Malaysian Palm Oil Council (MPOC)

PALM OIL TRADE FAIR & SEMINAR 2015 SEOUL, SOUTH KOREA

Malaysian Palm Oil Its Role in the Global Oils

and Fats Supply Chain Tan Sri Datuk Dr Yusof Basiron

Chief Executive Officer Malaysian Palm Oil Council

MALAYSIA – SOUTH KOREA PALM OIL TRADE FAIR & SEMINAR 27 APRIL 2015


•  Global Oils and Fats Scenario •  The Importance of Palm Oil •  The Challenges •  New Demand for Palm Oil •  Conclusions

PRESENTATION OUTLINE


SOYBEAN FARM – PALM OIL PLANTATION


LAND CLEARING FOR SOYBEAN PLANTING


SOYBEAN FARM


HARVESTING OF SOYBEAN & PALM OIL


SUNFLOWER CROP


SUNFLOWER CROP HARVESTING


RAPESEED FARM


RAPESEED CROP HARVESTING


HARVESTING OF OILSEEDS Ø Compared to other oilseeds, oil palm is the most environment friendly agricultural crop.

Ø Oil palm trees are tall and provide a prominent green canopy cover all year round. The crop is an efficient carbon sequester

Ø HarvesPng of oil palm fruits is done conPnually during the year and does not require chopping down the trees which keep the land green and prisPne

Ø Other oilseeds such as soybean, sunflower and rapeseed: the crops are low lying and do not provide much green cover

Ø Other oilseeds when harvested leave behind a clear field without any green cover


MAJOR OILSEED PLANTED AREAS AND PRODUCTION

Ø  Since 2004, land for palm oil culPvaPon grew by only 6.88 million hectares compared to soybean culPvaPon which increased by 24.67 million hectares while land for rapeseed oil culPvaPon increased by 10.72 million hectares

Ø  In terms of producPon, palm oil increased by 28 million MT compared to soybean oil which increased by 14.38 million MT while rapeseed oil increased by 8 million MT

0 10 20 30 40 50 60 70 80 90

100 110 120

SBO SFO RSO PO

Planted area (Mn. Ha) Production (Mn. MT)

2004

0 10 20 30 40 50 60 70 80 90

100 110 120

SBO SFO RSO PO


2014

Global Oils and Fats Scenario


Global Oils and Fats Scenario •  The global oils and fats output in 2015 is forecast to increase by 4 million MT compared to 10 million tonnes last year.

•  Palm oil alone is expected to contribute 1.8 million MT or 45% of this growth

•  There will be more oilseed crushing acPviPes in 2015 especially for sunflower and soybean seed because of excess producPon in the previous year.


Oils and Fats ProducPon (1990 – 2014)

1990 ProducPon : 80.89 million MT

2014 ProducPon : 199.75 million MT Source: Oil World

0.00%

Rapeseed oil

10.09% Soybean oil

19.90%

Palm oil 13.62%

Sunflower oil

9.73%

Others 46.67%

Rapeseed Oil

13.61% Soyabean

Oil 22.56%

Palm oil 29.63%

Sunflower Oil

8.17%

Others 26.04%


OILS & FATS PRODUCTION 1990 2014 ('000 MT) (%) ('000 MT) (%) Palm oil 11,013 13.62 59,189 29.63 Soybean oil 16,096 19.90 45,072 22.56 Sunflower oil 7,869 9.73 16,312 8.17 Rapeseed oil 8,160 10.09 27,163 13.60 Subtotal 43,138 53.33 147,736 73.96 Cottonseed Oil 3,782 4.68 4,910 2.46 Groundnut Oil 3,897 4.82 3,930 1.97 Sesame Oil 612 0.76 872 0.44 Corn Oil 1,477 1.83 2,998 1.50 Olive Oil 1,855 2.29 2,940 1.47 Palmkernel Oil 1,450 1.79 6,521 3.26 Coconut Oil 3,387 4.19 3,071 1.54 Butterfat 6,499 8.03 7,742 3.88 Lard 5,509 6.81 8,425 4.22 Fish Oil 1,378 1.70 912 0.46 Linseed Oil 653 0.81 619 0.31 Castor Oil 437 0.54 650 0.33 Tallow /Grease 6,812 8.42 8,424 4.22 Subtotal 37,748 46.67 52,014 26.04 Total 80,886 100.00 199,750 100.00

