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

PAKISTAN EDIBLE OIL

CONFERENCE

 Global Oils and Fats Scenario

The Importance of Palm Oil
Pakistan Oils & Fats Scenario
Market Challenges &
Opportunities
New Demand for Palm Oil
Conclusions

What goes up usually comes down:

High prices create low prices and
vice-versa
With high prices, those in an
advantageous position based on
competitiveness factors will over invest in
response to high price signals leading to
subsequent over-supply and depressed
prices.
Eg Indonesia revving up palm oil
production, Thailand and Vietnam for
rubber, Latin America for soya, and USA
for soya lately; USA in petroleum and gas.

Price (US$/MT)
2000

201.80

2001

174.43

2002

178.33

2003

206.50

2004

269.89

2005

381.35

2006

459.39

2007

508.38

2008

693.56

2009

441.54

2010

564.88

2011

743.39

2012

750.55

2013

743.84

2014

687.92

2015

537.60

800.00

CRUDE OIL US$/MT)

(High prices attracted investments causing oversupply and fall in
prices)

700.00
600.00
500.00
400.00
300.00
200.00
100.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

2005

367.69

495.75

2006

416.81

551.50

2007

719.12

799.74

2008

862.92

1,133.79

2009

644.07

787.02

2010

859.94

924.83

2011

1,076.50

1,215.82

2012

939.83

1,151.75

2013

764.20

1,011.11

2014

739.41

812.71

2015

569.13

671.71

1,000.00
800.00
600.00
400.00
200.00
-

Palm Oil

Soybean Oil

2015

590.45

2014

434.72

2013

2004

1,200.00

2012

500.28

2011

410.37

2010

2003

1,400.00

2009

409.84

2008

356.75

2007

2002

2006

346.99

2005

238.40

2004

2001

2003

351.82

2002

261.14

2001

2000

Palm Oil & Soybean Oil Price - US Dollars per Metric Ton
(Veg. oils prices follow petroleum price trends, due to role of
biodiesel)

2000

Year

Palm Oil Soybean Oil

(US$/MT)

3,000.00
2,000.00
1,000.00
2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

1,921.15
3,652.45
4,816.05
3,376.31
2,793.77
1,956.11
1,558.93

4,000.00

2003

2009
2010
2011
2012
2013
2014
2015

5,000.00

2002

2,613.04

6,000.00

2001

2008

RUBBER PRICE US$/MT

Rubber prices were influenced by petroleum prices with similar
shape and impact

2000

2000
2001
2002
2003
2004
2005
2006
2007

US$/MT
667.78
574.91
764.86
1,082.70
1,304.16
1,501.35
2,106.20
2,289.66

2008

136.18

2009

76.98

2010

106.04

2011

130.12

2012

103.25

2013

90.60

2014

75.14

2015

61.63

80.00
60.00
40.00
20.00
2015

2007

52.60
70.43

2014

2006

2013

51.02

2012

2005

100.00

2011

56.73

2010

2004

2009

27.95

2008

2003

120.00

2007

27.06

2006

2002

140.00

2005

32.31

2004

2001

2003

26.25

2002

2000

160.00

2001

Price
(US$/MT

2000

Year

Coal, Australian Thermal Coal Monthly Price - US Dollars Per

Metric Ton

PRICES OF MAJOR COMMODITIES 2000 2015

(All the commodities saw recent boom in prices)
6000

5000

USD per MT

4000

3000

2000

1000

0
2000

2001
Palm Oil

2002

2003

Soybean Oil

2004

2005

Sunflower Oil

2006

2007

2008

Rapeseed Oil

2009
Corn

2010
Wheat

2011

2012

Crude Oil

2013

2014

Rubber

2015

MALAYSIA & INDONESIA CPO PRODUCTION 1980 2014

Indonesia responded to recent high prices by investing in oil palm
production creating the potential of oversupply
35000
30000
' 000 MT

