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COVER STORY With agricultural land in Malaysia capped for about 50% forest preservation, demand growth has been met mainly by Indonesia [Bangun] whereby the present surplus of supply of palm oil is threatening prices. Apart from this, uncontrolled agricultural expansion in Indonesia threatens the region’s environment with fires and haze during dry seasons. In good measure Indonesia's moratorium against further deforestation and use of some fragile peat lands has now been in place. As projected Indonesia’s production will be double that of Malaysia’s by 2020, even as total production has been projected for about 4% per yr growth to meet global needs. At present the imbalance of supply and demand has caused palm oil to be priced much lower than the other vegetable oils. The excess supplies will remain since maturing trees will be expected from Indonesia and at a time when palm bio-diesel was slowly being excluded by the major users. Flagging economies have also considerably reduced the zeal for alternative energy, bio-fuels biofuel mandates and mitigating climate change. Producers need to have rapid policy responses in view of unfair trade practices. The divergence of palm and kernel oils from correlation with other oils (de Lavigne; Fry] has caused palm bio-diesel to be priced below petroleum diesel. It is up to the producer countries to exploit this beneficially and put their infrastructure in place to use B5 and B10 bio-diesel blends and at the same time remove surplus palm oil stocks for stabilizing prices. It is well known that Malaysia can raise palm oil production without opening more new agricultural lands by improving yields. With available technology and agronomic practices, replanting with markerassisted planting materials can improve the average yield from below 4 to 5.4MT/ha/yr or better [Joseph Tek]. Back Page: Picture of oil palm trees are from IJM Plantations and calculations that show GHG emissions and sequestrations of tropical forest and oil palms are comparable [Yusof Basiron]. Printing: Percetakan Soon Lee Heng Sdn bhd No. 15, Jalan Besar, Selayang Baru, 68100 Batu Caves, Selangor
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
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Malaysian Oil Science and Technology (MOST) EDITORIAL POLICY
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Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
CO N T E N T S i
Cover Story
ii
Editorial Policy
iii
Contents
iv
Editorial
1–4
TESTING THE FLOOR OF THE PRICE BAND James Fry
5–8
PALM AND LAURIC OILS: 2013 PRICE OUTLOOK WITH SPECIAL REGARD TO INDIA Dorab Mistry
9 – 14
GLOBAL PALM OIL BUSINESS – PROSPECTS AND CHALLENGES A.H. Ling
15 – 21
INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING: IS THE GAME NOW CHANGING? Chris de Lavigne
22 – 34
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND Yusof Basiron
35 – 37
INDONESIAN PALM OIL MARKET AND ITS IMPACT ON PRICE IN 2013 Derom Bangun
38 – 39
“THE TROJAN WAR” SEEMS TO BE OVER – LAURIC OIL MARKETS ARE BACK TO FUNDAMENTALS . . . FOR NOW Harald Sauthoff
40 – 42
OIL PALM: THE HOLY GRAIL OF PLANTATION ARICULTURE – TIMELINE AND APPRAISAL Joseph Tek Choon Yee
43 – 47
GENETIC IMPROVEMENT AND CHOICE OF OIL PALM PLANTING MATERIALS C.C. Tan, Kumar K., Aida N., Chin S.Y., Melody M., and C.K. Wong
vi
Talking Points
ix
On A Lighter Note
x
Index
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E D I TO R I A L
Rising Populations, Energy Security and Climate Change A miniscule rise in temperatures of oceans and melting ice in the Artic had led to the belief of global warming and that later climate change is going to engulf planet earth. This plausibly could have been caused by GHG emissions since as far back as the industrial revolution. While the sudden and soaring world population should be more of a concern than the increasing CO2 emissions although together they pose a combined threat to the fragile planet’s resources. However, anthropogenic activity on climate change pales in comparison to the massive scale of natural geologic disasters and solar activities. Whatever the combined causes of recently observed climate change and the threat posed by population explosion, it may be a time for ingenious solutions or just plain adaptation. One possible solution is in green energy and Europe has been a leader arising from the twin fears of an urgent threat of global warming and that of rising costs from the world’s diminishing fossil fuels. Recently it seems that both of these speculations were wrong or premature. Temperatures seem to be cooling in 201213, even if temporarily, while increasing CO2 emissions are shown in the EU despite mandating for bio-fuels for the last few years. New science (fracking, horizontal drilling and Octopus technology) has led the US to a bonanza of fossil fuels – light crude petroleum and an excess of natural gas, so that worries about peak oil may be premature. With much of the world trying to recover from the long recession, efforts towards reducing GHG emissions appear to have receded from all policy agendas. Much is left for science to learn of the natural world even as problems from the world’s over-population seem to be of increasing concern.
iv
Social unrest, unemployment, economic slowdowns, forest fires and illegal movements of people appear to be more of a threat to world security.
Renewable Energy and Palm Oil Despite the lack of evidence of the economic sustainability of corn and rapeseed for bio-fuels, mandates have been put forth for the use of mainly corn bio-ethanol in the US and rapeseed bio-diesel in the EU. Much of these were politically motivated to reduce the increasingly costly dependence of foreign fossil fuels. The use of corn in the US was premature without cellulosic ethanol technology while in Europe rapeseed bio-diesel LCA values on site-specific situations are questionable for GHG savings. Both raw materials need subsidies and redirected food material to fuel. Palm bio-diesel has also emerged and together with those from soyabean and rapeseed came into the market and caused vegetable oils to be priced as fuels correlating with crude petroleum. But palm oil is different from temperate oils as it can be produced at lower prices and sold not only without subsidies but with extremely high taxes. Bio-fuels should benefit the palm oil industry but this was not to be as trade barriers were put up. In specifications, LCA of palm bio-diesel without and (better) with CH4-capture were superior to those of soyabean and rapeseed but at the moment poor LCA values for palm bio-diesel, derived from undesirable land-use change or from peat, were used; these of course cannot meet the 20% GHGsavings standard. Apart from this, stringent standards for winter-conditions would exclude the use of unblended or non-fractionated palm methyl esters. It is fortunate that palm bio-diesel and blends can find
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
EDITORIAL
a market in China due to lower prices compared to diesel. High production costs for petroleum will likely maintain high prices of crude oil. The inter-relationship of energy and oils will likely ensure a secure future for palm oil.
Palm Oil Prices and Implementing Usage of B5 to B10 Bio-diesel Blends Palm methyl esters were still sold (106,000 tonnes were exported) but in relatively small quantities while in the complex of vegetable oils some substitutions take place as wide price differences appear among the traded oils. For some time vegetable oil prices have been traded in a higher band because of biodiesel competing with petroleum diesel and prices continued until late 2012 when palm bio-diesel was slowly excluded from the major users. It is a time when EU countries realize the enormous drain on finances due to subsidies for renewable energy in the face of a deep recession. By early 2013 palm oil prices decoupled from the correlation band with petroleum basically from barriers to palm bio-diesel and relatively low CPO prices have prevailed as compared to other oils. The present imbalance of oversupply of CPO supply vs unrealized demand (especially palm bio-diesel) due to economic pressures has caused relatively low prices
for CPO and PKO to fall below crude petroleum prices. Crude petroleum surprisingly maintained slowly rising prices in response to a slight S 2 MMT Energy Prices Crude oil prices will prop the price of veg oils due to their usage as energy crop
New Markets for Bio-diesel 1. Bio-diesel can be considered as such 2. Other future new uses for PO (Feed?)
Import/Export Taxation 1. Major impact on markets & complex 2. Higher the tax, the higher the price of oil
Global Economic Health Sentiments based on economics and stock market impact the prices of veg oils
Particular Events (War) Wars can create major shocks to commodities in terms of demand and pricing
Regulations
Commodity Speculation
Asset Allocation Strategies
Regulation such as product specifications can influence product prices
Commodities across the board are highly speculative, and oils are part of this complex
Around $600 bn is allocated to the commodities sector, up 10x since 2000
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING: IS THE GAME NOW CHANGING? been more expensive than crude oil barrel prices (Fig. 6). CPO’s price competiveness to soy-oil and crude oil is now at its best since the previous economic crisis in 2008. CPO’s price discount is at US$375 per MT to soy oil (spot) versus its historical mean discount of US$152 per MT. The Dec 2012 CPO price at $714 per MT was discounting Brent crude oil prices at US$89 per barrel, a discount it has not seen over five years, and which makes it very attractive in the bio-diesel sector even before considering subsidies and blending targets.
Figure 4. Average CPO price (US$/MT), 2003 – 2012
Bio-diesel – the Largest Impact on Palm Oil Prices Arguably, bio-diesel has had the largest impact of palm oil prices, and has sent palm oil into a new trading range well above historical highs (Fig. 5). With around 14% of global vegetable oil feedstock being used for bio-diesel (rapeseed, soy, and palm), the prices of vegetable oils have soared. Although only around 5% of palm oil finds its way into bio-diesel, it has benefitted from the rise in price of other vegetable oils. Since 2007, it is clear that palm oil is trading in a new band, driven by bio-diesel which is now more to the energy complex than it was prior to 2006.
Source: Frost & Sullivan
Figure 6. CPO price vs SBO vs Brent oil crude price, 2007-2012
Bio-diesel: Salient Points Going Forward Bio-diesel growth is highly dependent of government policies and subsidies, especially Europe which has been a major import market. Will this continue?
Policy Background: Rule of the Game of Biodiesel Usage
Source: Frost & Sullivan
Figure 5. Average palm oil price (US$), 1991-2012
CPO Prices Fall Below Brent Petroleum Prices Bio-diesel (methyl esters), has until recently not been profitable as palm prices on a per barrel basis have
The main regulations impacting the EU bio-fuels market are the Bio-fuels Directive (2003/30), the Fuel Quality Directive (2009/30), and the EU Energy and Climate Change Package (CCP). The CCP which was adopted by the European Council in 2009, includes the so-called “20/20/20” mandatory goals for 2020, one of which is a 20% share for renewable energy in the total EU energy mix (Fig. 7). Part of this 20% share is a 10% minimum target for renewable energy consumed in the transportation sector. This goal is to be achieved by all EU Member States and, in practice, is the driver behind demand for biodiesel and ethanol.
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INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING: IS THE GAME NOW CHANGING? Under the EU system, bio-fuels must meet certain criteria to count against the 10% goal. The Renewable Energy Directive (RED), which is part of the CCP, lays our specific sustainability requirements. These include minimum greenhouse gas (GHG) emissions reductions as well as economic and social criteria, which focus on food price impacts, and adherence to International Labour Organisation conventions. The RED entered into force on June 25, 2009 and was to be transposed into national legislation by December 5, 2010. However, in most EU Member States, full implementation is expected to drag out at least through 2011 and possibly longer. In late 2012, the European Commission (EC) has approved palm-oil based bio-diesel for the renewable fuels standard provided it is certified under the Roundtable for Sustainable Palm Oil (RSPO). To date, RSPO certified palm oil currently accounts for 14% of the global palm oil market, where the EU is world’s largest buyer of RSPO-certified palm oil and the second largest importer of palm oil.
EC’s Bio-diesel Anti-dumping Proceeding Progresses to Registration of Imports Since 2013, EU require all bio-diesel imports from Argentina and Indonesia to be registered, so that any
future decision to apply import tariffs as a result of an ongoing anti-dumping proceeding against countries may be applied retroactively. The proceeding will be due by May 2013, any tariff would be decided on the basis of the findings of the investigation.
GHG Emission Savings of Different Biofuels Certain bio-fuels do not have a high enough default value to count towards the GHG emissions target and must be RSPO compliant. While bio-diesel produced from most major feed-stocks appear to meet the current default GHG emissions savings target of 35%, palm bio-diesel was not accepted unless methane capture has been installed at the palm mill. This therefore makes palm bio-diesel ineligible towards the GHG emissions target. Soybean oil based bio-diesel is also not meeting the target.
Price Forecast for Palm Oil Several factors are likely to weigh heavily on the prices of palm oil in 2013, and we see more downside catalysts all inter-linked than the upside ones. Table 2 outlines some of the key factors with explanatory notes but no level of impact or weightage is offered here.
Figure 7. Scheme of legislation based on Directive 2009/28/EC and Directive 2009/30/EC
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Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING: IS THE GAME NOW CHANGING?
Table 2. Factors likely to weigh heavily on prices of palm oil in 2013 Oil Demand vs Supply 1. S&D of all vegetable oils 2. S&D of palm oil
Land Usage and Switching
Stock to Usage Ratio
New Markets (bio-diesel)
1. Stock to usage ratio of palm oil 2. Important when stocks are > 2 MMT
1. Bio-diesel can be considered as such. 2. Other future new uses for palm oil (e.g. Feed?)
Energy Prices
Farmer switch in and out of crops based on Crude oil prices will prop the price of incentives/profits impacts supply veg oils due to their usage as energy Regulations Regulation such as product specifications can influence product prices
Soy Crops in US and Brazil A strong soy crop in US and Brazil coupled with very strong production of palm oil both in Malaysia and Indonesia will cause high stocks in palm oil. Due to a firm soybean price and declining soybean crop, palm oil has been trading at a heavy discount to soybean oil (Fig. 8). With a low Malaysian export tax in Q1 2013, palm oil has enjoyed some additional volume though stock levels continue to remain high. This is likely to continue to be the case over the next few months. If Malaysia and Indonesia have a bumper crop as is expected, then palm oil will continue to trade at a heavy discount.