Source: Oil World


Ø  Growth in populaPon, income growth, low per caput consumpPon level

Ø  Against a backdrop of lack of arable land and reduced supply from compePng sod oils, palm oil reliability in supply gives it the added advantage

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

1990 Exports : 23.27 million MT 2014 Exports :78.58 million MT

Oils and Fats Exports (1990 – 2014)

Source: Oil World

Soyabean oil

12.63% Sunflower

oil 5.18%

Palm oil 59.79%

Rapeseed oil

10.69%

Others 11.71%

Soybean oil

14.15%

Sunflower oil

9.13%

Palm oil 36.22%

Rapeseed oil

6.93%

Others 33.57%


OILS & FATS EXPORTS 1990 2014

('000 MT) (%) ('000 MT) (%) Palm oil 8,429 36.22 46,030 59.79 Soybean oil 3,294 14.15 9,720 12.63 Sunflower oil 2,126 9.13 8,230 10.69 Rapeseed oil 1,613 6.93 3,990 5.18 Subtotal 15,462 66.43 67,970 88.29 Cottonseed Oil 302 1.30 180 0.23 Groundnut Oil 318 1.37 230 0.30 Sesame Oil 22 0.09 40 0.05 Corn Oil 360 1.55 790 1.03 Olive Oil 287 1.23 890 1.16 Palmkernel Oil 886 3.81 3,110 4.04 Coconut Oil 1,617 6.95 1,510 2.48 Butterfat 625 2.69 850 1.10 Lard 269 1.16 120 0.16 Fish Oil 694 2.98 780 1.01 Linseed Oil 184 0.79 80 0.10 Castor Oil 178 0.76 470 0.61 Tallow /Grease 2,070 8.89 1,560 2.03 Subtotal 7,812 33.57 10,610 11.71 Total 23,274 100.00 78,580 100.00

Source: Oil World


Average Annual Growth in World Vegetable Oil ProducPon (1990 – 2014)

Source: Oil World

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

Palm Oil Production Soybean Oil Production Sunflower Oil Production Rapeseed Oil Production

Average Annual Growth (1990 – 2014) 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

-‐

50,000

100,000

150,000

200,000

250,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Oils & Fats ProducPon Oils & Fats ConsumpPon


OILS & FATS PRODUCTION VS CONSUMPTION 1990 – 2050 (F)

-‐

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050 (‘0

00 M

T)

Oils & Fats ProducPon Oils & Fats ConsumpPon Linear (Oils & Fats ProducPon) Expon. (Oils & Fats ConsumpPon)

Source : Oil World


GLOBAL OILS & FATS PRODUCTION & CONSUMPTION Y-‐O-‐Y CHANGE 1991 – 2014 (‘000 MT)

Source : Oil World

-

2,000

4,000

6,000

8,000

10,000

12,000

PRODUCTION CONSUMPTION


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

Source: Oil World

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

Palm Oil - % of Oils & Fats Consumed Other Oils - % of Oils & Fats Consumed


Palm Oil Supply from Malaysia and Indonesia

Source : Oil World

2011 (MT)

2012 (MT)

2013 (MT)

2014 (MT)

Change 2014/ 2013 (MT)

Change 2014/ 2013 (%)

ProducPon

(Malaysia) 18,912 18,785 19,216 19,500 284 1.48

ProducPon

(Indonesia) 24,300 26,900 28,300 30,100 1,800 6.36

Total 43,212 45,685 47,516 49,600 2,084 4.39


Supply of Other Oilseeds (Million MT) 2014E 2013 Diff (MMT) (%)