25000
20000
15000
10000
5000
0
Source : Oilworld & MPOB

Indonesia

Malaysia

OILS & FATS NET IMPORTERS AND EXPORTERS 2015

India

China,PR
EU-28
U.S.A
Pakistan
Bangladesh
Iran
Mexico
Japan
Turkey
S.Africa,Rep
Korea,South
Taiwan

Brazil
Philippines
Egypt
Nigeria
-20000

-15000

-10000

-5000

Malaysia

Argentina

Ukraine
Canada

Indonesia

Net Exporter
Net Importer

5000
'000 MT

10000

15000

20000

25000

30000

35000

OILS AND FATS PRODUCTION (1990 2015E)

Rapeseed oil
10.09%
Others
46.67%

Sunflower Oil
Rapeseed Oil
8%
13%

Soybean oil
19.90%
Palm oil
13.62%

Other Oils
26%

Soybean Oil
23%

Palm Oil
30%
Sunflower oil
9.73%

1990 Production : 80.89 million MT

2015E Production : 204.2 million MT

Source: Oil World

AVERAGE ANNUAL GROWTH IN WORLD VEGETABLE OIL

PRODUCTION (1990 2016F)
70.00
60.00
50.00

Average Annual Growth (1990 2016F)

Palm Oil (7.05%)
Rapeseed Oil (5.2%)
Soybean Oil (4.6%)
Sunflower Oil (4.4%)

Palm oil overtook soybean

oil as the most produced oil
in 2004

40.00
30.00
20.00
10.00
0.00

Palm Oil Production

Soybean Oil Production

Sunflower Oil Production

Source: Oil World

Rapeseed Oil Production

250000

200000

150000

100000

50000

2015(E)
2014
2013

Source: Oil World

2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990

Oils & Fats Consumption

Oils & Fats Production

OILS & FATS PRODUCTION VS CONSUMPTION

1990 2050 (F)
700,000

Oils & Fats Production

Oils & Fats Consumption
Linear (Oils & Fats Production)
Expon. (Oils & Fats Consumption)

600,000

(000 MT)

500,000
400,000
300,000
200,000
100,000
-

2050

2045

2040

2035

2030

2025

2020

2015

2010

2005

2000

1995

1990

Source : Oil World

The global oils and fats

production line is linear while
consumption
line
is
exponential
The reason is that population
growth which is infinite will
continue to drive demand
However, there is a finite
amount of land available for
plantings which will limit
production growth to be much
lower
than
consumption
growth

17 OILS & FATS

GROWTH IN WORLD CONSUMPTION (MMT)

Source : Oil World

WEATHER FACTORS: EL Nino

2015 has so far been the warmest year in more than a century. The ranking serves as a reminder of how
much the globes overall temperature has risen in the atmosphere. NASA released its latest monthly
temperature data for the globe showing November as the warmest on record for the planet. The Japan
Meteorological Agencys dataset also shows the same record warmth for the month.

PALM OIL SUPPLY FROM MALAYSIA AND INDONESIA

Malaysia and Indonesia
are the two leading palm
oil producers in the world
These
two
countries
produce almost 90% of
the global palm oil
production
The contribution of palm
oil towards global oils and
fats is immense as it is the
most affordable oil

2011
(MT)
Production
(Malaysia)
Production
(Indonesia)
Total

2012
(MT)

2013
(MT)

2014
(MT)

18,912 18,785 19,216 19,669

2015
(MT)

2016 F

19,962

20,100

24,300 26,900 28,520 31,000 32,500 (E) 33,500

43,212 45,685 47,516 49,600
Source : MPOB, Oil World, gapki

62,462

63,600

OTHER OILS PRODUCTION (MILLION MT)

2015E

2014

47

45

1.98

4.40

Cottonseed

4.83

4.87

(0.04)

(0.82)

Rapeseed

26.8

27.2

(0.40)

(1.47)

Groundnut

3.55

3.87

(0.32)

(8.27)

Sunflower

15.4

16.2

(0.73)

(4.52)

Sesameseed

0.79

0.78

0.01

1.28

Castorseed

0.63

0.64

(0.01)

(1.56)