Asset Allocation Strategies Around $600 bn is allocated to the commodities sector, up 10x since 2000
Indonesia still has a significant amount of immature land to come into production, its rate of new plantings has slowed in recent years. In Malaysia, growth has slowed as suitable new land for planting is diminishing rapidly. The edible oil market is now “short” over a million planted palm oil hectares (ha) over the next decade due to the slowdowns in Malaysian and Indonesian plantings (Fig. 9). In 2012, the Ministry of Agriculture Malaysia commented that Malaysia’s planted area will only increase by approximately 400,000 ha in the coming years – this implies less than 4 years of planting at the current rates. Meanwhile, Indonesia’s recent moratorium on new land allocations points to a further slowdown in that market as well.
Figure 8. CPO vs SBO Prices
Increasing Palm Oil Supplies There have been significant land plantings in Indonesia due to high CPO prices which has translated into CPO oversupply, and this will take time to alleviate. While
Figure 9. Estimated new hectarage of oil palm, 2000-2030
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INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING: IS THE GAME NOW CHANGING? Palm Oil Prices Loses Correlation to Crude Oil Prices Palm oil no longer seems to enjoy the correlation that it has had to crude oil prices in the last 6 years due to biodiesel, further pressuring prices downward. CPO prices have traded at between 10-12 times WTI Nymex prices from 2007 to 2012, with the average being 11.2x, showing a clear link. Currently, at the end of February 2012, that has decoupled and is now standing at CPO $784/Nymex Crude $92 = 8.5 (all figures rounded) as shown in Fig. 10
and help put some floor under prices. Indonesia is also increasingly using biodiesel but it is expensive compared to subsidised fuel. But so much money has already gone to waste where killed plants are now mostly scrap.
Will Downstream Industries Benefit form lower CPO and Lauric Prices? One argument is that the downstream will benefit from lower CPO/Laurics prices but is there too much additional capacity coming into the market? SE Asia, especially Indonesia and Malaysia, accounted for the majority of fatty acids and fatty alcohols capacity. Abundant capacity spurred mainly by high Indonesian taxes in late 2011 and the first half of 2012 have been the major driver. Price and margin pressure will be the only result of this move. Non-integrated players will suffer more though. Fig. 12 summarises the global productions of fatty acids and alcohols.
Figure 10. CPO Price vs Nymex WTI crude oil price
Bio-diesel Usage in Malaysia and Indonesia B10 blending in Malaysia in 2014 (Fig. 11) and additional bio-diesel usage in Indonesia could help to ease some of the pain in 2014 but is it going to be enough? Biodiesel has been slow in implementation in Malaysia even as CPO prices have fallen below crude petroleum prices. The recent B10 mandate will help to address biodiesel woes. This could provide a boost to the market *Assuming biodiesel export equals biodiesel production. ** Estimated Malaysian biodiesel production if B10 programme is implemented as planned.
Sources: CIMB, MPOB, MPOPC
Figure 11. Estimated bio-diesel production in Malaysia to 2014
20
Figure 12. Global production and estimated capacity increases for fatty acids and alcohols
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING: IS THE GAME NOW CHANGING? New Applications for Palm Oil Needed to Meet the Increased Supply Malaysia and Indonesia may need to find new applications for palm oil in order to take up the slack caused by increased CPO supply, less bio-diesel. Malaysia’s palm oil industry currently accounts for ~RM50 billion annually. With limited land available, the country will need to enhance upstream productivity and exploit the full potential of downstream opportunities. The Palm Oil NKEA is targeted to reach RM178 billion by 2020 and 98% of funding will be from the private sector.
A Mini Slump in Palm Oil Prices for 2013 Until excess CPO supply can be taken up, we could possibly see another mini slump in prices in 2013, taking us closer to a mid range in prices between the last 6 year highs and lows. Prices will depend on whether a low tax can clear stocks and whether demand can pick up enough of the supply coming into the market. Even if this does happen, it will take some time before CPO settles. If not CPO has a real chance of taking another correction again during 2013 (Fig. 14)
With regards to oleochemicals, Malaysia’s focus will now shift from basic oleochemicals to high value oleo derivatives, from a current 1% share to a forecasted 40% by 2020 (Fig. 13). Five key products to be focused on are: y
Agro-chemicals
y
Surfactants
y
Bio-lubricants
y
Bio-polyols
y
Glycerol derivatives Figure 14. Average palm oil price (US$/MT), 1991 – 2012, 2013F
Outlook for 2013 CA G R
( 02-' 07 )
CA G R
2013 is likely to be another very challenging year for palm oil prices .......
( 09-' 14)
of M alay s ia’ s prod uc tion is f oc us ed on b as ic oleos
Figure 13. Malaysia’s plan for future downstream growth
Abbreviations. B10 = 10% methyl ester bio-diesel in diesel mix; Bn = billion; CCP = climate change package; CIMB = commercial international merchant bankers berhad; CPO = crude palm oil; EBB = Economic Bulletin Board (US); EC = European Council; EU = European Union; F = forecast; ha = hectare; FAS = Foreign Agricultural Service; GHG = green house gas; MMT = million metric tonne; Mn = million; MPOB = Malaysian Palm Oil Board; MPOC = Malaysian Palm Oil Council; POC = Palm Oil Conference; MT = metric tonne; NBB = National Biodiesel Board; NKEA = national key economic area; OECD = Organisation for Economic Cooperation and Development; RED = renewable energy directive; RM = ringgit Malaysia; RSPO = round table for sustainable palm oil; SBO = soybean oil; USDA = US Department of Agriculture
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
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MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND Yusof Basiron CEO, MPOC [Lecture presention at the POC2013 Conference, 4-6 March 2013, Kuala Lumpur]
Outline of Presentation y
Importance of palm oil in the global supply scene
y
Palm oil global market challenges
y
The opportunities for palm oil in the future growth of oils and fats
y
Conclusion
The Importance of Palm Oil & Its Derivatives in the Global Supply Scene The palm oil industry has been synonymous with Malaysia’s economic development. The industry has contributed tremendously towards providing a continuous supply to the global market. In 2012, palm oil and palm oil products contributed RM71.39 bln of exports to the global market. These numbers form 10.4% of Malaysia’s total merchandise exports. The importance of the palm oil industry is given due focus as one of the NKEA of the NTP to transform Malaysia to a high income nation.
Production of Palm Oil and Other Oils 1990 – 2010 Malaysia contributed significantly towards the oils and fats market. In 1990 palm oil accounted for 12% of the total production of 80.7 million metric tonnes (MMT) together with contributions of soyabean oil (20%), rapeseed oil (10%, sunflower oil (10%) and other oils (47%). By 2012 palm oil (PO) accounted for29% of the production of 185 MMT together with contributions of SBO (23%), RSO (13%), SO (8%) and other oils (27%).
Oils and Fats Exports 1990 – 2012 In 1990 PO accounted for 36% of the total exports of 23.1 MMT together with SBO (14%), SO (9%), RSO (7%)
22
and others (34%). By 2012 total world exports were at 72.34 MMT being contributed by PO (56%), SBO (12%), SO (10%), RSO (6%) and other oils (16%). Growth in exports was due to global population growth, income growth and low per caput consumption level. Against a backdrop of lack of arable land and reduced supply from competing soft oils, the reliability of palm oil supply gives it the added advantage. In food and industrial demand there was increasing applications in the production of food and non-food products (oleochemicals/bio-diesel), especially in countries such as China, India, Middle East, EU and US
Palm Oil Global Market Challenges All of the palm oil production comes from utilization of 5 Mha of land which contributes only 2% of the total hectarage of over 200 ha used in oils and fats production in the year 2012. Given the small footprint compared to the world’s agricultural planted area, the oil palm is the most efficient oil-producing crop. Oil palm in Malaysia produces an average of 4.01 MT/ ha (2012) as compared to soyabean 0.47, rapeseed 0.72 and sunflower 0.56 MT/ha. In short the oil palm is almost 8.5 times more efficient than soyabean. However, despite high yields and low acreages palm oil has been the target of critics. Many of the critics come from developed temperate countries facing high production costs and low yields. Many may recall the campaign against palm oil due to its relatively high saturated fat content and as a result the health of temperate oil users suffered from the detrimental health effects of trans fats, resulting from partial hydrogenation of polyunsaturated fats to obtain many desirable properties of saturated fats. Today the same groups are using other ways to discriminate against palm oil. Despite the competitive advantages of palm oil, the prices have been fluctuating poorly in the backdrop of supply/demand situation. In 2012 much of the
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND developed world suffered from economic crisis which led to high stocks of CPO and resulting low prices. The Malaysian government has introduced counter measures to meet the challenge. Restructuring the export taxes of CPO and increasing incentives for replanting old palms helped to reduce the high stocks. At a time when managing volatility of commodity prices is essential, Bursa Malaysia Exchange has provided a creditable and robust futures market of CPO and derivatives for international traders. The maturity of BMD has made the exchange the guardian of price discovery and benchmark for palm oil prices. With regional integration of capital markets and international collaboration BMD is on course to provide exciting and easily accessible trading for palm oil and derivatives.
Summary of Challenges Ahead 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” to preserve their forests and importers of food, 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.
3.
Scarcity of land/policies – expansion vs productivity vs environmental pressure
4.
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 the effect of fracking shale gas.
5.
Market Challenges – Growth in World Population/Food Security The world population is projected to grow from 7 bln in 2011 to 9 bln in 2043. Food production must meet this rate of increase. This alone is sufficient to exert pressure on commodity prices. By 2043, per capita oils & fats consumption will reach (0.5kg x 32yr) + 24 kg = 40 kg; world demand of oils & fats will be 40 kg x 9 bln = 360 MMT. This is an increase of 184 MMT in 32 years or 5.75 MT per annum. If increased demand is to be fulfilled by soyabean oil with a crop yield of 0.5 MT/ha, it will require an additional 11.8 Mha of land/year. The world is deforesting at 15Mha/year. If increased demand is to be fulfilled by oil palm with an oil yield of 4 MT/ha, it will only require an additional1.48 Mha of land/year.
Market Challenges – Growth in World Population/Food Security Nearly all the population growth will occur in developing countries. Sub-Saharan Africa’s population is expected to grow the fastest (up 108%; 910 M people), and East and SE Asia’s the slowest (up 11%; 228 M people). In 2012, there are still 870 M hungry people worldwide, down 1,000 M 20 years ago; or one out of eight people goes hungry every day. There is an unequal distribution of food supply with the developed countries having excess and insufficient supplies in Central Africa, India, Mongolia and isolated areas of Central S America and SE Asia (Laos and Cambodia). Net exporters of oils and fats are from Asia Pacific (palm oil) and Americas (soybean). The rest of the countries are net importers (Fig. 1).
Global warming/climate change – the impact of climate change on weather variability and crop yields.
China
Net Exporters
North Africa Pakistan Bangladesh Iran Mexico Egypt Japan Turkey South Africa South Korea Nigeria Taiwan
Market Challenges – Ideology Threat Concept: make developed countries as food granary & keep undeveloped countries for forest conservation. This is a wrong ideology on land use policy, denying developing countries from developing their agriculture sector. Correct ideology should be to choose crops that produce most foods with least land area: need for UN Sustainable Agriculture Initiative. Developed countries have limited new land for agriculture. Oil palm is a perennial crop and yields about 10x more than annual crops on the same land area.
Net Importers
EU-27 India
-15000
-10000
-5000
FAO estimates that by 2050, rising population and incomes will require70 percent in crease in global food production
Indonesia Malaysia Argentina Brazil Ukraine Canada Philippines Russia 0
5000
10000
15000
20000
Source: Oil World, Dec 2012
Figure 1. Importers and exporters of oils and fats
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
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25000
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
The FAO Food Price Index and the FAO Commodity Price Indices are given in Fig. 2. For 2012 as a whole, the food price index averaged 212, 7 % less than that of 2011, with the sharpest declines registered by sugar (17.1%), dairy products (14.5%) and oils (11.7%). The 2012 price fall s were much more modest for cereals (2.4 %) and meat (1.1%). For 2012 as a whole the oils/ fats index averaged 225 which compared with 252 in 2011. The main reason for the fall in December is the continued build-up of large global inventories of palm oil – as abundant production in SE Asia coincided with a protracted weakness of import demand.
Year
World’s population (bln)
Arable land per capita (x10-3 km2)
Arable land per capita (ha)
1922
2.0
7.50
0.75
1975
4.0
3.75
0.38
2005
6.6
2.27
0.23
2030
8.0
1.88
0.19
2042
9.0
1.67
0.17
Source: Freeworld Academy & University of Michigan FAO Food Commodity Price Indices
FAO Food Price Index
The world cultivated areas for oil crops and comparative
2002-2004=100
2002-2004=100 data are given in Tables 2&3 which show that 5.25 % of 250
250
2011
2010
220
2008
2012
190
2009
total land area has been planted with oil seeds. Only Sugar 0.29% of the world’s agricultural land has been used 220 for palm oil and Malaysian palm used only 0.09%. 190 Table
160
160
Cereals
2. World cultivated areas for oil crops Oils & Fats
Land Use Type Dairy
Total Area (Mha)
As % Area
4911
100
Meat
Total Agricultural Land 130
130
J
F
M
A
M
J
J
A
S
O
N
D
OilDSeeds J F 2011
M A M
Soyabean
x
S
Table 1. Estimated future population and land needs
2002-2004=100 250
Sugar 220
Cereals
190
2009
160
Meat 130
O
N
D
D
2011
J
F
M
A
M
J
J
2012
A
S
O N
258.03 S O N D
5.25
103.88
2.12
33.28
0.68
Sunflower
25.83
0.53
14.14
0.29
Coconut
9.76
0.2
Other Oil Seeds
57.8
1.18
Malaysian Oil Palm
4.32
0.09
Sources: FAO (2011), Oil World, MPOB (2012)
Table 3. Comparative planted acreages and oil yields
D
Oil Crop Source: FAO
Figure 2. FAO food price index and food commodity price indices
Market Challenges – Scarcity of Arable Land With the scarcity of arable land in the world, there is a need to use land wisely. The FAO has called upon governments to pay urgent attention to the needs of agriculture and to increase investment in agricultural practices (Table 1).
