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 OI LS
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
ANI MAL OI LS/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 !
PalmOil (PO) 12%
Rapeseed 9%
Sunflower 13%
Groundnut 8%
Cotton 8%
Coconut (CNO) 7%
Corn 2%
Linseed 2%
Sesame 1%
PalmKernel Oil (PKO)
2%
Soybean (SBO) 35%
Castor 1%
Soybean (SBO) 26%
Sunflower 10%
Groundnut 3%
Cotton 3%
PalmOil (PO)
33%
PalmKernel Oil (PKO)
4%
Rapeseed 16%
Coconut (CNO) 2%
Corn 2%
Linseed 0%
Sesame 1%
Castor 0%
1980
2009
2000
PalmOil (PO) 12%
Rapeseed 9%
Sunflower 13%
Groundnut 8%
Cotton 8%
Coconut (CNO) 7%
Corn 2%
Linseed 2%
Sesame 1%
PalmKernel Oil (PKO)
2%
Soybean (SBO) 35%
Castor 1%
Soybean (SBO) 26%
Sunflower 10%
Groundnut 3%
Cotton 3%
PalmOil (PO)
33%
PalmKernel Oil (PKO)
4%
Rapeseed 16%
Coconut (CNO) 2%
Corn 2%
Linseed 0%
Sesame 1%
Castor 0%
PalmOil (PO) 12%
Rapeseed 9%
Sunflower 13%
Groundnut 8%
Cotton 8%
Coconut (CNO) 7%
Corn 2%
Linseed 2%
Sesame 1%
PalmKernel Oil (PKO)
2%
Soybean (SBO) 35%
Castor 1%
1980
Soybean (SBO) 26%
Sunflower 10%
Groundnut 3%
Cotton 3%
PalmOil (PO)
33%
PalmKernel Oil (PKO)
4%
Rapeseed 16%
Coconut (CNO) 2%
Corn 2%
Linseed 0%
Sesame 1%
Castor 0%
PalmOil (PO) 12%
Rapeseed 9%
Sunflower 13%
Groundnut 8%
Cotton 8%
Coconut (CNO) 7%
Corn 2%
Linseed 2%
Sesame 1%
PalmKernel Oil (PKO)
2%
Soybean (SBO) 35%
Castor 1%
PalmOil (PO) 24%
PalmKernel Oil (PKO)
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%
PalmOil (PO)
33%
PalmKernel Oil (PKO)
4%
Rapeseed 16%
Coconut (CNO) 2%
Corn 2%
Linseed 0%
Sesame 1%
Castor 0%
PalmOil (PO) 12%
Rapeseed 9%
Sunflower 13%
Groundnut 8%
Cotton 8%
Coconut (CNO) 7%
Corn 2%
Linseed 2%
Sesame 1%
PalmKernel Oil (PKO)
2%
Soybean (SBO) 35%
Castor 1%
2009
2000 1980
Soybean (SBO) 26%
Sunflower 10%
Groundnut 3%
Cotton 3%
PalmOil (PO)
33%
PalmKernel Oil (PKO)
4%
Rapeseed 16%
Coconut (CNO) 2%
Corn 2%
Linseed 0%
Sesame 1%
Castor 0%
PalmOil (PO) 12%
Rapeseed 9%
Sunflower 13%
Groundnut 8%
Cotton 8%
Coconut (CNO) 7%
Corn 2%
Linseed 2%
Sesame 1%
PalmKernel Oil (PKO)
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 OI LS
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
ANI MAL OI LS/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
PalmOil (PO) 32%
PalmKernel Oil (PKO)
3%
Soybean (SBO) 27%
Rapeseed 6%
Sunflower 9%
Groundnut 3%
Cotton 4%
Coconut (CNO) 10%
Corn 2%
Linseed 2%
Sesame 0%
Castor 2%
PalmOil (PO) 47%
PalmKernel Oil (PKO)
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
PalmOil (PO) 61%
PalmKernel Oil (PKO)
5%
Soybean (SBO) 15%
Rapeseed 5%
Sunflower 9%
Groundnut 0%
Cotton 0%
Coconut (CNO) 3%
Corn 1%
Linseed 0% Sesame 0%
Castor 1%
2009
PalmOil (PO) 32%
PalmKernel Oil (PKO)
3%
Soybean (SBO) 27%
Rapeseed 6%
Sunflower 9%
Groundnut 3%
Cotton 4%
Coconut (CNO) 10%
Corn 2%
Linseed 2%
Sesame 0%
Castor 2%
PalmOil (PO) 47%
PalmKernel Oil (PKO)
4%
Soybean (SBO) 22%
Rapeseed 6%
Sunflower 9%
Groundnut 1%
Cotton 1%
Coconut (CNO) 6%
Corn 3%
Linseed 0%
Sesame 0%
Castor 1%
PalmOil (PO) 61%
PalmKernel Oil (PKO)
5%
Soybean (SBO) 15%
Rapeseed 5%
Sunflower 9%
Groundnut 0%
Cotton 0%
Coconut (CNO) 3%
Corn 1%
Linseed 0% Sesame 0%
Castor 1%
PalmOil (PO) 32%
PalmKernel Oil (PKO)
3%
Soybean (SBO) 27%
Rapeseed 6%
Sunflower 9%
Groundnut 3%
Cotton 4%
Coconut (CNO) 10%
Corn 2%
Linseed 2%
Sesame 0%
Castor 2%
PalmOil (PO) 47%
PalmKernel Oil (PKO)
4%
Soybean (SBO) 22%
Rapeseed 6%
Sunflower 9%
Groundnut 1%
Cotton 1%
Coconut (CNO) 6%
Corn 3%
Linseed 0%
Sesame 0%
Castor 1%
2009
PalmOil (PO) 61%
PalmKernel Oil (PKO)
5%
Soybean (SBO) 15%
Rapeseed 5%
Sunflower 9%
Groundnut 0%
Cotton 0%
Coconut (CNO) 3%
Corn 1%
Linseed 0% Sesame 0%
Castor 1%
PalmOil (PO) 32%
PalmKernel Oil (PKO)
3%
Soybean (SBO) 27%
Rapeseed 6%
Sunflower 9%
Groundnut 3%
Cotton 4%
Coconut (CNO) 10%
Corn 2%
Linseed 2%
Sesame 0%
Castor 2%
PalmOil (PO) 47%
PalmKernel Oil (PKO)
4%
Soybean (SBO) 22%
Rapeseed 6%
Sunflower 9%
Groundnut 1%
Cotton 1%
Coconut (CNO) 6%
Corn 3%
Linseed 0%
Sesame 0%
Castor 1%
2000 2009
PalmOil (PO) 61%
PalmKernel Oil (PKO)
5%
Soybean (SBO) 15%
Rapeseed 5%
Sunflower 9%
Groundnut 0%
Cotton 0%
Coconut (CNO) 3%
Corn 1%
Linseed 0% Sesame 0%
Castor 1%
PalmOil (PO) 32%
PalmKernel Oil (PKO)
3%
Soybean (SBO) 27%
Rapeseed 6%
Sunflower 9%
Groundnut 3%
Cotton 4%
Coconut (CNO) 10%
Corn 2%
Linseed 2%
Sesame 0%
Castor 2%
PalmOil (PO) 47%
PalmKernel Oil (PKO)
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 2009
PalmOil (PO) 61%
PalmKernel Oil (PKO)
5%
Soybean (SBO) 15%
Rapeseed 5%
Sunflower 9%
Groundnut 0%
Cotton 0%
Coconut (CNO) 3%
Corn 1%
Linseed 0% Sesame 0%
Castor 1%
PalmOil (PO) 32%
PalmKernel Oil (PKO)
3%
Soybean (SBO) 27%
Rapeseed 6%
Sunflower 9%
Groundnut 3%
Cotton 4%
Coconut (CNO) 10%
Corn 2%
Linseed 2%
Sesame 0%
Castor 2%
PalmOil (PO) 47%
PalmKernel Oil (PKO)
4%
Soybean (SBO) 22%
Rapeseed 6%
Sunflower 9%
Groundnut 1%
Cotton 1%
Coconut (CNO) 6%
Corn 3%
Linseed 0%
Sesame 0%
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
PalmOil (PO) 61%
PalmKernel Oil (PKO)
5%
Soybean (SBO) 15%
Rapeseed 5%
Sunflower 9%
Groundnut 0%
Cotton 0%
Coconut (CNO) 3%
Corn 1%
Linseed 0% Sesame 0%
Castor 1%
PalmOil (PO) 32%
PalmKernel Oil (PKO)
3%
Soybean (SBO) 27%
Rapeseed 6%
Sunflower 9%
Groundnut 3%
Cotton 4%
Coconut (CNO) 10%
Corn 2%
Linseed 2%
Sesame 0%
Castor 2%
PalmOil (PO) 47%
PalmKernel Oil (PKO)
4%
Soybean (SBO) 22%
Rapeseed 6%
Sunflower 9%
Groundnut 1%
Cotton 1%
Coconut (CNO) 6%
Corn 3%
Linseed 0%
Sesame 0%
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 dIvoire 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 dIvoire 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 - Isia
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
M
i
l
l
i
o
n