Linseed

0.66

0.63

0.03

4.76

Palmkernel

6.7

6.52

0.18

2.76

Coconut

2.97

3.02

(0.05)

(1.66)

Corn

3.19

3.16

0.03

0.95

Total

112.52

111.84

0.68

(4.15)

Soybean

Source : Oil World, MPOC Estimates

Diff (MMT)

(%)

PALM OIL SUPPLY

Malaysia and Indonesia are the two dominant
global suppliers overseeing four fifths of global
production while responsible for nine tenths of the
world trade.
While palm oil competes with other oilseeds, its
production cycle is significantly different.
It is this difference that is critical to understanding
CPOs impact on the global vegetable oil market.

GLOBAL OILS & FATS

SUPPLY & DEMAND SCENARIO
('000 T)

2010

2011

2012

2013

2014

2015E

2016F

Opening Stock

19,291

20,725

22,815

26,382

25,087

25,497

26,007

Production

172,595

180,324

187,420

190,464

200,241

204,230

206,993

Import

66,724

68,403

73,308

75,601

77,351

78,459

80,183

Export

66,518

68,851

73,020

75,616

77,455

78,763

79,275

Consumption

171,367

177,786

184,141

191,744

199,727

203,416

207,826

Ending Stock

20,725

22,815

26,382

25,087

25,497

26,007

26,082

Stock Usage Ratio

12.09%

12.83%

14.33%

13.08%

12.77%

12.79%

12.55%

Source : Oil World MPOC Estimates

TRACKING CPO PRICES

AGAINST STOCK USAGE RATIO
4,000

16.00%

3,500

14.00%

3,000

12.00%

2,500

10.00%

2,000

8.00%

1,500

6.00%

1,000

4.00%

500

2.00%

0.00%
2006

2007
SUR

2008
CPO Price

2009

2010

2011

Forecasted CPO Average

2012

2013

Forecasted CPO Higher

2014

2015E

2016F

Forcasted CPO Lower

Global Oils and Fats Scenario

The global oils and fats output in 2015 is estimated at 204.23
million MT and is forecast to reach 206.99 million MT by end of
2016
The smaller growth in production will be due to the lower than
anticipated supply of rapeseed and sunflower oil in 2016
Despite lower production forecasts, palm oil is expected to
contribute at least an increase of 1.5 million MT
However, the overall supply growth will depend more on soya but
this will be negated by the lower supply of other oils

PAKISTAN OILS AND

FATS SCENARIO

BRIEF DESCRIPTION OF PAKISTAN

OILS & FATS SCENARIO
Pakistan continues to be an important oils and fats player in the region
Local production is insufficient and can cater to only 40% of local demand
Hence Pakistan need to import their balance of oils and fats
This makes Pakistan as an attractive export destination for oils and fats
exporting countries.
The total oils and oilseed imports in 2015 is estimated to reach 3.0
million MT which will make Pakistan among the top 5 importers of oils
and fats.

PAKISTAN OIL & FATS CONSUMER CATEGORIES

The Pakistan oils and fats consumer can be categorized into these four
categories:Oils and Fats Processing Industry
Food Industries (Vanaspati, Food Manufacturing, Hotel & Catering)
Household
Non Food Users (soap, personal care and etc)

AVAILABILITY OF OILS & FATS IN PAKISTAN

Sources
Oil from Indigenous Oilseeds

2011

2012

2013

2014

2015

Quantity (MT)
696,000

636,000

567,000

573,000

546,000

2,125,427

2,073,212

2,373,866

2,512,336

2,776,254

Oil from Imported Oilseeds

376,324

287,746

291,748

453,301

566,790

Butterfat

100,000

100,000

100,000

100,000

100,000

3,277,751

3,096,958

3,332,614

3,638,637

3,989,044

Imported Oils

Total

Source: MPOC, Shipping Agents Vessel Reports

PAKISTAN EDIBLE OIL IMPORTS

2015

2014

Changes
Vol. (Tonnes)

Changes
%

125,308

104,290

21,018

20.15

Palm Oil

1,077,195

1,122,732

(45,537)

(4.06)