24
A
Oil Palm
Oils & Fats
Dairy
J
Rapeseed
FAO Food Commodity Price Indices
2010
J
2012
Pro- % of Total Production duction MMT
Total Area Mha
% Area
Average Oil Yield T/ha/yr [Rel Yield]
Soyabean
41.75
22.54
103.88
40.26
0.40 [1.00]
Sunflower
14.92
8.06
25.83
10.01
0.58 [1.43]
Rapeseed
24.21
13.07
33.28
12.90
0.73 [1.83]
Oil Palm *
66.96
36.15
14.14
5.48
4.73 [11.8]
Total **
160.21
258.03
Notes: * Total for palm oil and palm kernel; ** For 7 major oils (groundnut, coconut, cottonseed and above oils)
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
prices. This has kept prices high until very recently when supplies of bio-diesel were not taken up due to protectionist policies as well as the easing of mandates due to financial problems, especially in Europe.
10.4% 51.9%
14.9% 56.7%
30.4%
Figure 3. Forested areas in developed vs developing countries
17.9%
Food vs Fuel: Price Protection for Farmers
As illustrated in Fig. 6 vegetable oil prices follow their own S&D but with the advent of bio-fuels price correlate to volatile movements of petroleum crude
CPO
Soybean Oil
Rapeseed Oil
Brent Crude Oil
160
The era before biofuels drove prices
1600.00 1400.00
140 120
1200.00
100
1000.00
80
800.00
60
600.00
40
400.00
Source: World Bank, Oil World, MPOB
Figure 6. Vegetable oil price movements before and after the demand for bio-fuels
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
25
Jul-12
Oct-12
Apr-12
Jul-11
Jan-12
Oct-11
Apr-11
Jul-10
Jan-11
Oct-10
Apr-10
Jul-09
Jan-10
Oct-09
Apr-09
Jul-08
Jan-09
Oct-08
Apr-08
Jul-07
Jan-08
Oct-07
Apr-07
Jul-06
Jan-07
Oct-06
Apr-06
Jul-05
Jan-06
Oct-05
Apr-05
Jul-04
Jan-05
0 Oct-04
0.00 Apr-04
20
Jul-03
200.00 Jan-04
Vegetable Oil Price Movements Before and After the Demand for Bio-fuels
EU Price, US$ per tonne 1800.00
Oct-03
The use of US corn for bio-ethanol with subsidies seems a little premature in terms of available technology as cellulosic ethanol has not yet been proven to be economically viable. Meanwhile corn could be better used feed to millions of people rather than cars (Fig. 5)
Figure 5. US corn subsidized for use as bio-ethanol
Jan-03
The current world’s energy needs are large and cannot be supported by bio-fuels and the blame game in the food vs fuel debate will be much the same as projected to 2035 (Fig. 4). Economic policies in bio-fuel subsidies and the modest savings in CO2 emissions (some sitespecific values have been questioned) are likely to be non-sustainable. Current financial problems in EU countries are causing them to revise policies on alternative energy initiatives.
Figure 4. Total world energy demands and the contribution of bio-fuels
Apr-03
Higher crude oil prices encourage greater use of food products such as corn, vegetable oil and sugar for the production of bio-fuels. Petrol additives such as ethanol and bio-ethanol are manufactured from plant crops as a means of reducing dependence on fossil fuels and potentially cutting carbon dioxide emissions. Both US and the EU have ambitious long term targets for the use of bio-fuels to further these objectives. These biofuels mandates would create a higher demand for soft oils leaving a gap in vegetable oil supply which could be met by palm oil. Higher energy prices feed into the cost of food production through higher fertilizer prices and other farm inputs.
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
Market Challenges – Trade Protectionism?
Labelling of Food Quality and Nutrition
Deteriorating economic conditions are beginning to give rise to trade protectionism. According to the latest data, the EU has become the most protective region amid rising debt-ridden crisis concerns ….. “Since July 2011, new protectionist measures have outnumbered liberalisation measures by nearly three to one. As the vast majority of these initiatives are not traditional trade defense measures or tariff increases, but new forms of protectionism” [10th Global Trade Alert]. Countries ranked (as of 2010) according to their protectionism are as follows in decreasing order as: Russian Federation, United States, Brazil, India, Argentina, China, Indonesia, France, Germany, United Kingdom, Canada, Japan, Italy, South Africa, Mexico, Republic of Korea, Australia, Saudi Arabia and Turkey.
Major food retailers in Europe and other developed countries have used old and new forms of protectionism. There have been movements to remove palm oil from foods, claiming that oils with saturation higher than local temperate oils are unhealthy or otherwise environmentally unfriendly or even the country origin may be objectionable.
Discriminating Directives Against Palm Oil The EU and US EPA have used threshold values of GHG savings that will not be met with some uncertified palm methyl esters. LCA values for certified methyl esters, especially with CH4 capture, are superior to those of rapeseed and soyabean bio-diesels. Fig. 7 illustrates the thresholds set against palm bio-diesel in worst-case scenarios, even though there are national (ISPO) and international (RSPO) certified palm oils. Despite all its positive attributes, the palm oil industry is subjected to certifications, while other oilseed producers are not required to, or have yet to adopt certifications. Efforts to implement the requirement for certification must be mandated for all vegetable oil producing countries, to ensure a level playing field.
Market Challenges – Weather Phenomenon. Weather risks are a major source of uncertainty in agriculture. In recent years drought severely affected crops such as corn and soya bean. It is rare for droughts or floods not to occur in India, China, USA, Brazil or Argentina in any given year. Oil seed production will always be affected if weather disasters occur in at least one of these countries. Climate change will likely get worse as GHG emissions from US and China, each emitting 7 billion tonnes, remain unabated. Severe drought is also disastrous for the oil palm. El Nino in SE Asia, the last severe one being in 1997-8, seems like a distant memory even though it caused forest fires and decimated palm oil production but gave rise to record prices.
Fossil Fuel Usage and Climate Change Excepting natural geologic disasters, the use of fossil fuels has been considered the main contributor to climate change. In decreasing order contributions are from fossil fuel (57%), deforestation (17%), CH4 emissions (14%), N2O (8%), Fluorocarbons (1%) and others (3%). The Malaysian oil palm industry has a
Figure 7. EU and US EPA use their own GHG emission specification values to discriminate against palm bio-diesel
26
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
negligible carbon foot print of 0.015% of the global total GHG emissions. If sequestration is included the industry is a net remover of CO2.
Malaysia’s Greenhouse Gas Emission and Removal A previous study on Malaysia’s GHG emissions indicated that at an estimated level of < 50 MMT net CO2 emission pales into insignificance compared to those of US and China. The positive contribution by the oil palm in the removal of CO2 has been determined (Fig. 8).
NGOs/Environmental Pressure Groups There are policies emerging, proposed or imposed either by developed nations or activist groups that issue misrepresented statements under the misguided concern for the protection of the environment. These may lead to unnecessary export controls such as: bans, embargoes, quotas and taxes, enforcement of unfair certifications which distort or mislead the consumers and disrupt the growth of vegetable oils, its production and supply potential. Pressure groups are sometimes government sponsored or funded by entities that are threatened by the presence of better, more viable vegetable oils and fats products. They have become anti-growth agents to prevent developing countries from expanding their agricultural production. The real culprits with devastating deforestation records are the countries where these “green NGOs” are coming from, e.g. UK (11% forest left), France (29%), US(33%) and Australia (19%) compared to Malaysia (56% forested).
3Ps of the Palm Oil Industry There is much care for the planet based on the 3Ps principle of the palm oil industry – care for the people, planet and profits. Malaysian palm oil wildlife conservation fund was set up for the local palm oil industry to actively participate for conservation and wild life diversity in Malaysia. In addition to national parks and forest reserve areas, there are other sanctuaries for orang utans. There are involvements of WWF, WCF and WFP. In Malaysia there are sustainable palm oil certification schemes – RSPO, MSPO and MARESPO
Opportunities for Palm Oil – Solution Provider The future is full of opportunities to exploit for more value from the oil palm. These may be summarized as follows: y Branding y New Palm Oil Frontier – Africa y Product Innovations – Aviation biofuel, Fast Pyrolysis Bio-Oil for Renewable Energy, Virgin Red Palm Oil, Smart Balance Blended Oils for Specific Nutritional Needs, The Palm Factory for Ethical GeneticallyEngineered Products, Reduction of Post Harvest Losses
Product Innovation and Diversification The Malaysian Palm Oil Industry’s experiences in global marketing shows the wide spectrum of opportunities and applications as summarized in Table 4. Palm oil and derived products are channeled into worldwide industrial and commercial activities to churn out food products as well as non-food applications.
Figure 8. Malaysia’s GHG emissions moderated by forests and oil palms Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
27
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
Table 4. Product innovation and diversification for the palm oil industry
Upstream
Midstream
Activities Seed production Nursery Cultivation Harvesting Milling Products DxP seeds FFB CPO Palm kernel Biomass (EFB, kernel shell, fronds)
Downstream Processing
Trading CPO bulking
Refining Fractionation Oleochemicals Esterification Refined product storage
Packaging Food products Non-food products
DxP seeds FFB CPO Palm kernel Biomass (EFB, kernel shell, fronds)
RBD palm oil PFAD RBD Palm Olein RBD Palm Stearin RBD PK Olein
Cooking oil, frying fats Margarine Shortening Vanasparti Ice cream, non-dairy creamers Candles, soap Emulsifiers Vitamin E supplements Confectionery Bakery fats
45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
65
/19
64
19
Dispelling Myths by NGOs through Branding
2.
28
Branding through product diversification and differentiations (e.g. Malaysian Responsible Palm Oil Brand) to focus on quality control and assurance, health, environment and production sustainability. Responsibly produced palm oil provides key values from Brand Promises – community relationships, environmental responsibility, 100% licensed activities and responsibility of rights. “Aggregate Compliance Approach” – similar approaches used successfully in other countries e.g. “Aggregate Compliance Approach” in Canada for bio-fuels to EPA under RFS2 and “Aggregate Cross Compliance Approach” in EU. Commitment to stabilizing forested areas will be included. All palm oil exported from Malaysia can be certified as being responsibly produced.
7
RBD PK Stearin CBE CBS CBR Fatty acids, alcohols, amines, amides Glycerine Palm methyl esters Tocotrienols
00
6/2
0 20
Branding – Areas of Opportunities
1.
Consumer Products
Bio-diesel Energy generation Animal feed Organic fertilizer from biomass
Opportunities – Africa the Next Frontier in Oil Palm Cultivation Waves of private investments have gone to Africa and accumulated data is summarised in Fig. 9. Future GDP growth of African countries will catch up with those of Asia. There is a clear 21st century African land rush as worldwide 115 M acres are leased to foreign investors with the bulk of that in Africa. Food security and the push to produce bio-fuels drive the land rush. Table 5 provides some comparative data from FAO. After expanding at a rate of 5% a year in the past two years (2011-2), Africa was officially branded the second fastest growing economy on the planet at the 43rd World Economic Forum Annual Meeting (23-27 Jan. 2013, Davos, Switzerland). The continent is predicted to grow by 5.3% in 2013.
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
Figure 9. Agriculture investments in Africa West Africa has attracted investments from multi-billion dollar companies for development of oil palm plantations in the past 2-3 years. Olam (Singapore) will spend $250 M on Gabon Palm Oil Project. Sime (Malaysia) has also made a foray into Liberia. Golden Veroleum (Liberia) is developing more than 200,000 ha of oil palm in West Africa. Dozens of US companies are expanding into Africa, after focusing international expansions in Asia and Latin America. Malaysian plantation companies such as Sime, IOI, FELDA, KLK and KOG are now venturing further afield to Indonesia, Thailand, Cambodia, Papua New Guinea and increasingly to West Africa. Table 4. Land acquisitions in Africa for growing key agricultural commodities
Country
Projects
Sudan Mozambique Liberia Ethopia Cambodia (Asia) Nigeria
132 45 17 406 61 115
LARGE LAND ACQUISTIONS IN SELECT COUNTRIES Area Domestic Notes in M acres share* 9.8 78 *Proportion of area held by domestic investors 6.6 53 4.0 7 2.9 49 2.4 70 2.0 97 KEY COMMODITIES DRIVING LAND USE CHANGE, 1990-2007
Commodity Corn Oil palm Rice Rapeseed Soybean Sunflower Sugarcane Forestry
Area 2007 M acres 390 36 385 74 222 67 57 343
Change 1990-2007 M acres 67 20 22 30 81 10 15 91
% of Large-Scale Operations 52% 55 4 85 78 90 55 n.a.