Soybean 279.68 265.88 13.80 5.19

Colonseed 43.62 45.02 (1.40) (3.11)

Groundnut 28.75 27.94 0.81 2.90

Sunflower 41.63 35.23 6.40 18.17

Sesameseed 4.36 4.25 0.11 2.59

Castorseed 1.38 1.54 (0.16) (10.39)

Linseed 2.32 2.03 0.29 14.29

Rapeseed 69.82 63.68 6.14 9.64

Palmkernel 14.61 13.96 0.65 4.66

Copra 5.24 5.39 (0.15) (2.78)

Total 491.41 464.92 26.49 5.70


Oilseed Crushing (Million MT) 2014E 2013 Diff (MMT) (%)

Soybean 235.27 225.84 9.43 4.18

Colonseed 32.51 34.31 (1.80) (5.25)

Groundnut 10.23 9.44 0.79 8.37

Sunflower 37.2 32.24 4.96 15.38

Sesameseed 2.05 2.34 (0.29) (12.39)

Castorseed 1.5 1.55 (0.05) (3.23)

Linseed 1.89 1.84 0.05 2.72

Rapeseed 62.58 61.77 0.81 1.31

Palmkernel 14.5 13.75 0.75 5.45

Copra 5.16 5.52 (0.36) (6.52)

Total 402.89 388.6 14.29 3.68


Oilseed Oils ProducPon (Million MT) 2014E 2013 Diff (MMT) (%)

Soybean 43.78 42.58 1.20 2.82

Colonseed 4.87 4.97 (0.10) (2.01)

Groundnut 4.14 3.82 0.32 8.38

Sunflower 15.57 13.5 2.07 15.33

Sesameseed 0.87 0.86 0.01 1.16

Castorseed 0.66 0.68 (0.02) (2.94)

Linseed 0.63 0.61 0.02 3.28

Rapeseed 25.35 24.99 0.36 1.44

Palmkernel 6.52 6.18 0.34 5.50

Copra 3.21 3.44 (0.23) (6.69)

Total 105.6 101.63 3.97 3.91


The Importance of Palm Oil


IMPORTANCE OF PALM OIL CONSUMPTION – PALM OIL VS OTHER OILS in 2014

Soybean oil 22.45%

Sunflower oil 7.37%

Palm oil 30.00%

Rapeseed oil 12.69%

Others 27.50%


Scarcity of Arable Land Year World’s populaPon

(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 populaPon 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 alenPon to the needs of agriculture and to increase investments in agricultural pracPces.”Sustainability Team Discussion Paper-‐ March 2010-‐ Dexia Asset Management


DistribuPon of Agricultural Area


MAJOR OILSEED PLANTED AREAS AND PRODUCTION

Ø  Since 2004, land for palm oil culPvaPon grew by only 6.88 million hectares compared to soybean culPvaPon which increased by 24.67 million hectares while land for rapeseed oil culPvaPon increased by 10.72 million hectares

Ø  In terms of producPon, palm oil increased by 28 million MT compared to soybean oil which increased by 14.38 million MT while rapeseed oil increased by 8 million MT

0 10 20 30 40 50 60 70 80 90

100 110 120

SBO SFO RSO PO


2004

0 10 20 30 40 50 60 70 80 90

100 110 120

SBO SFO RSO PO


2014


The Challenges


Global Challenges Faced by Developing Countries

1.   IDEOLOGY Threat – Developed countries (already deforested) promoted to play the role of supplying food, whereas developing countries to play the role of “Forest Ranger” - preserving their forest, leading to anti-growth movements.

2.   Growth in World Population/Food security - Ever Growing World Population resulting in more mouths to feed. Growing economies, and improving incomes will increase per capita demand for oils and fats.