Palm Olein

1,291,187

1,088,460

202,727

18.63

Palm Fats

92,541

81,133

11,409

14.06

Soybean Oil

167,310

98,249

69,060

70.29

Tallow

22,713

17,472

5,241

30.00

2,776,254

2,512,336

263,918

10.50

Commodity
Crude Palm Oil

Total

Source: MPOC, Shipping Agents Vessel Reports

PAKISTAN - SHARE OF PALM OIL IN TOTAL IMPORTS

3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000

79%

77%

87%

80%

78%

82%

85%

87%

81%

77%

500,000
MT-

2006

2007

2008

2009

2010
Imports

2011

2012

2013

2014

2015

MALAYSIAN PALM PRODUCTS EXPORTED TO PAKISTAN

Malaysian Palm Products

Jan-Dec 2015 ( MT)

Crude Palm Oil

105,395

RBD Palm Oil

65,300

RBD Palm Olein

340,657

Cooking Oil / DPL

155,588

Other Palm Products

39,995

Total Volume

706,935

Source : MPOB

PAKISTAN OILS & FATS SCENARIO

With a population of approximately 200 million and a 2% population
growth rate, Pakistan will continue to be a dependable export
destination
The country will continue to remain a net importer of oils and fats.
Consumption is growing steadily while there is a decline in the
development of oilseed cultivation in the country.
As a result, demand has to be met with and will continue to be met with
imports of edible oils and oilseeds.
Palm oil will continue to make inroads in the Pakistani market as it is the
most suitable to meet Pakistani manufacturers and consumers needs.

THE CRUCIAL ROLE OF PALM OIL

Palm Oil in The Global Oils & Fats Market

Palm oil is the largest produced vegetable oil in the world
In 2004 palm oil pushed soybean oil into second place as the most
produced oils & fats in the world
Palm is generally the cheapest commodity vegetable oil and also the
cheapest oil to produce and to refine.
By reason of its availability and (relatively) low cost, it is an
important component of the increasing intake of oils and fats in the
developing world
It is a versatile oil used not only in food applications but also non
food such as detergents, pharmaceuticals and biofuels.
Palm oil is widely used in the food industry, for example, palm olein
used as a frying oil and palm stearin as hardstock in the production of
spreads and cooking fats.

EXPORTS OF 4 MAJOR OILS 2010 - 2015

50
45
40
35
30
25
20
15
10
5
0
2010
2010
Source : Oil World

2011
2011

2012
2012
Palm oil

2013
2013

2014
2014

2015
(F)
2015E

Soybean, Rapeseed & Sunflower Oil

Palm oil is by far the most important oil worldwide

It is expected that world PO imports to rise by 2 million MT and usage by 3.0 million MT in 2016
Pakistan will likely increase palm oil consumption and import as the current attractive price will
spur demand

Demand of palm oil to increase

1,200.00

70.00

1,000.00

60.00

(US$/MT)

40.00

600.00

30.00

400.00

20.00

200.00

10.00

0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source : Oil World, Indexmundi

Palm Oil Consumption

Price (US$/MT)

Palm oil producing countries benefitted through both increase in price and volume
Volume to increase further in future due to growth in population and affluence, while importig
countries benefitted from lower prices of palm oil relative to other oils, a win-win situation

(Million MT)

50.00

800.00

Scarcity of Arable Land

Year

1922
1975
2005
2030
2042

Worlds population
(bil)
bil)

Arable land per capita

(x10-3km2)

Arable land per capita

(ha)

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

Need to Use Land Wisely

World population increasing

Arable land resource decreasing

Source: Freeworld Academy & University of Michigan

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 PaperMarch 2010- Dexia Asset
Management

Distribution of Agricultural Area 2014

MAJOR OILSEED PLANTED AREAS AND PRODUCTION

Oil Palm Is The Most Efficient, Effective And Highest Yielding Among All Vegetable
Oils Produced
120
110
100
90
80
70
60
50
40
30
20
10
0

120
110
100
90
80
70
60
50
40
30
20
10
0

2004

SBO

SFO

Planted area (Mn. Ha)