Key Contributors (% of net increases)** China (29), US (29), Nigeria (11%) Indonesia (50), Malaysia (26), Nigeria (1%) Myanmar (38), Thailand (21), Indonesia (18%) Canada (32), India (15), France (8%) Argentina (33) Brazil (28), India (19%) Russian Federation (41), Ukraine (38), Myanmar (10%) Brazil (47), India (29), China (9%) China (35), US (18), Russian Federation (12%) ** Changes in crop area may include substitution for other crops
Source: FAO
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
29
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND Opportunities for Product Innovation – Aviation Biofuels
Potential of Further Uses of Oil Palm Biomass and POME
Sustainable aviation bio-fuel has been a world-wide quest because of stringent specifications and the need to mitigate the high carbon foot print. Boeing and many research centers around the world are focusing on providing answers. Acting as catalyst, many airlines are carrying out trials on experimental aviation bio-fuels from various raw materials. The US military, along with commercial airlines, are the two largest prospective customers for aviation bio-fuels. By 2016 the US Air Force will acquire 50% if its jet fuel for domestic operations from alternative blends. By 2020, the US Navy expects to reduce its total fossil fuel usage by half [ Berdy (2012) ].
Based on 2012 statistics large amounts of biomass and POME “waste” have not been exploited for valueadded applications. A summary is given in Fig. 12 on the huge amounts of oil palm biomass available; use of biomass for bio-fuel is more acceptable when supplies of palm oil are needed for food.
Palm Oil Product Innovation – Land Hectarage required for Aviation Bio-fuel The estimated acreage of land required to replace fuel demand from commercial aviation, which is responsible for 2-3% carbon footprint, with bio-fuels produced from various crop feed-stocks (soyabean, sugarcane, oil palm, corn, rapeseed/Canola) is given in Fig. 10 [Darrin Morgan (2008) www.news.mongabay. com/2008/1027-aviation.html ] Figure 11. Raw feedstock materials and processing methods for aviation bio-fuel
Figure 10. Estimated crop land acreage for aviation bio-fuel production
Bio-fuel Options for Aviation Several raw material sources are potentially suitable for conversion to aviation bio-fuel and are shown diagrammatically in Fig. 11
30
Figure 12. Oil palm biomass available for valueadded applications
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
FIG 11?
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
Oil Palm Biomass and Renewable Energy Oil palm biomass has been used for energy in traditional ways but new technologies will look into biorefinery aspects and new generation bio-fuels (Fig. 13). Processes in development include bio-ethanol from lignocelluloses, processing of BTL oil, F-T synthesis, etc. Fast pyrolysis bio-oil is presently available using Lipochem BTL technology [ Jin (2012) ] Solid biomass, constituting ~90% of materials produced by the oil palm (80 MMT, dry weight), have not been completely exploited presently and the amount will swell up to about 110 MMT in 2020. New wealth creation strategies have been outlined for the palm oil industry in the ETP of Malaysia [ National Biomass Strategy 2020, MPOB; [Wicke et al, (2011)] Liquid biomass (POME) will increase from 60 MMT in 2010 to as high as 110 MMT in 2020.
Figure 13. Renewal energy from oil palm biomass
BTL Liquid Bio-oil The processing, yields and feed-stocks for BTL bio-oil is diagrammatically in Figs. 14 and Table 5. EFB can be practical for BTL bio-oil which can be blended for use as heating oil for power or as raw material for chemicals and processed for hydrocarbon fuels.
Figure 14. BTL processing technology for bio-oil Table 5. Comparative heating values of pyrolysis bio-oil and yields obtained from various biomass feed-stocks Comparison of Heating Value of Pyrolysis Bio-oil and Typical Fuels F uel
MJ/ L itre
Pyrolysis b io oil
19 . 9
H eav y F uel O il # 6
4 2. 2
BTU/ US G allon
71, 500
151, 3 00
Yields For Various Feeds Biom
ass F eed
H ardwood S wood H ardwood Bark So wood Bark Corn F ib er Bagasse W aste paper Palm Kernel Cake Em pty F ruit Bunch
Typical pyrolysis b io oil yield, wt% of D ry F eedstock 70-75 70-8 0 6 0-6 5 55-6 5 6 5-75 70-75 6 0-8 0 50-6 0 50-6 0
Source: Jin, 2022
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
31
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND Market Opportunity for Oil Palm Biomass BTL Bio-oil There is a large potential of biomass resources to offer sustainable new business opportunities, worth RM40 bln pa on top of the RM80 bln from palm oil products. Palm biomass residues provide a renewable source for bio-energy production that is still underexploited. Large availability of marginal or degraded land with abundantly available palm biomass allows for ready bio-energy production. Government subsidy for bioenergy development can be a catalyst. Oil palm produces about 4 MT of palm oil, 0.5 MT of palm kernel oil and a potential of 8 MT of bio-oil per ha per year. These values are more than other oil crops. Opportunities exist in R&D, development of new technologies and in providing specific expertise. Multiple investment incentives are to be given for bioenergy development. Locally developed technology is available for bio-oil production.
inside and out. Red palm oil contains 30% α-carotene, 60% β-carotene, 1% lycopene and 9% other nutritional components. Importantly there are 70% tocotrienols in the vitamin E mixture.
Nutritional Oil Blends with Palm Oil Innovative oil blends containing palm oil are now used as heart-healthy food products; various food products contain smart blends.
Discussion Summary The palm oil industry has vast opportunities for future exploitation to increase revenue. Challenges are manageable and world demand for food, food and fibre remains strong. Palm oil is increasing its dominant role as net supplier for almost oil/fat needs. It has to address short term imbalance issues.
Liquid Bio-oil – Market Demand
Tracking CPO Prices Against Stock Usage Ratio
US Energy Policy: Energy Independence & Security Act (2007) and Renewable Fuel Standard 2 (2010) project cellulosic and other advanced bio-fuel planned production of 21 MMT/yr by 2015 and 126 MMT/yr by 2022.
This is given in Fig. 15. The present CPO prices are under pressure.
4,000
13.20%
3,500
13.00%
European Union Energy Policy: The target of producing 20% of total EU energy consumption from renewable energy sources by 2020 as well as measures for promoting renewable energy sources in the electricity, bio-fuels, heating & cooling industries. 90% of aviation fuel to be bio-fuel blends by 2050.
3,000
12.80%
2,500
12.60%
2,000
12.40%
1,500
12.20%
1,000
12.00%
Indonesia Energy Policy (National Energy Mix 2025) projects a target of producing 17% energy usage from renewable energy sources by 2025. Bio-fuel utilization with 5% mix of 22 MMT/yr by 2025.
500
11.80%
The governments of Japan and Korea committed to a minimum 2% replacement with biomass-based resources for power generation in all power plants which run by fossil fuels.
11.60% 2006
2007
2008
SUR Forecasted CPO Higher
2009
2010
CPO Price Forcasted CPO Lower
2011
2012
2013F
Forecasted CPO Average
Figure 15. Tracking CPO Prices against Stock Usage Ratio
China’s Oils & Fats Consumption 1993 – 2012 (E)
Product Innovations Miracle Fat: Red Palm Fruit Oil Well-known red palm oil is now rediscovered by the Americans. Dr Oz’s first miracle solution of 2013 is red palm oil, an amazing oil that helps stop signs of ageing
32
0
China has remained an important consumer of palm oil and an almost linear projection of consumption can be projected (Fig. 16). Malaysia’s data on palm oil production, stocks, and exports are given in Fig. 17. The recent excess supply imbalance leads large amounts of stocks resulting in a depressive effect of CPO prices.
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND Palm Oil Prices Palm oil prices are affected by temporary oversupply and a relaxed policy shift in the use of bio-fuels as shown in Fig. 18. Supply rationalization is needed and an accelerated implementation of the usage of biodiesel blends in all parts of Malaysia is required.
Steps to Supply Rationalisation
Figure 16. Projection of China’s palm oil consumption
y
Build more tanks to cater for peak months
y
More ships to cater for shipments in peak production months
y
More multi-feedstocks of bio-diesel plants to remove high FFA palm oil from the market
y
These issues must be addressed collaboratively in Malaysia and Indonesia
3 , 000, 000
( ‘ 000 MT)
2, 500, 000
2, 000, 000 1, 500, 000 1, 000, 000 500, 000
D
ec ' 2012
ct O
Nov
Sep
Jul
Aug
Jun
Apr
May
F eb
Mar
ec D
Jan ' 2012
ct O
Nov
Sep
Jul
Aug
Jun
Apr
May
F eb
Mar
Jan ' 2011
0
Stock
Export
Production
Figure 17. Malaysian monthly production, export and end stock
EU Price, US$ per tonne
CPO
1800.00
Soybean Oil
Rapeseed Oil
Brent Crude Oil
Supply rationaliz ation needed to prevent prices decoupling
1600.00
160 140
1400.00
120
1200.00
100
1000.00 80 800.00 60
600.00
40
400.00
20
200.00 0.00
Jul-12
Oct-12
Jan-12
Apr-12
Jul-11
Oct-11
Jan-11
Apr-11
Jul-10
Oct-10
Jan-10
Apr-10
Jul-09
Oct-09
Jan-09
Apr-09
Jul-08
Oct-08
Apr-08
Jan-08
Jul-07
Oct-07
Apr-07
Jan-07
Jul-06
Oct-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Jan-03
Apr-03
0
Source: World Bank, Oil World, MPOB
Figure 18. Correlation of vegetable oil prices with petroleum crude Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
33
MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
Conclusions Increasing Dominance of Palm Oil. Palm oil continues to be an attractive long term commodity for producers and consumers. Investment in oil palm cultivation should continue in the long term Solution Provider. Consumers get strategic solutions from palm oil: food-secutrity, trans-free fat products and competitive prices. ENGO as Part of the Palm Oil Industry. Palm oil continues to be attacked by ENGOs on issues of deforestation but this is not a problem in Malaysia. Malaysia has more than enough forest conserved to meet any standard imposed by the developed countries. Anti-Palm Oil Campaign. Last year’s (2012) ENGO’s campaign has no significant impact on palm oil exports to the EU which actually increased by 10-12%. Old Health Issues. Issues like saturated fats have been recycled in France but these have been overcome previously in the US. Over 90% of saturated fats consumed in the EU comes from animal sources. Branding for Improved Assurance and Added Value. Malaysia must complement its traditional way of promoting palm oil through branding and give a national identity for Malaysian palm oil as being responsibly produced. Opportunity exists to work with stake holders keen to have fully certified palm oil exported from Malaysia. Branding and full certification of Malaysian palm oil can allay unfounded common fears of ENGOs and consumers. Branding differentiates Malaysian palm oil as being responsibly produced with strong forest conservation commitment, and highly regulated supply chain through comprehensive (100%) licensing and enforcement capability by MPOB. ENGOs and Deforestation. ENGOs who are supporters of certification systems should promote products that they produce i.e. certified palm oil, and not demonise other products that they are not involved in producing e.g. non-certified palm oil. Negative promotion puts fear into consumers resulting in avoidance of palm oil (including certified oil) as recently attempted in
34
France. Deforestation has been rampant in developed countries where the green NGOs are coming from but they choose to focus on preventing developing countries from developing their agriculture. Unlike the developed countries, the developing nations have better record in practising sustainable development. Abbreviations. ASTM = American Society for Testing and Materials; bln = billion; BTL = biomass to liquid oil; CBE = cocoa butter equivalent; CBR = cocoa butter replacer; CBS = cocoa butter substitute; CPO = crude palm oil; DxP = Dura x Pisifera; EFB = empty fruit bunches; ENGO = Environmental NGO; FFB = fresh fruit branches; ETP = economic transformation programme; FT = Fischer-Tropsch; MARESPO = Malaysian responsible palm oil; MMT = million metric tonnes; MT = metric tonne; MSPO = Malaysian sustainable palm oil; NGO = non-governmental organization; NKEA = national key economic area; pa = per annum; PFAD = palm fatty acid distillate; PK = palm kernel; PKO = palm kernel oil; PO = palm oil; POC = palm oil conference; RBD = refined, bleached and deodorized; RFS2 = renewable fuel standard 2: RSO = rapeseed oil; RSPO = roundtable on sustainable palm oil; SBO = soyabean oil; SO = sunflower oil; WCF = wildlife conservation fund; WFP = world food programme; WWF = world wildlife fund; z. B. = e.g. in German
References Peter Berdy (2012). The next gold rush. http://www. scribd.com/doc/93294496/Biofuels-The-Next-GioldRush Mckin Lee Byung Jin (2012). Lipochem BTL International Sdn Bhd. 2nd Korea-Malaysia Friendly Workshop for Energy Cooperation, 20 Sept 2012, Kuala Lumpur Darrin Morgan (2008). Boeing, mongabay.com www. news.mongabay.com/2008/1027-aviation.html B. Wicke, R. Sikkema, V. Domburg, A Faaij (2011). Exploring land use changes and the role of palm oil production in Indonesia and Malaysia, Land Use Policy 29(1): 193-206. http://www.sciencedirect. com/science/article/pii/S0264837710000633
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
INDONESIAN PALM OIL MARKET AND ITS IMPACT ON PRICE IN 2013 Derom Bangun Chairman, Indonesian Palm Oil Board [ Presented at the POC2013 Conference, 4-6 March 2013, Kuala Lumpur ]
Outline of Lecture
Role of Indonesian Palm Oil
The following topics will be covered: y Indonesia’s role in the world’s palm oil y Indonesian palm oil market y Trade barriers and challenges y Dynamics of palm oil export y Impact on international oils and fats market y Price outlook
Palm oil contributes to more than 30% of the world’s vegetable oil consumption. Indonesia produces about 50% of the world’s palm oil production in 2013. Therefore, Indonesian palm oil market will have a significant impact on prices in 2013.