5.   Scarcity of land/Policies- Expansion vs Productivity vs Environmental Pressure

6.   Food vs Fuel - Higher crude oil prices encourage greater use of food products such as corn, vegetable oil, and sugar in the production of biofuels, plus higher cost of production unless offset by effect of fracking shale gas

7.   Global Warming/Climate Change - The impact of climate change on weather variability and yields


NGOs / Environmental Pressure Ø  These groups are sometimes government sponsored or funded

by entities that are threatened by the presence of better, more

viable vegetable oils and fats products.

Ø  They have become anti-growth agents to prevent developing

countries from expanding their agricultural production via “no deforestation” ideology.

Ø  The real culprits with devastating deforestation records are the

countries where these green NGOs are coming from, UK(11%),

France(29%) , US(33%) and Australia(19%) compared to Malaysia (56% forest).

•  Non Tariff Barriers, Policies emerging, proposed or imposed either by developed naPons or acPv is t g roups that i ssue misrepresented statements under the misguided concern for t h e p r o t e c P o n o f t h e environment.

•  Impose export controls such as:

q  Bans q  Embargoes q  Quotas and taxes q  Enforce unfair cerPficaPons

which distort or mislead the consumers and disrupt the growth of vegetable oils, its producPon and supply potenPal


Ideology Threat

CONCEPT: Make developed countries as food granary & keep undeveloped or developing countries for forest conservaPon

•  Wrong ideology on land use policy, denying developing countries from developing their agricultural sector.

•  Correct ideology should be to choose crops that produce most food with least land area: need for UN Sustainable Agriculture IniPaPve

•  Developed countries have limited new land for agriculture use •  Oil palm is perennial & yields 11 X more than annual crop of soya on same land area


WORLD HUNGER MAP LogisPcs advantages for buyers

The areas in red, which indicate severe weight and malnutrition issues, stretch from Western Africa to South Asia. According to the UN "Underweight is most common in the UN regions of Southern Asia (30%), followed by Western, Eastern, and Middle Africa (20%, 19% and 16%, respectively) and South-Eastern Asia (16%). In comparison, less than 10% of children in Europe and the Americas are underweight


Nearly all of the populaPon growth will occur in developing countries. Sub-‐Saharan Africa's populaPon 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).

Growth in World Population/Food Security


New Demand


VERSATILITY OF PALM PRODUCTS IN FOOD APPLICATIONS

40 40

•  TradiPonal Foods •  Cooking oil •  Industrial Frying Fats

•  Margarine

•  Shortening

•  Vegetable Ghee •  ConfecPonery Fats •  Ice Cream

•  Filled Milk

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

•  As a source of pro Vitamin A and E


VERSATILITY OF PALM PRODUCTS IN NON FOOD APPLICATIONS

41 41

Personal Care Products

Powder & Liquid Detergent for Fabric Cleaning

Fabric Sodener Using Palm-‐Based Esterquat

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


OpportuniPes: Trans Fats in Food Ø Many countries around the world have banned the use of

trans fats in food Ø The government of India has made it compulsory for food

manufacturers to menPon trans fats content on labels Ø The U.S. Food and Drug AdministraPon was looking to ban

trans fats included in food Ø Harvard scienPsts esPmate that trans fats may contribute

to more than 30,000 premature deaths each year Ø  FDA officials esPmate as many as 7,000 deaths and 20,000

heart alacks would be prevented by eliminaPng trans fats from processed foods

Ø Palm oil is proven to be healthy and trans fats free Ø Opportunity to expand market using this opportunity


Capitalizing on Trans Fats Issue

Big market potenPal that is just emerging •  Solid food formulaPon Promote sales of palm stearin to make margarines, vanaspaI and

shortenings •  Blending sod oils with palm oil Blending soL oils with palm oil E.g. Smart Balance •  US sIll hygrogenaIng 900,000t of soL oils. At 50% replacement, US alone will need 450,000t palm oil to make trans free products