RSO
Production (Mn. MT)

PO

2015

SBO

SFO

Planted area (Mn. Ha)

RSO

PO

Production (Mn. MT)

Since 2004, land for palm oil cultivation grew by only 6.88 million hectares compared to soybean cultivation which increased by 24.67
million hectares while land for rapeseed oil cultivation increased by 10.72 million hectares
In terms of production, 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

COMPARING COST OF PRODUCTION

OF VEGETABLE OILS (US$/MT)

Source: YeltoZimmer; 84 Journal of Oilseed Brassica 1(2) : July 2010

Compared to other oils, palm oil has the lowest cost of production this making it most competitively priced
and affordable

PALM OIL - SOLUTION TO LAND

SCARCITY, AFFORDABILITY AND
SUSTAINABILITY

Palm oil is grown on the least amount of land

compared to other oilseeds
It is the highest yielding oilseed crop in the world
Palm oil plantations contribute to reducing GHG by
acting as a natural carbon sink
No other source of vegetable oil than palm oil can
actually
spare
more
land
and
deliver
more
accessible, abundant and affordable calories to people
worldwide.
In a sense, palm oil is always discriminated against as
it is the only edible oil which certification is imposed.
Other oils do not have to meet this criteria

Ideology Threat
CONCEPT: Make developed countries as food granary & keep undeveloped or
developing countries for forest conservation

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 Initiative
Developed countries have limited new land for agriculture use
Oil palm is perennial & yields 10 X more than annual crop of soya on same land area

DEMAND DRIVERS

VERSATILITY OF PALM PRODUCTS 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%. The latest is
producing Nylon from palm fatty acids.

45

Opportunities: Trans Fats in Food

Many countries around the world have banned the use of trans fats in
food
The government of India has made it compulsory for food manufacturers
to mention trans fats content on labels
The U.S. Food and Drug Administration is looking to ban trans fats
included in food
Harvard scientists estimate that trans fats may contribute to more than
30,000 premature deaths each year
FDA officials estimate as many as 7,000 deaths and 20,000 heart attacks
would be prevented by eliminating trans fats from processed foods
Palm oil is proven to be healthy and trans fats free
Opportunity to expand market using this theme

Capitalizing on Trans Fats Issue

Big market potential that is just emerging
Solid food formulation
Promote sales of palm stearin to make margarines, vanaspati and shortenings
Blending soft oils with palm oil
Blending soft oils with palm oil
E.g. Smart Balance
US still hygrogenationg 900,000t of soft oils.
At 50% replacement, US alone will need 450,000t palm oil
to make trans free products

BIODIESEL
Following on from initiatives set by the U.S. and
European governments, many countries have announced
new and improved biodiesel blending mandates.
If the plan is implemented, CPO should be a key
beneficiary.
As these initiatives stalled in 2015 due to low petroleum
prices, the palm oil market could be moving into
structural oversupply, unless balanced by local biodiesel
mandates operating in Indonesia and Malaysia.

BIODIESEL DEMAND
Malaysia implemented the B-7 in Peninsular Malaysia in 2014
This has been extended to Sabah & Sarawak
The plan in Malaysia is expected to consume at least an
additional 700,000 MT palm oil domestically if industrial
sector consumption is included
Malaysia plans to increase biodiesel mandates to 10% in
2016 and this would consume up to an additional 1 million
MT of palm oil
Taken altogether, this establishes a trend where key
oilseed/vegoil producing countries are stoking domestic
demand in anticipation of large domestic surpluses over the
coming years

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

CONCLUSIONS
Palm oil is without doubt the ultimate edible oil when it
comes to affordability, sustainability and economic
development
Palm oil prices have consistently remained lower than the
prices of other major vegetable oils
Palm oil is expected to continue if not grow in its role of
meeting global oils and fats demand
Palm oil production respects and adopts the 3Ps principles
of sustainability People, Planet and Profit.

THANK YOU

Visit Our Website : www.mpoc.org.my

Follow me on Twitter
www.twitter.com/yusofbasiron