Introduction
Data estimated for 2013 are given below in 1000 MT as follows:
Indonesian Palm Oil Market
World Palm Oil Production and Consumption
Beginning Stocks 2,500
Ending Stocks 2,300
The world’s vegetable oil consumption (2011) is summarized as follows: palm (33%), soyabean (28%), rapeseed (15%), sunflower (9%), palm kernel (3%) and other oils (12%); [ IndexMundi/USDA ]
Production 28,000
Domestic Use 9,200 Export 19,000
The estimated 2013 production of palm oil is contributed by the following countries: Indonesia 28 MMT, Malaysia 19.7, Colombia 0.98, Thailand 1.7, Colombia 0.96, Nigeria 0.85 and others from 22 countries 3.317 MMT [ IndexMundi/ USDA, Oil World, MPOB ]. The total production at 54.7 MMT is slightly rectified from the above after communication with other speakers. Palm oil consumption is given in Table 1 where the total forecasted for 2013 is marginally higher than total production. It is noted Indonesia’s consumption will exceed that of India in 2013. Table 1 Global consumption of palm oil in 1000 MT Country India Indonesia China EU27 Malaysia Pakistan Others Total
2012 7,950 7,870 6,400 5,070 3,604 2,195 18,695 51,784
2013f 8,350 9,200 6,720 5,270 3,780 2,300 19,630 55,250
Domestic uses: for Food 5,700; for Industrial Uses 3,500 including bio-diesel 2,400, from 1,600 in year 2012 [Sources of data: IndexMundi/USDA, IPOB and BPS ]
Estimated figures for domestic uses and for export are as follows: Domestic uses for food 5,700, up from 5,377 in 2012 Domestic industrial uses including bio-diesel 3,500, up from 2,493 in 2012 Export of processed products is 13,000 Total exports are at 19,000
Palm Bio-diesel [ Data from Ministry of Energy, Republic of Indonesia ] The estimated export will increase to 1.55 M kL from 1.15 M kL in 2012. The estimated domestic use will be 1.1 M kL vs 0.669 M kL in 2012 (current blending is 7.5%) Total bio-diesel production in 2013 is estimated to be 2.65 M kL which is equivalent to 2.4 MMT of CPO feedstock.
Source: USDA, IPOB
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
35
INDONESIAN PALM OIL MARKET AND ITS IMPACT ON PRICE IN 2013 Trade Barriers and Challenges
Addressing Challenges
Trade barriers come in many forms: there are export duties and import taxes. The EU has the Renewable Energy Directive (EU-RED).The US-EPA issued the Notice On Data Availability (NODA) for Renewable Fuel Standard (RFS). There were campaigns and advertisements against palm oil, e.g. in France “sans huile de palme” and a proposal to increase palm oil tax by Euro300 per tonne.
AIPH of Ivory Coast won a court case in Tribunal de Commerce in France against a retailer company for advertising against palm oil. IPOB joins hands with IPPA of Nigeria and the AIPH to watch and address advertisements and campaigns against palm oil. IPOB supports the implementation of ISPO. The country is making more efforts toward sustainable palm oil (ISPO, forest moratorium) which will hopefully be accepted by APEC in the category of environmentally friendly products. Indonesia is working together with Malaysia to improve the image of palm oil.
Indonesia’s Palm Oil Market Versions of data estimates differ widely; traders have their own estimates. Anti-palm oil campaigns in Europe, notably in France, cause a negative impact to the market. The victory of Ivory Coast’s oil palm farmers in the court case at Tribunal de Commerce in Paris is a positive sign. IPOB of Indonesia joined hands with IPPA of Nigeria and AIPH of Ivory Coast to watch and counter against anti-palm oil campaigns. The US-EPA issued NODA and has yet to confirm whether palm bio-diesel is acceptable in US, even as the emissions savings from palm oil was chosen so as to be not acceptable using an arbitrary threshold standard. Indonesia submitted data to the US-EPA showing palm bio-diesel’s emission reduction savings is higher than the 20% threshold.
Price Outlook World demand slightly exceeds supply. There will be increasing domestic demand in Indonesia for downstream and biodiesel industries. Increased use for biodiesel in EU since certified palm by ISCC and also RSPO is acceptable. Price ratio of PO/Petroleum is seen to have passed the lowest level, and will likely go up (Fig. 1).
Challenged by the abundance of stocks, companies started constructing more storage tanks. Futures markets in Jakarta, ICDX, JFX and PT iPasar are to support trade and prices.
Export Duty A new structure of export duty, PMK 75 was issued on 16th May 2012. If CPO price is US$ 750-800 (cif Rotterdam), taxes will be CPO 7.5% and RBD Olein 2%. There are significant differences in rates for crude and processed products. In Indonesia since Feb 2013, at USD 800-850 for CPO, tax is at 9% and RBD Olein at 3%; at USD 850-900 in Mar 2013 taxes were 10.5% and 4% respectively. In Malaysia till Feb 2013 there was no tax on CPO. In Mar 2013 with CPO at RM2250-2400 the tax was 4.5%. The intention of the Indonesian government was to boost downstream industry especially for Sei Mangkei, Dumai and Maloy. As unintended consequences, difficult times were experienced by refineries outside Indonesia.
36
J a n ’ 12
A pr i l ’ 12
J
ul y ’ 12
O
c t ’ 12
J
a n 2013
www.indexmundi.com/commodities/?commodity=palmoil&months=60
Figure 1. Price ratio of PO over petroleum crude (WTI) Last year’s low price was caused by decline of petroleum price and weak PO demand in China and India due to economic crisis in the Eurozone. Now (Mar 2013) demand for palm oil is strengthening; petroleum crude price increased to USD 93/bbl (Nymex) and USD 114/bbl (Brent).
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
INDONESIAN PALM OIL MARKET AND ITS IMPACT ON PRICE IN 2013
CPO price outlook is forecast to slowly but steadily move up: USD 870-900/T by June and USD 900-940/T in the second half of 2013 The CPO price, cif Rotterdam for the last two years is given in Fig. 2
Conclusion As the largest palm oil producer, Indonesia’s supply impacts significantly the international palm oil price. Although supply is adequate, demand is also increasing and will marginally exceed supply and thus stocks will be reduced in the first half of 2013.
U S D / M T
Campaigns against palm oil should be watched and addressed by all PO producing countries otherwise PO price will be depressed relative to other oils.
F e b 201
1
J ul y 201
1
J a n 201
J ul y 201
J
a n 2013
Figure 2. CPO Prices cif Rotterdam, Feb 2011- Jan 2013
Recent (2013) Palm Oil Prices CIF Rotterdam
Abbreviations. AIPH = International Association of Horticultural Producers; APEC = Asia-Pacific Economic Cooperation; BPS = Badan Pusat Statistik (Statistics Indonesia); CPO = crude palm oil; EPA = US Environment Protection Agency; EU = European Union; ICDX = Indonesian Commodity and Derivatives Exchange; IPOB = Indonesian Palm Oil Board; IPPA = Initiative for Public Policy Analysis; ISCC = International Sustainability and Carbon Certification; JFX = Jakarta Futures Exchange; kL = kilo liters; M = million; MMT = million metric tonne; MT = metric tonne; NODA = Notice On Data Availability; PO = palm oil; PT iPasar = Indonesian national private company that holds physical commodity market with Indonesian National Standard; RED = EU Renewable Energy Directive; RFS = Renewable Fuel Standard; RSPO = Round Table on Sustainable Palm Oil; T = tonne; USDA = US Department of Agriculture; WTI = West Texas Intermediate
Feb. 20: USD 870 Feb. 21: 847.5 Feb. 22: 870 Feb. 25: 860 Feb. 27: 845 (fluctuating in the range 845-870)
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
37
“THE TROJAN WAR” SEEMS TO BE OVER – LAURIC OIL MARKETS ARE BACK TO FUNDAMENTALS . . . FOR NOW Harald Sauthoff Vice President, Global Procurement Natural Oils and Oleochemicals BASF Personal Care and Nutrition GmbH, Monheim, Germany [ A summary of the lecture presented at the POC2013 Conference, 6th Mar 2013, Kuala Lumpur ]
Introduction Vegetable oil prices including lauric oils have been following supply and demand fundamentals until 2005 and 2006 when biodiesel came into the picture. Lauric oils became part of the massive energy commodity mix but the relatively high prices obtained may be coming to an end with the winding down of the global
bio-diesel growth rates (Fig. 1). With no increase of growth estimated for 2012-13, lauric oils (which are not used for methyl esters in the bio-diesel energy sector) will be back to follow the supply and demand fundamentals.
Figure 1. Bio-diesel growth rates in %, y-o-y
38
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
LAURIC OIL MARKETS ARE BACK TO FUNDAMENTALS . . . FOR NOW
2500 2400 2300 2200 2100 2000 1900 1800 1700 1600
USD/mt
1500 1400 1300
Soybean Oil FOB mi
1200 1100 1000 900
Palm Oil CIF Rdm Lauric Oil CIF Rdm
800 700 600 500 400 300 200 100 Jan 13
Jan 12
Jan 11
Jan 10
Jan 09
Jan 08
Jan 07
0
Source: H. Sauthoff, BASF
Figure 2. Major EU vegetable oil prices
Review for 2012 Year 2012 was not the year for agricultural commodities. While corn and soybean saw modest price rises of 4% and 15% respectively, losses were recorded for soy oil (- 6%) and palm oil (- 22%). Laurics which are not used in the methyl esters of bio-diesel became the “collateral damage product” suffering a 66% price decline. The severe price decline, especially in 2011 and 2012, is illustrated in Fig. 2.
Outlook For 2013
supply and lower prices have not stimulated demand. Oversupply situation of palm kernel has caused coconut to assume its own pricing premium according to its own S&D and to recover its market share.
Price Forecasts for 2013 Forecast of prices are given in the Table 1 below: Table 1. Forecast prices of Laurics and CPO Product
In a poor economic environment there is less political will to impose mandates and provide subsidies. The increasing vegetable supplies expected in 2013 will continue to depress prices. Eurozone rebounds strongly but only for the first part of 2012 and then consolidation followed. There has been cautiousness in investment support for commodities especially for agricultural commodities. Weather risks seem to be gone and the correlation with crude oil seems to be weakening so that the general picture needs to be watched carefully.
Range
Average
Laurics, cif Rdm, US$/MT
720 – 900
830
Palm Oil Futures, MR/MT
1950 – 2500
2200
Palm Oil, cif Rdm, US$/MT
690 – 890
780
Abbreviations. cif = cost, insurance and freight; CPO = crude palm oil; EU = European Union; MT = metric tonne; Rdm = Rotterdam; MR = Malaysian ringgit; POC = palm oil conference; S&D = supply and demand; y-o-y = year over year [ The paper was summarized by S.H. Goh of MOSTA ]
For laurics demand growth suffered because of the economic situation. Demand has not kept up with
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
39
OIL PALM: THE HOLY GRAIL OF PLANTATION AGRICULTURE – TIMELINE AND APPRAISAL Joseph Tek Choon Yee IJM Plantations Berhad [ Lecture given in the Agricultural Seminar 7, 6th July 2013, UTAR, Kampar]
Introduction The agriculture story is now different from past years with a world running out of arable land coupled with populations soaring beyond 7 billion people. Successful small plantations (~100 ha) to large ones (~millions ha) can impact and dominate global businesses. Malaysia has over centuries tried a variety of crops – spices, pepper, tea, coffee, banana, pineapple, cocoa, coconut, rubber and oil palm (Fig. 1). Perhaps we have found the holy grail for agriculture in this part of the world.
Historical Advantage in Plantation Agriculture Malaysia has a long plantation history and now has a reasonably good infrastructure to collect, transport, process and export palm oil products. Palm oil has remarkable versatility and has multiple uses for food and non-food products. Apart from its wide uses in all basic food as well as culinary creations, non-food uses also dominate on account of its chemical stability and diverse fatty acid types. Its recent introduction as use in bio-fuels promises almost unlimited volume uptake if prices are right. Historically, the oil palm was brought in from Africa as an ornamental plant (Alexander Guthrie, 1821), then Henri Fauconnier and Adrian Hallet started Socfin’s plantation (1909), which was then followed by William Middleton Sime & Henry Darby in Sime Darby plantation (1910). Later years saw local businessmen emerging as plantation business tycoons, e.g. Tan Sri Robert Kuok Hock Hine (Wilmar group, 2006), the late Tan Sri Dato’ Seri Lee Loy Seng (KLK founder) and Tan Sri Lee Shin Cheng (IOI group). Sime and FGV (2013) are very large local plantation companies.
Figure 1. Why SE Asia is optimally suitable for oil palm agriculture The tropical climate with good sunshine and high rainfall is highly suitable for the oil palm. Though there is the need for workers, the crop needs little maintenance care and an operational worker/area ratio can be found in developing countries.
40
Oil Palm – the Highest Oil Yielding Crop The greatest advantage of the oil palm is its yield advantage over the other oil producing crops. Benchmarking edible oil yields is given in Fig. 2 and a comparison of the world’s highest oil producing companies are given in Fig. 3. The Malaysian oil yield average is low (~ 4 MT/ha) due to small holdings with aged palms. On the other hand agronomically wellmanaged plantations with optimally mature palms can provide higher yields, e.g. IJMP 5.49 MT/ha.
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
OIL PALM: THE HOLY GRAIL OF PLANTATION AGRICULTURE introduction of weevils (Datuk Leslie Davidson & late Datuk Dr Rahman Anwar Syed, 1981).