APPLICATIONS OF OIL PALM BIOMASS

OIL PALM BIOMASS

BOARD OF VARIOUS KINDS

•  MDF •  Plywood •  Moulded parIcleboard •  Sawn lumber

PROPERTIES OF OPT, OPF & EFB FIBRE BUNDLES

•  Fibre quality •  Fibre morphology •  Fibre properIes •  Usable fibre fracIons

OTHER PRODUCT TYPES

•  Oil palm heart •  Carbon products •  Carboxymethyl cellulose •  Fine chemicals

FIBRE REINFORCING COMPOSITES

•  Agrolumber •  PlasIc composite

PAPER PULP & PAPER PRODUCTS

•  Chemical pulp •  Semi-‐mechanical pulp •  Mechanical pulp •  Moulded paper products •  Soilless planIng medium


SOUTH KOREAN VENTURES IN MALAYSIA

Dongwha Malaysia Sdn. Bhd. (DFB), is one of the early pioneers of the MDF industry in Malaysia. Dongwha Enterprise Company Limited, a listed company in Korea, acquired the share capital and established a joint venture with Golden Hope is one of the forerunners in wood panel manufacturing industry in Malaysia. This factory has started to use oil palm tree trunk which is a palm biomass as the raw material for MDF wood producPon.

Dongwha MDF Plant in Kulim, Kedah Dongwha MDF Plant in Nilai, Negri Sembilan


OpportuniPes: PKC potenPal yet to be tapped fully exploited 2013 2010 2005 2001 Difference 2013 -‐

2001 (%)

2001-‐2013 EU 827,651 1,000,766 1,559,852 1,534,492 (706,841) (-‐46.06)

NEW ZEALAND 795,642 640,296 225,543 21,018 774,624 3,685.47

SOUTH KOREA 470,156 462,169 165,578 201,221 268,935 133.65

CHINA P.R 202,580 227,008 -‐ 28,856 173,724 602.03

TURKEY 123,949 -‐ -‐ -‐ 123,949 -‐

SAUDI ARABIA 111,546 47,000 -‐ -‐ 111,546 -‐

PAKISTAN 57,062 19,871 -‐ -‐ 57,062 -‐

AUSTRALIA 22,455 4,759 -‐ -‐ 22,455 -‐

OTHERS COUNTRIES 56,054 43,524 83,027 23,842 32,212 135.11

TOTAL 2,667,096 2,445,393 2,034,000 1,809,430 857,666 47.40

MPOC’s efforts to inform end users of PKC’s use for animal feed which is economically feasible have paid off


PKC Advantages Ø  PKC total metabolizable energy per USD is higher than soyameal, rapeseed and sunflower meal

Ø For every USD spend on PKC, the energy value is 52.7 MJ which is 29.5%-‐108% higher than that of soya, rapeseed and sunflower meal

Ø For crude protein, PKC has 22.1%-‐33% lower protein content compared to rapeseed and sunflower meal

Ø  However, the crude protein content that can be obtained per USD is the same for soyameal and PKC

Ø  PKC crude fibre content is high at 17% Ø The high crude fibre content is said to be more suitable for ruminants than non-‐ruminants


NutriPve and cost advantage of PKC

CP

Kg/USD ME

(MJ/USD) TDN

(Kg/USD)

PKC 0.81 52.7 3.57 Soymeal 0.81 25.3 1.42 Rapeseed meal

1.21-‐1.27 33.6-‐40.7 2.42

Sunflower meal

1.04 29.0 2.27

Based on cif Rolerdam price 2013 Price : PKC –USD199/MT, Soymeal – USD590/MT Rapeseed meal – USD297/MT, Sunflower meal – USD286/MT

CP : Crude protein, ME : Metabolizable energy, CF – Crude Protein TDN : Total Digestable Nutrients


PALM OIL USE IN KOREA •  The use of palm oil in South Korea has come a long way

ever since its introducIon into the Food System in Korea in 1980’s aLer we conducted a techno-‐economic study with the Korean authority.

