Becherer

CEO

United Soybean Board

Steve Censky

CEO

A merican Soybean Association

18 June 2004

European “Non-Food” Dem and

0200

400600800

10001200

14001600

99-00

00-01

01-02

02-03

03-04

04-05

Th

ou

san

d M

T

Soya Rape Sun Palm

Biodiesel

• EU commitment to renewable energy resources

• EU mandated target for 2% biofuels by 2005, 5.75% by 2010 and 10% by 2020

(so 2010 target approx. 10.2 mio tonnes biodiesel)

Therefore enormous pressure on supplies of non-GM food oils in Europe…….where will the oil come from ?

• UK introduced 20p/litre duty discount for biodiesel

Biodiesel

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0

200

400

600

800

1000

1200

1400

1600

1800

2000

1998

2000

2002

2003

2004(F

)

2005(F

)

Th

ou

san

d T

on

nes

Germany

����������������

France Italy Rest of EU EU Total

Growth in BiodieselProduction

0

5

10

15

20

25

30

35

91/9

2

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4 (f)

Millio

n M

SBO RSO SFO PALM

World Growth in Vegetable Oils

20.0%

22.0%

24.0%

26.0%

28.0%

30.0%

32.0%

34.0%

36.0%

38.0%

40.0%

91/9

2

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4 (f)

04/0

5(f)

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

68.0%

70.0%

72.0%

74.0%

76.0%

Palm & SoyaShare(Right Axis)

Sun & RapeShare(Left Axis)

World Market Share by Oil source

Mexican Palm Oil Market Sourcing

28%

19%2%36%

9%3%3%

Honduras

Guatemala

Mal/Indo

Costa Rica

Ecuador

Colombia

Mexico

In the last 10 years :

• Regional Oil Deficits have increased by over 15 million MT

• All that has been met by increases in Palm & Soya exports

• 70% has come from Palm Oil

• of which 35% has come from Indonesia alone

•Predictions for the future?

Genetic Modification

• Europe only grows non-GM Oilseeds

• Soya oil now mostly GM and price discounted due to unacceptability

• European consumers paying a premium for our GM free stance?

• Can’t use GM oil for biodiesel due to non-GM glycerine by-product

GM in Europe

• Most European refineries are now “GM Free”

Food Supply

• NEEDS TO GROW!!!• Soya @ 32 million tonnes• Palm @ 28 Million tonnes• Palm set to double in next 20 years• More land required• Maybe 10 million hectares!

• Does this mean rain forest?

Sustainable Agriculture

Sustainable Agriculture

Complex, and not easy in a few minutes but here goes…

• Environmental –land use, water table, pollution, nature….

• Human rights –land tenure, wages, conditions, children….

• Economics –wealth creation, socialist capitalism!

NGO / Consum er reaction

• <900 NGO’s in 1956• Now > 20,000 • 1 in 20 A m ericans paid up members!!

The 3 Pronged Solution

• NGO’s more recent tactics.• But they can still only point!!!!! So …

• Governments must legislate

• Technology must invent

• Private sector must invest

SUPPLY DEMAND

STIMULANTS

SUPPRESSORS

SIDE SHOW S

STIMULANTS

SUPPRESSORS

SIDE SHOW S

FUNDAMENTALS

PRICE

-200

0

200

400

600

800

Jan

-87

Jan

-88

Jan

-89

Jan

-90

Jan

-91

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

$/m

t

Rape OilSun OilSoya Oil

Prices – 1987 to 2004

Key m essages… ..

! Sustainability

! G M O

! Health……..Trans Saturated Fats

! Free Trade WTO

! Demand Growth - Supply Limitations –what next?

! The Role of the IASC

THANK YOUAND MAYBE SEE YOU IN MUMBAI IN JANUARY 2005