Ideas and Innovations for the Oil Palm and Palm Products
Figure 2. Oil yield benchmarking for edible oils (see front cover)
Oil Yield (ml/ha) 5.49
FFB Yield (ml/ha) 26.5
OER (%) 20.7
Mature Area (ha) 24,041
1
IJM PLANTATIONS BHD (M)
2
UNITED PLANTATIONS BHD (M)
5.48
25.1
21.9
28,680
3
FIRST RESOURCES LTD
5.40
23.0
22.3
98,181
4
GOLDEN AGRIRESOURCES LTD
5.27
23.3
22.6
416,309
5
REA HOLDINGS PLC
5.20
22.4
22.9
26,688
6
KIM LOONG RESOURCES BHD
5.19
23.8
21.8
12,740
7
UNICO-DESA PLANTATIONS BHD
513
25.0
20.6
9,889
8
IOI CORPORATION BHD
4.86
23.2
21.0
138,892
9
SIME DARBY BHD
4.77
22.5
21.2
277,070
10 HAP SENG PLANTATIONS BHD
4.65
21.9
21.3
30,456
11 KUALA LUMPUR KEPONG BHD
4.63
21.3
21.7
152,829
Source: Review of Annual Reports to May 2013
Figure 3. World’s highest oil-yielding companies Despite relative low prices in 2013, there is reasonable profitability due to low cost of production of palm oil. Among the reasons have been the well-organized plantation culture, good planting materials and good agronomic practices. The introduction of weevils has reduced labour costs while the availability of guest workers remains the main operational challenge to the industry. The yield productivity trend averaging19.84 MT/ha/yr FFB in Malaysia remains stagnant over 35 years with only a slight up-spike around 1984 with the
There have been continuous trials in the past in the development of advanced planting materials while waiting for the genetically engineered oil palms and enhanced drive towards mechanization. Likewise revisiting practices of site-specific and cost-effective innovations incorporating precision agriculture, IDT and aerial technology have been balanced against cost-benefit amid present realities. The simple idea of delivering only detached loosed fruits from field to mill has to be explored. Harvesting still needs skilled labour as compared to pruning and loose fruit collection.
Oil Palm High Density Planting High density planting could be relooked in view of the present need of replanting aged trees. This is summarized in Fig. 5.
Figure 5. High density planting
Harvesting Tools and Mechanisation Fruit harvesting has remained the most difficult to solve by mechanization. Evolutionary improvements provide light long poles, better knives and sharpening tools. The motorized Cantas has been successful to improve harvesting efficiency but this is insufficient to serve the industry’s needs and much more research and funding may be needed to find solution. Meanwhile site-specific & cost effective mechanized vehicles are now available, e.g. mechanized weeding, mini FFB grabber, crane & net for collecting and transferring fruits, and the Huka system for transporting fruits.
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
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OIL PALM: THE HOLY GRAIL OF PLANTATION AGRICULTURE Curiously the buffalo cart seems a worthy innovation as an all-weather and all-terrain transporter. The present state of technology can provide wheelchairs and exoskeletons to assist natural human abilities. Perhaps the exoskeleton technology can be used to provide a solution to assisted fruit harvesting.
Enhancing Product Development The use of palm oil had been at least 5000 years old as found in jugs of Egyptian Pharoahs’ tombs. Yesteryear’s products include Palmolive made from palm and olive oils. Recent use of blending temperate oils with palm oil seems to provide acceptable oils for perceived nutritional needs. There are potential uses of biotechnology and nanotechnology to further marketable products from palm oil, palm oil fractions, nutriceuticals, nutraceuticals and non-food cosmeceuticals. Useful health products include medium chain triglycerides, carotenoids, Vitamin E tototrienols, phenolics, etc Meanwhile there are opportunities for biomass utilization as 90% of the oil palm can provide woody materials, pyrolysis oil and pyrolysis chemicals.
Plantation Business of the Future As expected, business has to be economically sustainable but with shared responsibility to people and planet. Corporate social responsibility (CSR) has been popularized in all businesses, and this supposedly leads to Creating Shared Value (CSV) in ways to reinvent capitalism. An example of “shared value” wealth distribution is given in Fig. 6. Going forward it has to be the use of science and technology to provide the tools for greater productivity and growth. Businesses led by forward thinkers will acquire and keep talent where there can be innovation and productivity. The world will remain much the same and it will remain the survival of the fittest – only quality and profitable products remain. Learning from history remains paramount as complacency and absence of innovation allows alternatives to take the lead or supplies swamp demand in the absence of safety nets. Abbreviations. FFB = fresh fruit bunches; FGV, KLK and IOI = Major oil palm companies; ha = hectare; IDT = interdisciplinary team; IJMP = oil palm plantation company in Sabah; MT = metric tonne;
Figure 6. An example of shared value wealth distribution system
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Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
GENETIC IMPROVEMENT AND CHOICE OF OIL PALM PLANTING MATERIALS C.C. Tan, Kumar K., Aida N., Chin S.Y., Melody M., and C.K. Wong Applied Agricultural Resources Sdn Bhd, [ Presented by C.K. Wong at the MOSTA Workshop on Best Agronomic Practices for the Oil Palm, 2012, Sandakan ]
Abstract
Genetic Improvements
Oil palm commercial planting material at the beginning of the industry of was of the thick shell dura. Through breeding and understanding of the mechanism lying behind the shell thickness, the current oil palm commercial planting material is the thin-shell tenera. The premium plating planting material is clone. When all these materials were put into perspectives to quantify for genetic improvement, oil palm genetic improvement is 1.8% per year. However, with the rise of population and climate change, higher genetic improvement needs to be targeted. As the biotechnology tools in oil palm mature, biotechnology shall enable to shorten breeding cycle which for further increases in genetic improvement per year. Traits like efficient nutrient used, tolerance to abiotic stress and disease tolerance are the new demand list of plant breeders to combat the challenge from climate change. Since there are various planting materials available, planters knowledge about them need to be thorough to facilitate decision making.
Steady genetic improvement in maize grain yield is demonstrated to be 1-3% per year (Fig. 1). Corn yield in the 1930s and 2000s were 4.8 tonnes/ha, and 10.2 tonnes/ha, respectively. The difference was 5.4 ton/ ha. 60% of the difference was attributed to genetic improvement and the remaining 40% being attributed to improved agronomic practices. [Lee & Tollenaar (2007), Duvick et al. (2005)]
= Canadian yield;
Superior Cultivars to Feed 9.1 Billion in 2050 World population is expected to reach 9.1 billion by 2050. This set the stage to challenge plant breeders for superior cultivars as food production by then will need to nearly double especially in developing countries. In this challenge of food security, there are more hurdles ahead, which include that 40% of the world’s arable land, degraded to some degree, and will be further affected by climate change [IFAD (2013)]. Rise of disease continues to pressure upon current cultivar. Current wheat cultivars are subjected to Fusarium Head Blight. Oil palm is subjected to Ganoderma Basal Stem Rot. Both situations have no varieties that are immune to the disease.
= US yield
Figure 1. Corn yields during pre-hybrid era (18651938) followed by the hybrid era
Breeding Efforts to Produce Commercial Oil Palm Planting Material The oil palm industry is a relatively young industry as compared to other cultivated crops. The industry started in the early 1900 in South East Asia. The commercial planting material then was Deli dura with thick shell characteristics. Components that make up an oil palm fruit are kernel, shell, mesocarp and pericarp. The pericarp is the thin waxy outer layer of the fruit, which is insignificant in practice. Therefore, in practice, the fruit components described are kernel, shell and
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
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GENETIC IMPROVEMENT AND CHOICE OF OIL PALM PLANTING MATERIALS mesocarp. The fruit characteristics of Deli dura are defined as 30% of shell and 62-63% of mesocarp. The ratio of oil:bunch of Deli dura is 16-18%. The fresh fruit bunch (FFB) production was 100 kg/palm/year [Corley & Tinker (2003)]. This translates to oil yield of 16 – 18 kg/ palm/year. Deli dura was used as commercial planting material until the 1960s. To achieve the performance of current commercial oil palm planting materials, the oil palm breeders have bred the oil palm following either the modified recurrent selection (more commonly known by the oil palm breeders as Family and Individual Palm Selection) or modified reciprocal recurrent selection. The steps of modified recurrent selection are show in Fig. 2. The selected pisiferas (by DxP test) and the duras (by dura performance per se) are used to produce commercial DxP seeds.
D1
X
D4
D2
D1xD4
X
D2xD5
D5
D3
X
D6
T1
B est F amily D B est I D3xD6 ndividuals
X
T3
T1xT3
T2
X
T4
B Pisiferas est F amily T2xT4
Innovatively, both the modified recurrent selection and the modified reciprocal recurrent selection could be combined (Fig. 4). The oil palm breeding program could be initiated with the modified reciprocal recurrent selection to reduce entries and to exploit General Combining Ability and Specific Combining Ability, and then followed by modified recurrent selection to cream for the superior pisiferas and duras and reduce genetic variability of commercial DxP. The best tested DxP families could be reproduced in bulk using the semi-clonal seed approach. The parental dura of the best tested DxP families are cloned to increase the number of individuals to be served as clonal mother palms. The clonal mother palms are then pollinated with the tested pisifera, resulting seeds that are termed semi-clonal seeds. Semi-clonal seeds are defined by seeds produced by having one rametparent and a sexual parent.
D1
X X T1
D1xT1
D2
X X T2
D2
X X T2
t reduce entries t exploit GCA & SCA
Best Performance D3xT3
D2xT2
selfing
self
1. Create d u r a family 2. Create p i s i f e r a family 3. Select B est d u r a & p i s i f e r a families 4 . Select best d u r a ind. w ith in best family & identify p i s i f e r a w ith in best family 5 . DxP progeny test to select p i s i f e r a 6 . Comm. Seed Production
Comm. DxP seeds DxP
DxP
DxP
D1xT1
D2
DxP
Dx P
Commercial Planting
D2xT2
selfed T
selfed D
t identify superior Pis. & dura (creaming) t reduce genetic variability in comm. DxP seeds (uniform)
Commercial DxP seeds
Figure 4. AAR Selection scheme Apart from genetic improvement through breeding, another important aspect for commercial planting material is the ability to reproduce the legitimate superior cultivar. This involved a stringent field aspect of controlled pollination to avoid foreign pollen and efficient seed production system.
X D3
T2
selfing
1. Assemble of d u r a 2. Assemble of 3. DxT Testing Selfed D 4 . I dentify best family 5 . Self parental D & parental T 6 . Production of seeds for sales
T3
Clone: The Premium Commercial Planting Material
B est D3xP3 Performance D3xT3
selfed P
selfing
selfed T
selfed D
Commercial DxP seeds
Figure 3. Modified reciprocal recurrent selection
44
Clone/self
Clone/Self D
X T1
selfed P
DxP
The steps of modified reciprocal recurrent selection are illustrated in Fig. 3. Commercial DxP seeds are produced by crossing between the selfed duras and the selfed pisiferas.
X
Selected Selfed DD
DxP
Figure 2. Modified recurrent selection (FIPS)
D1
Modified Recurrent Selection (FIPS)
Modified Reciprocal Recurrent Selection
There is another oil palm planting material that deserves further discussion – tenera clones. The aim of cloning is to reproduce superior genotypes from the selected individuals (ortet) that were superior among the DxPs. The current DxPs produced are not F1 hybrid, therefore individuals within family and among families are not homogenous; genetic differences occur. Hence, the approach of cloning tenera for genetic improvement is justified.
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
GENETIC IMPROVEMENT AND CHOICE OF OIL PALM PLANTING MATERIALS Current oil palm cloning approach is only possible through micropropagation; tissue culture. The current oil palm cloning could be achieved through tissue culture process of gel- or liquid-system. The latter is a more efficient process because the embryoid maturation and shoot development are synchronized, which lead to better productivity because subculturing process that occur in the gel-system is significantly reduced. The tissue culture liquid-system also opened the avenue of artificial seed production which could lead on to the possibility of direct germination in the non-sterile environment. One of the main advantages of the approach is making tissue culture economically viable, because laboratory time is further reduced. Tissue culture process is a propagation process, yet, genetic improvement of the clones shall rely on accurate ortet selection and ultimately on field performance testing of the clones. Clones that are superior, defined after performance testing, are then recloned. At this juncture, SIRIM specifies that primary ortet (palm that is not reclone) must meet oil:bunch minimum 27% and oil yield minimum 50kg/p/year. The clonal ortet (ortet selected from clones) must meet oil:bunch minimum 28% and oil yield minimum 55kg/p/year [SIRIM MS 2099:2008]. Results published by Soh et al (2011), showed that clones were 18% higher in oil yield as compared to DxP at that juncture.
Current Genetic Yield Improvement of the Oil Palm
this challenge. One of the approaches in biotechnology that could be incorporated in oil palm breeding is molecular marker assisted selection. The general scheme of marker-assisted selection is illustrated in Fig. 5. Step 4 (create genetic maps) and 5 (identify trait) could be eliminated if the approach uses no genetic maps e.g. Genomewide Selection or Genomic Selection. In short, marker assisted selection is a form of indirect selection using molecular markers. Integrating marker assisted selection into classical breeding program (Fig. 6) shall enhance its efficiency because selection can be carried out prior flowering and with no long duration phenotypic recording is required [Wong and Bernardo, (2008)]
O il Palm Pop.
DN A
+
Math
G enetic maps tQ T L link ag e map tH D Q T L link ag e map tA ssociation map tetc.
model
A dv . Stats C om. Prog .
T y pes of Molecular Mark er tRFL P tA FL P tRA PD tSSR tDA rT tDA rT - N G S tSN P
+ Ph enoty pic Records (traits of interest)
Iden. mol. mark .