•  Palm Oil and Soyabean Oil are now the two most used oils & fats for food purposes. Palm Oil has established itself as an excellent medium for instant noodle making, snack food frying and solid fats.

•  Soyabean Oil has long been used as a major salad/ cooking oil – but it is now in part replaced by canola oil, rapeseed oil, corn oil and olive oil and potenIally palm olein.


LOGISTICS ADVANTAGE OF MALAYSIAN PALM OIL TO SOUTH KOREA

Lahad Datu

Sandakan

Shipping of palm oil from Malaysia to South Korea is much faster and cheaper than from Indonesia, or other major exporters.


LOGISTICS ADVANTAGE OF MALAYSIAN PALM OIL TO SOUTH KOREA Ø  The ports closest for shipping palm oil to South Korea are

located in Malaysia, which are the Ports of Lahad Datu and Sandakan.

Ø  The time taken for shipment is between 9 to 10 days which is at least 5 days faster than shipping from Indonesia

Ø  Compare this with Indonesia, where the ports with bulk palm oil export facility are Pontianak in Kalimantan where the distance is 2,906 NM and Port of Tanjung Pandan in Sumatra where the distance is 3,688 NM and it would take between 13 to 16 days travel time

Ø  The cost of shipping is also much cheaper by between USD10 – USD15 per MT

Ø  Thus, Malaysian palm oil is the most economical, viable

and with the fastest delivery time to South Korea

PORT DISTANCE (NauPcal Miles)

TRAVEL TIME

SHIPMENT COST

East Malaysia (Sandakan)

2,272 NM 9 Days USD50 –USD55 per MT

East Malaysia (Lahad Datu)

2,345 NM 9.5 days USD50 –USD55 per MT

West Malaysia (Port Klang)

3,403 NM 14 Days USD55 – USD60 per MT

Indonesia (PonPanak, Kalimantan)

2,906 NM 13 Days USD60 – USD65 per MT

Indonesia (Tanjung Pandan, Sumatra)

3,688 NM 15 days USD65 – USD70 per MT

Source : www.ports.com


•  The versaIlity of palm oil is now more recognised. Palm Oil is now associated with no trans fat and oxidaIvely stable for many applicaIons. More sophisIcated usage of palm oil in terms of speciality fats and coaIngs of Korean confecIonery and snacks are commonly in used. Such products required specific characterisIcs like those needed for cream pie and snacks.

•  However, there are certain sectors which are concerned with frying oil for instant noodle and viewed palm oil as saturated. More non-‐fried noodles are coming on stream for health concern. But there are organolepIc differences between the two types, and palm oil does not behave like a saturated fat.

PALM OIL USE IN KOREA


CONCLUSIONS


CONCLUSION – To Compliment the Green Opportunities Complementing the Future Needs of Global Oils & Fats in

Developing Countries •  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 countries with best potential to produce it.

•  Palm oil is the powerhouse in the oils and fats market and is a suitable crop for tropical developing countries

•  Malaysian oil palm industry is leading the world in responsible and sustainable production of palm oil and offering opportunities for green technology investments while contributing to growth of its national economies (small oil palm farmers) through the palm oil industry development.


Conclusions •  Demand for palm oil and its derivaIves will conInue to increase in the future and Malaysia is well placed to fulfill the demand.


Conclusions • ImporPng palm oil will assist all countries to reduce deforestaPon by not having to grow more of land intensive oilseed crops, while providing food security and sufficiency to net imporPng countries. It also promotes poverty eradicaPon and improve income for small holders and uplid the economy of developing naPons where oil palm can be grown, and the need to deforest and hunt animals in these countries is also reduced with the new source of revenue or income..


THANK YOU VISIT OUR WEBSITE FOR A COMPREHENSIVE INFORMATION ABOUT

PALM OIL www.mpoc.org.my

Malaysian Palm Oil Council (MPOC)

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