H
a


/

t
o
n
n
e
s
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
m
i
l
l

t
o
n
n
e
s

p
a
l
m

o
i
l
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
M
a
p
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 /
Region
Country / 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
Disappearance
World 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 LDCs - 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
P
o
p
u
l
a
t
i
o
n
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
P
o
p
u
l
a
t
i
o
n


(
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$/tonne
Note: veg oil prices generally track each other (highly substitutable in end uses)
0
200
400
600
800
1000
1200
1
9
8
0
8
1
8
2
8
3
8
4
1
9
8
5
8
6
8
7
8
8
8
9
1
9
9
0
9
1
9
2
9
3
9
4
1
9
9
5
9
6
9
7
9
8
9
9
2
0
0
0 1 2 3 4
2
0
0
5 6 7 8 9
2
0
1
0
Year
P
r
i
c
e



-



U
S
$

/

t
o
n
n
e

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
Indias 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 Chinas 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
Chinas 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 2/3
rd
of this was Palm Oil.

CHINA
Veg Oil Imports
Import Share
%
2009/10
Palm Oil 64.0
from Msia
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, Gi rth, Hei ght, 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 fi el d) @ 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:
Msia - 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 Msia to now start setting up its 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 / Americas)

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 ... arabis@arabis.org
58
ARABIS