Mol. A ss. Sel.
N o G enetic maps tG enomew ide selection tG enomic selection
Figure 5. General scheme of marker-assisted selection
Y ear
The three planting materials, i.e. Deli dura, DxP tenera, and tenera clones shall be put in perspective. Using the minimum oil yield standards of DxP tenera (42.5 kg/p/year) and tenera clones (55 kg/p/year) defined by SIRIM, compared against the early planting materials Deli dura (18 kg/p/year), the difference was 24.5 kg/p/ year and 37 kg/p/year. The difference between the clones (year 2009) and the Deli dura (year 1930) is two folds. If 60% of the difference was due to genetics, then the yearly genetic improvement is averaging about 1.8% per year. Indonesia oil palm estate yield records (DxP Unggul Socfindo Brochure) also demonstrated that the genetic improvement in oil palm oil-yield by classical breeding is 1 – 2 % per year.
Cycle 0 (N ) 0
Step 1: M ark er- trait associations (Genotyping) Cycle 1
19
Ph enoty pic selection
G enomew ide selection
(N o mark ers)
(All mark ers)
25
Cycle 2
31
Cycle 3
Step 2: mark er- based selection (1st cycle)
Step 2: mark er- based selection (2nd cycle) Step 2: mark er- based selection (3rd cycle) 37
38
Cycle 2 (N )
Cycle 4
Source: W
ong &
Bernardo, 2 0 0 8
Figure 6. Integrating marker-assisted selection into classical breeding program
Integration of biotechnology tools for higher genetic improvement
More Traits Needed
Year 2050 is 37 years ahead; oil palm genetic improvement needs to exceed 2.5% per year in order to meet the expected world population then. Therefore, integration of biotechnology tools is necessary to meet
A Mohd Din et al. (2011) reported that Malaysia Palm Oil Board breeding program has identified oil palms with following traits: high oleic, high Iodine Value, low lipase, high carotene, high vitamin E, high linoleic,
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GENETIC IMPROVEMENT AND CHOICE OF OIL PALM PLANTING MATERIALS thin-shell tenera, high bunch index, large kernel, large fruit, long stalk and low height (Fig. 7). These traits could be grouped into three general groups; high oleic, high iodine value, low lipase, high carotene, high vitamin E and high linoleic could be grouped as traits for oil quality; thin-shell tenera, high bunch index, large kernel and large fruit could be grouped as traits for oil yield, long stalk and low height could be grouped as traits for management efficiency. However, these traits were insufficient, as discussed early in this manuscript, that there are needs for traits including high efficiency in nutrient used, abiotic stress tolerance and disease tolerance. Some diseases that are major threats to oil palm include Ganoderma basal stem rot in South East Asia, Bud rot in South America and Fusarium wilt in Africa. H igh H igh L ow H igh H igh H igh
oleic I odine V alue lipase carotene vitamin E linoleic
oil q uality
oil yield
Th in- sh ell t e n e r a H igh bunch index L arge k ernel L arge fruit L ong stalk L ow h eigh t Manag ement E fficiency
Awareness and Discernment of Various Planting Materials Commercial oil palm planting materials currently available in the market could be characterized by the method they are produced, hence, do not indicate performance. They are mix DxP seeds, near-singlecross DxP seeds, semi- and bi-clonal DxP seeds, and tenera clones. The degree of uniformity increases according to the listed sequence. Detail discussions on each type were presented by Wong et al (2011). Current oil palm planting materials show potential FFB greater than 30 t/ha/year and oil yield greater than 7 t/ha/year (commercial oil palm seed brochures from various reputable producers in Malaysia, Indonesia & Thailand). Some of the key questions shall be useful for buyers to determine their choice could be as follows: 1.
Do you have an active breeding program?
2.
Who are the people that conduct the breeding research?
3.
What are your breeding approaches?
4.
Where is your breeding program conducted? Any multi-locational trials?
5.
What are your progenitors / parents / ortets? Are all the parents (e.g. dura & pisifera) progeny tested?
6.
How are the progeny test results? And their characteristics?
7.
What oil palm planting materials are you producing? Mix DxP seeds, near-single cross DxP seeds, clonal DxP seeds, semi - / bi -, or clones?
Source: A Mohd Din et. al., 2011
Figure 7. Other traits of interest in OP breeding The general approach in breeding for Basal Stem Rot (Ganoderma boninense) disease tolerance oil palm reported could be summarized in Fig. 8 [PIPOC 2009 & 2011, IOPC 2010] General approach in breeding for Basal Stem Rot (Ganoderma boninense) disease tolerance oil palm O rganiz ations e.g. F elda, M PO B , CI R AD, Socfindo, SumB io
E arly screening (e.g. nursery screening) for G a n o d e r m a b o n i n e n s e tolerance O P
O rganiz ations e.g. F elda, M PO B
Deploy molecular tools to develop biomark ers
8.
Who are the people that produce the planting materials?
F ield screening (h ot spot / endemic area) results to identify G . b o n i n e n s e tolerance O P
9.
What quality control measures are in place to produce the legitimate oil palm planting materials?
O rganiz ations e.g. M PO B , CI R AD, Socfindo, SumB io O rganiz ations e.g. F elda, M PO B , SumB io O rganiz ations e.g. CI R AD, Socfindo
F urth er breeding for disease resistance or R elease of commercial G . b o n i n e n s e tolerance DxP
10. What after sales service will you provide?
Source: PIPO C , 2 0 0 9 & 2 0 1 1 ; IO PC , 2 0 1 0
Figure 8. General approach in breeding for Ganoderma disease tolerance
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GENETIC IMPROVEMENT AND CHOICE OF OIL PALM PLANTING MATERIALS
Conclusion
References
In conclusion, in order to meet the challenge of the increase of world population and remain competitive among other crops, oil palm breeders need to aim for higher genetic improvement. Role of molecular biotechnology is important to be integrated in oil palm breeding program, increasing oil palm breeding efficiency, e.g. selection prior flowering, hence allowing quick turnover of breeding generation. Tissue culture continues to be an important tool to accelerate the exploitation of new and improved planting materials. Strong awareness among the planters about oil palm planting materials is essential in making the right choice meeting their needs.
IFAD (2013), The future of world food and nutrition security. http://www.ifad.org/hfs/index.htm accessed July, 2013
Abbreviations. AAR = Applied Agricultural Resources Sdn Bhd; AFLP = Amplified Fragment Length Polymorphism; D = dura; DArT = Diversity Arrays Technology; DArT-NGS = DArT-Next generation sequencing; F1 = Filial 1; FFB = fresh fruit bunches; ha = hectare; HD QTL = Heading Date Quantitative Trait Locus; P = pisifera; QTL = Quantitative Trait Locus; RAPD = Random Amplified Polymorphic DNA; RFLP = Restriction Fragment Length Polymorphism; SIRIM = Standards and Industrial Research Institute of Malaysia; SNP = single-nucleotide polymorphism; SSR = simple sequence repeat; t = tonne; T = tenera
Beirnaert A and Vanderweyen T (1941); Contribution a l’etude genetique et biometrique des varieties d’Elaeis guineensis Jacq.; Publ. INEAC; Serie Scientifique 27 Corley RHV and Tinker PB (2003); The Oil Palm (4th Edition); Blackwell Publishing Duvick DN (2005); The contribution of breeding to yield advances in maize (Zea mays L.); Adv Agron 86:83-145 Lee EA and Tollenaar M (2007); Physiological Basis of Successful Breeding Strategies for Maize Grain Yield; Crop Sci 47:S-202-2-215 Malaysian Standard MS 175: 2005 Malaysian Standard MS 2099:2008 Meunier J and Gascon JP (1972); General scheme for oil palm improvement at IRHO; Oleagineux 27:1 – 12 Mohd Din A, Rajinder S, Meilina OA, Ravigadevi S and Rajanaidu N (2011); Oil palm breeding: The anchor for genome-based technology; Proceedings Internat Palm Oil Congress (PIPOC) Soh AC, Wong G, Tan CC, Chew PS (2003) Oil Palm Genetic Improvement. Plant Breeding Rev. 22:165 – 220 Soh AC, Wong G, Tan CC, Chew PS, Chong SP, Ho YW, Wong CK, Choo CN, Nor Azura H and Kumar K (2011); Commercial-scale Propagation and Planting of Elite Oil Palm Clones: Research and Development towards Realization; Journal of Oil Palm Research; 23:935-952 Wong CK and Bernardo R (2008); Genomewide Selection in oil palm: Increasing selection gain per unit time and cost with small populations; Theor. Appl. Genet. 116:815-824 Wong CK, Choo CN, Ng WJ, Kumar K, Aida N, Chin S and Tan CC (2011); Semi-clonal seeds: Development and performance, Applied Agricultural Resources Sdn Bhd perspective; Proceedings Internat Palm Oil Congress (PIPOC)
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TA L K I N G P O I N T S Recession is still around in the short and middle terms and the Fed, despite hints of tapering of QE, would still do “whatever it takes” to prop up the economy and keep interest rates low. The EU will do likewise to support the Club-Med-problem countries while Japan’s similar enhanced QE stimulation has showed signs of sputtering. China is struggling to get real growth while India and Indonesia may drag the rest of Asia to go the recession path. We can’t solve problems by using the same type of thinking we used when we created them. -- Albert Einstein Obfuscating Creative Fed-Talks Continue – Quantitative easing (QE) is supposed to solve problems of the economy, unemployment and deflation arising from sub-primes and derivatives. But the problems still remain after three QEs although these provided for rising stock markets, mild inflation and falling bond yields although in the horizon mortgage insurers can face loan defaults. The Fed-talk solution to this conundrum is unclear. Operation Twist, ZIRP (zero interest rate) or maybe “dove-nado” will continue until a QE tapering tantrum (“Septapering”?) may shock markets while by the end of the year the US will be faced with another fiscal cliff and will need more sequestrations. Give me control of a nation’s money and I care not who makes its laws.– Mayer Amschel Rothschilda The only financial innovation useful to the country in the last 20 years is the ATM. – Paul Volcker Next Financial Crisis. In the world of stock market trading there is High Frequency Trading (HFT) and Dark Pools. Run by mega computers, these programs are buying and selling stocks, commodities and currencies by the microsecond. It’s a mysterious and shady world of programmers mixed together with traders and brokers. Any error or rogue-trader could unleash a tsunami of disaster among connected banks. Or it could be the opportunistic currency speculators involving banks where there is pressure for profits and growth, putting short positions to damage small and vulnerable nations. Speculative money in derivatives massively dwarfs that of the real economy and where risks can arise as potential rogue-traders hazard speculative gambles to cover simple errors. Or a contagion can spread from bank-runs starting inconspicuously from small countries. Or a sovereign debt default will cause chain reaction panics on banks
vi
around the world as even now mortgage insurers are feeling the impact of defaulting loans. US Economic Turn-around? US have cheap energy to attract investments to kick-off a revival of manufacturing. There is the hype that 3D printing can almost manufacture anything – first results are seen in producing human tissues and some industrial products. US will return to sustainable growth as a competitor, not a consumer as there will be cheap energy, competitive exchange rates and the country’s dominance in technology. In US and UK all major indicators point to slow but firming economics. Germany shows stabilization of growth while in France is negative until recently. In earnest, Japan and Brazil show potential emerging growth. But China, India, Canada and Russia show growth below trend. The puzzling trend of why emerging markets (the worst being the Shanghai market which even lags behind Greece) have not emulated the records of the Dow, may be pointing to the reindustrialization of the world’s biggest economy. Forest Fires Whether in Australia or in America forest fires constitute one of the largest single source of CO2 emissions. In SE Asia tropical forest fires spreading to peat become insidious because of polluting haze. The development of Asia’s tropical regions has resulted in almost yearly problems of haze during the hot dry seasons. As this can cause serious health and economic problems SE Asian countries have finally agreed to address the problem. While it is easy to locate the areas using satellite technology, the mitigating measures must be in place to rapidly control and stop illegal slash & burn for land clearing. The recent fires were outside forest areas; with as much as 27% from timber plantations, 20% from palm oil concession areas, 4% from protected areas and 1% from logging areas. As plantations have the zero-burn policy, it is likely that there has been arson and that land clearing contractors or small holders have taken the easy option of burning. It is clear that emergency fire fighting measures across national boundaries have to be employed and fire bans enforced during hot seasons for countries on the way to developed status. The Future May Not Be So Green – Economic pressures from the on-going Global Financial Crisis are providing for second thoughts about the renewable energy revolution and CO2 as the cause of climate change. Hard economic realities from US and MedClub nations as well as the austerity fatigue spreading
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TALKING POINTS
into core EU nations, which are bearing the financial cost burden, have now reached the point that each country reluctantly abandons or postpones the oncezealous commitment to renewable energy, carbon credits and bio-fuels. The EU’s great leap into renewable energy now seems like an economic and green political debacle causing an increasing drag on nations in recession. Green energy subsidies and bio-fuel mandates have distorted markets besides causing unnecessary economic pain. There has been a substantial transfer of wealth from poor to rich as the rich can benefit from subsidies while the average has to cope with increasing electricity bills. More seriously the rapid expansion of green energy has eroded Germany’s competitiveness in the global economy. Governments should be concerned with consumers’ grievances of rising energy costs and the threat to Europe’s industrial base at a time when the cost of energy is only one third of Germany’s. In the US, subsidizing food for fuel prematurely before support of practical science and technology has become an inconvenient financial drain. While bio-fuels may be useful for energy security to decrease dependence on Middle East fossil petroleum, the unexpected bonanza from fracking gas and oil has slowly changed from mitigating CO2 emissions to one of adaptation to climate change. In Australia, costs and climate change are still topics of simmering debate, the financial burden of the carbon tax may well decide on the outcome of the coming elections. Food and oil-crop producing nations will also have to face coming political and climate-change realities. Palm oil, which could be the most sustainable of crop bio-diesels from cost and LCA considerations, is now in surplus due to protectionist import restrictions. Being temporally below the price of petroleum crude, it is up to the producing countries to substitute it for diesel consumption. Heavy rains and floods (Aug 2013) may wipe out >30% agricultural crops in South Carolina. Drought in February of 2013 was considered the worst in 50 years but this had been followed by many months of good weather allowing for good harvests. Vegetable oil prices have been generally weak from liquidation and better harvests in N. America and Asia. August dryseason stress on other US soybean crops is providing a relief to falling palm oil prices.
High Fat Mediterranean Diet Plus Nuts (A-diet) beats High Oive Oil Mediterranean Diet (B-diet) but both high-fat diets demolish Low Fat High Carbo Diet (C-diet). The clinical study (on a group with cardiovascular risk) was stopped prematurely due to obvious experimental facts: 3.8% (96 events) of those on B-diet and 3.4% (83 events) of those on A-diet suffered a heart attack, stroke or death from cardiovascular disease. By comparison, 4.4% (109 events) of members in the control group (C-diet) suffered the worst outcome. The differences in the risk of stroke were statistically significant. The differences in the risk of heart attack weren’t, possibly because of the low incidence of heart attacks among people in the study. The results indicate the merits of a Mediterranean diet high in sea-food, fruits and vegetables improved with nuts (possibly those with more ω3 fatty acids and micronutrients).[R Estruch et al (2013) N Engl J Med 368:1279-1290]. A previous study has shown that it is additional nuts that are best against metabolic syndrome. [Salas-Salvadó J, et al (2008). Arch Intern Med 2008; 168: 2449-2458]. Obesity and Diabetes have been found linked to environmental plastic chemicals. The common Di2-ethylhexylphthalate (DEHP) and Bis-phenol A (BPA) found in urine closely tied to teenagers’ chance of developing insulin resistance. Obesity-heart disease paradox: overweight and obese patients have a better prognosis, an observation that is not understood. It may be that these obese patients exercise more or constantly seek medical help although they do not lose weight. BMI may not be a good health marker. A Free Market without Farm Subsidies has been advocated by Jeff Siegel [DR (2013)] to fight Obesity. The current obesity epidemic among the younger set has been the long term effect of cheap calories (600 more calories per person) produced from highly subsidised farming since 1980. Sugary beverages are commonplace and unknowingly subsidised indirectly and it will be of little consequence in trying to ban the sale of large cups or containers of sweetened drinks. Labelling – Europe now questions the accuracy of labelling because of the complex way food travels on the way to consumers. Horse meat in beef investigation show the complex network of slaughter houses, suppliers and processors and handlers to the dinner table and the controls governing food transported across borders. Can consumers rely on food labels on what they are eating?
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TALKING POINTS
New Australian Dietary Guidelines 2013 – Drink a lot of water and 5 major nutritious foods (vegetables, beans and legumes; fruits; reduced amounts of dairy products or their alternatives; grain food or mostly whole-meal; lean meats, fish, eggs, tofu, nuts, seeds and beans). Recommendations are targeted at promoting health, reducing obesity and protecting against major chronic diseases (cardiovascular, type-2 diabetes and cancer). There are hardly any controversial materials: eat plenty of vegetables and fruit, choose mostly unprocessed grains and cereals, cut back on salt, fat and sugars and get more active. Will these be just aspirational or reflect reality in available food choices? Ideology and business interests are put ahead of the science that could meet individuals. Impacts will have to come to and from industry food manufacturers, production of cloven-hoof animals, agriculture and sustainable environment. With two-thirds of the population overweight or obese, guidelines seem to be viewed through political prisms in relation to consumer tastes for sugars, salt, fats and oils (and their types), kinds of protein and dairy foods. Drug Discovery: Polyunsaturated fatty-acid derivative helps zap killer flu in mice Now, biological informatics and experimental therapeutics professor Yumiko Imai of Akita University, in Japan, and coworkers report that that the protectin D1 isomer 10S,17Sdihydroxydocosahexaenoic acid blocks replication of the flu virus by inhibiting export of viral genomic material from host-cell nuclei [Cell, DOI: 10.1016/j. cell.2013.02.027]. They found the compound by screening a lipid library
Microbatteries owe their high performance to their internal 3-D microstructure. Design has been possible to increase capacity (30 times) and faster (1,000 times) charging required by modern applications. This makes it potentially possible to reduce (30 times) progressively all consumer electronics, medical devices, sensors, etc. The Deaf Can Hear. Medical technology has advanced sufficiently to provide implants to children born deaf. It is not just the elderly that benefits from hearing aids, infants once diagnosed with total hearing disability can be provided with implants since 2000. RSPO Alert. Khor Yu Ling reported on the risks to PO growers on the “carbon tax” from the RSPO HCV compensation scheme. The vague rules have financial implications with cost indications of about US$3,000 – 13,000/ha of new plantings. There are many legalistic details for policy makers to address so as to ensure that Malaysia (a globally miniscule GHG emitter and a major stakeholder) does not get the wrong end of the stick. Palm Oil as Currency. Non-traditional Chinese traders have been innovatively importing CPO (and then selling it with a discount to market price for instant cash) in order to obtain bank credit for loan to SMEs who are unable to get funding due to a period of time when government policies are for slowing any “credit bubble” formation. Saturated Fat. British cardiologist Dr Aseem Malhotra has commented in the recent issue of British Medical Journal that "It is time to bust the myth of the role of saturated fat in heart disease and wind back the harms of dietary advice that has contributed to obesity"
Flammable Ice is Methane Hydrate, and the energy stored is bigger than that from fracking. Frozen away in the depths of the Artic, according to a 2010 International Energy Agency report, there is almost twice as much energy as all the world’s resources of gas, oil, and coal combined, and claims it can have commercial operations up and running by 2019.
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O N A L I G H T E R N OT E Someone commented that the FED had creatively added so much to the vocabulary: quantitative easing (QE), austerity measures, debt ceilings, Fiscal cliffs, sovereign debt defaults, green shoots, dark pools and black swans, tapering, etc – these were not part of our vocabulary five years ago. In the enthusiasm for QE, Operation Twist, ZIRP, and other monetary innovations to stimulate the economy, the FED forgot the basics. Maybe if the FED stuck to the essentials, the strong banks and corporations would survive and the weak ones should be allowed to disappear, by now the world economy would be recovering well and more people would have jobs.
The Germans are no doubt rather annoyed about a new study showing they’re amongst the poorer nations of Europe. Spain, Italy and Cyprus topped the wealthy end of the list. The reason for the surprising numbers lies in house prices.
We, as individuals, can live beyond our means by borrowing, but only for a limited period of time. Why then should we think that collectively, as a nation, we are not bound by that same limitation? – Ronald Reagan
G20 Summit, Regional Economic Cooperation, Free Trade Agreements, Etc Gabfests – provide the usual double speak, buzzwords, fostering cooperation, free trade, open economies, etc. But then competition, protectionisms, non-tariff barriers, anti-dumping regulations, currency manipulation, QE (stimulus, money-printing, etc), etc seem more and more apparent.
‘No very deep knowledge of economics is usually needed for grasping the immediate effects of a measure; but the task of economics is to foretell the remoter effects, and so to allow us to avoid such acts as attempt to remedy a present ill by sowing the seeds of a much greater ill for the future. – Ludwig von Mises Confucius wisely said, ‘Study the past if you would divine the future’ Men and nations behave wisely once they have exhausted all other resources – Abba Dban Give me control of a nation’s money and I care not who makes its laws.– Mayer Amschel Rothschilda Australia is the happiest country on earth, according to an OECD index. Only there’s a small kink in that claim. You need money to buy that happiness. A lot of money – Nick Hubble of DR People have the wrong idea of socialism. It is not a wellfunctioning welfare state. Any system based on giving people something for nothing, and sticking hardworking, productive citizens with the bill, is doomed to fail. Sweden is no exception – Nick Hubble of DR Nothing sedates rationality like large doses of effortless money – Warren Buffett How beautiful it is to do nothing and the to rest afterward – Spanish proverb The bitterness of poor quality remains long after the sweetness of low price is forgotten – Benjamin Franklin
There are four types of countries in this world, according to the old Argentine lament. There are first world and third world countries, rich and poor. Then there’s Japan, where nobody can work out how they did so very much with so very little. And lastly, there’s Argentina, where nobody can figure out how so little was done with so very much. – Joel Bowman
One must change one’s tactics every ten years if one wishes to maintain one’s superiority. – Napoleon Bonaparte The Universe only rewards action. -- Robert Redfern. Like Socrates, smart investors’ only advantage is knowing they don’t know anything. Nothing in this world is more dangerous than sincere ignorance and conscientious stupidity – Martin Luther King In the end we will remember not the words of our enemies but the silence of our friends – Martin Luther King Advice of a CEO to a Pretty Girl looking for a Mate earning $500k per year: A guy earning $500k and above will assess the investment value of the Pretty Girl as a depreciating investment unlike good wine. So he is unlikely to take up the offer as such investment will depreciate exponentially with age. It is probably best to learn with a little luck to be the $500k+ per annum person yourself instead of the futile pursuit to find one. I once had a rose named after me and I was very flattered. But I was not pleased to read the description in the catalogue: no good in a bed, but fine up against a wall. – Eleanor Roosevelt Be nice to people on your way up because you meet them on your way down – Jimmy Durante
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ix
INDEX Africa
6,28,40
diabetes
vii
aged palms
41
diesel
i,3
agriculture
i,29,40
dieting
vii
agronomic
41
economics
vi,viii
Aida N
43
economy
vi
Argentina
viii,8,13,15,18,26
energy
vi,16,25,31,38
aviation
30
ENGO
34
batteries
vii
EU-RED
36
bio-diesel
i,2,5,7,8,9,13,14-16,20,35,38,39
exoskeleton
41
bio-ethanol
iv
fatty acids
20
bio-fuels
i,iv,1,30,40
fatty alcohols
20
biomass
30,31
Fauconnier H
40
biorefinery
31
Fed
vi,viii
biotechnology
45
FGV
40
blends
32
food
vii,12,22-24,32,34,35
branding
34
forecast
4,8,12,18,35,37,39
Brazil
13,19,26
forest
vi,25,27
breeding
43
freight
2
Brent
1,8,13,17,36
Fry, J
1
buffalo
41
fuel
2,13
BTL
31
fundamentals
38
Bursa
5
Ganoderma
14,46
business
42
genetics
43,45
carbon dioxide
iv
GHG
i,iv,18,26
challenges
9,14,22,23,36
Goh SH
iv
Chin SY
43
green
vi
China
7,10,26,29,32,33,35,36
groundnut
5
climate
i,iv,vii,23
Guthrie A
40
coconut
39
harvesting
14,41
commodities
39
hybrid
43
contents
iii
IJM
40-42
corn
29,38,43
imbalance
14
cost
2,41
India
5-8,10,35
cover story
i
Indonesia
2,9-12,15,18,35-37
CPO
1-8,9-14,35-37
innovation
41
crops
41
ISPO
36
CSR
42
Ivory Coast
36
CSV
42
Kumar K
43
cultivars
43
Kuok Robert
40
Davidson L
41
labelling
vii,26
deaf
vii
labour
18
deforestation
i,26,34
land
10,24,29,30,40
De Lavigne C
15
laurics
8,38,39
Derom Bangun
35
LCA
iv,vii
x
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1
INDEX
Lee Loy Seng
40
QE
i,viii
Lee Shin Cheng
40
Rahman AS
41
Ling AH
9
rainfall
40
Malaysia
i,v,10,40
rapeseed
1,5,6,15,22,24,29,35
mandates
iv,3,7,13
reciprocal
44
mechanisation
14,41
RED
18
Mediterranean
vii
RSO
1,5
Melody M
23,43
RSPO
18
Mistry D
5
S&D
i,v,6,7,9,10,12,13,16,38,39
money
vi
Sauthoff H
38
moratorium
11
SBO
1,5,7,13
MPOB
2,5
Sime Darby
40
NGO
27,34
soybean
vii,7,15,19,22-24,29,35,39
NODA
36
standards
15
nut oils
viii
stocks
i,2,5,8,14,33,36
nutraceuticals
32,42
strategies
36
obesity
vii
subsidies
iv,vii
oil palm
11,40-42
substitutable
6
oilseeds
36,38,41
sunflower
7,22,24,29,35
oleochemicals
12,21
sustainable
36
palm oil
iv,9-14,15,19,22-34,35-37,39
Tan CC
43
petroleum
i,20,33
taxes
2-4,6,36
PKO
1,4
Tek J
40
plantation
41
trade barrier
36
plantings
7,9,41,43,46
traits
46
PME
2-4
tropical
40
population
iv,12,40
tycoons
40
premium
1,6,13,14
USDA
5,8
price band
1,13
vitamin E
42
prices
i,iv,1,4,8,9,13-19,21,33,36,3739,41
Wong CK
43
worker
40
productivity
14,41
WTI
36
pyrolysis
31,42
yield
11,14,22,23,41,43,45
protectin
vii
Yusof Basiron
23
protectionism
viii,26
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