Million MT - Malaysian Palm Oil Council

MPOC FACILITATED EMERGING MARKET OPPORTUNITIES : INNOVATIVE TOOLS TO MEET CHALLENGES IN 2014 Tan Sri Datuk Dr. Yusof Basiron MALAYSIAN PALM OIL COUNCIL OUTLINE OF PRESENTATION 1.  Malaysian palm oil trade has performed well 2.  Capitalizing on opportuniFes to strengthen or create more market demand 3.  Malaysia s own sustainability system (MSPO) 4.  MSPO++ 5.  Branding Malaysian palm oil to enhance trade 6.  Conclusions 1. Malaysia s Experiences in Global MarkeFng -‐ Scope and Products Upstream ACTIVITIES •  Seed producFon •  Nursery •  CulFvaFon •  HarvesFng •  Milling PRODUCTS •  DxP seeds •  Fresh fruit bunches •  Crude palm oil •  Palm kernel •  Biomass (Empty Fruit Bunches, kernel shell, fronds) •  Palm oil mill eﬄuent 1. 
Downstream Processing Midstream •  •  Trading •  Crude palm oil bulking •  DxP seeds •  Fresh fruit bunches •  Crude palm oil •  Palm kernel •  Biomass (Empty Fruit Bunches, kernel shell, fronds) •  Palm oil mill eﬄuent Source of food (global food security): 80% 2. Oleochemicals: 15% 3. Biofuel : 2% 4. Renewable energy source: Poten1al Remains Largely Untapped through Palm Biomass Consumer Products •  Reﬁning •  FracFonaFon •  Oleochemical •  EsteriﬁcaFon •  Reﬁned product storage •  Packaging and branding •  Food products •  Non – food products •  RBD Palm Oil •  Palm Fa]y Acid DisFllate •  RBD Palm Olein •  RBD Palm Stearin •  RBD PK Olein •  RBD PK Stearin •  Cocoa Bu]er Equivalent •  Cocoa Bu]er SubsFtute •  Cocoa Bu]er Replacers •  Fa]y acid, alcohols, amines, amides •  Glycerines •  Palm methyl esters •  Cooking oil, frying fats •  Margarine •  Shortening •  VanaspaF •  Ice cream, non-‐dairy creamers •  Candles, soap •  Emulsiﬁers •  Vitamin E supplements •  ConfecFonery •  Bakery fats •  Biodiesel •  Energy generaFon •  Animal feed These days, palm oil and derived products are channeled into worldwide industrial and commercial acFviFes to churn out food products as well as non-‐
food applicaFons Source: MPOC Publica1ons & USDA Database (Million MT) 1. Malaysian Palm Oil – Export By Region 2001 -‐ 2013 19
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Africa Americas Asia Paciﬁc Europe Middle East Sub-‐ConFnent Export increased by almost 70% since 2001. Palm olein comprises almost 50%, the rest :palm stearin and palm oil 1. Malaysian Palm Oil – Main Markets Ø  The biggest markets for Malaysian palm oil are Asia Paciﬁc, Sub ConFnent and Europe Ø  However, in terms of market growth, the two biggest growth regions are the African region and American region Ø  Export to Africa increased from 382,186 MT in 2001 to 1.72 million MT in 2013 (+ 351%) Ø  Export to America increased from 288,000 MT in 2001 to 1.15 million MT in 2013 (+ 299%) Ø  Increase due to eﬀorts of industry and agencies to overcome obstacles eg transfats issue, awareness issue 3500 1,400 3000 1,200 2500 1,000 2000 800 1500 600 1000 400 500 200 0 -‐ 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 CPO Price (RM/MT) Source : CPO Price – MPOB SBO Price -‐ Indexmundi SBO Price (US$/MT)) SBO (US$/MT) CPO (RM/MT) CPO PRICE VS SBO PRICE PRICE GAP BETWEEN CPO VS SBO AND EXPORTS 2001 -‐ 2013 50,000 300 45,000 250 40,000 200 30,000 25,000 150 20,000 100 15,000 10,000 50 5,000 -‐ 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 CPO Export (Million MT) Source : Indexmundi SBO Export (Million MT) CPOvs SBO Price Spread (US$/MT) (US$/MT) (Million MT) 35,000 60,000 300 50,000 250 40,000 200 30,000 150 20,000 100 10,000 50 -‐ 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Palm Oil ConsumpFon (Million MT) CPOvs SBO Price Spread (US$/MT) Source : Indexmundi Soyoil ConsumpFon (Million MT) (US$/MT) (Million MT) PRICE GAP BETWEEN CPO VS SBO AND CONSUMPTION 2001 -‐ 2013 MALAYSIAN PALM OIL EXPORT VS CPO PRICE (RM/MT) 2001-‐2013 20.00 3500 18.00 3000 16.00 (Million MT) 12.00 2000 10.00 1500 8.00 6.00 1000 4.00 500 2.00 -‐ 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Export ('000 MT) Source : MPOB CPO Price (RM/MT) (RM/MT) 2500 14.00 2. New Market OpportuniFes 1. Expanding markets Ø  Eastern Europe, Iran Ø  Russia s admission into WTO provides an excellent opportunity Ø  Philippines 2. Trans fats issue, India, Pakistan Middle East, EU and USA 3. Palm kernel cake 4. Palm biodiesel 5. Palm furniture MarkeFng palm olein in opaque bo]les Ø  MPOC iniFated idea of markeFng of cooking oil in opaque bo]les or packaging Ø  Highly suitable in regions with temperate climate Ø  Successfully done in Eastern European countries, Iran, Dubai, etc Half the price cf other oils Philippines Market Ø New market not well tapped previously Ø Palm oil to subsFtute coconut oil Ø MarkeFng of cooking oil in opaque containers Ø Locals used to buy light colored corn oil Ø Packing in smaller volumes e.g. 400 or 800ml (usual is 500-‐1,000ml) to meet price aﬀordability OpportuniFes: Trans Fats in Food Ø  Many countries around the world have banned the use of trans fats in food Ø  The government of India has made it compulsory for food manufacturers to menFon trans fats content on labels Ø  The U.S. Food and Drug AdministraFon is looking to ban trans fats included in food Ø  Harvard scienFsts esFmate that trans fats may contribute to more than 30,000 premature deaths each year Ø  FDA oﬃcials esFmate as many as 7,000 deaths and 20,000 heart a]acks would be prevented by eliminaFng trans fats from processed foods Ø  Palm oil is proven to be healthy and trans fats free Ø  Opportunity to expand market using this theme Capitalizing on Trans Fats Issue Big market potenFal that is just emerging •  Solid food formulaFon-‐ trans free Promote sales of palm stearin to make margarines, vasnapa3 and shortenings, using interesteriﬁca3on •  Direct use of RBD palm oil for vanaspa3.. E.g. Pakistan •  Blending soo oils with palm oil, palm olein Blending so> oils with palm oil E.g. Smart balance to help improve cholesterol ra3o eg in USA Credit goes to MPOB OpportuniFes: PKC potenFal yet to be tapped fully exploited 2013 2010 2005 (706,841) (%) 2001-‐2013 (-‐46.06) 21,018 774,624 3,685.47 165,578 201,221 268,935 133.65 227,008 -‐ 28,856 173,724 602.03 123,949 -‐ -‐ -‐ 123,949 -‐ SAUDI ARABIA 111,546 47,000 -‐ -‐ 111,546 -‐ PAKISTAN 57,062 19,871 -‐ -‐ 57,062 -‐ AUSTRALIA 22,455 4,759 -‐ -‐ 22,455 -‐ 32,212 135.11 857,666 47.40 EU 827,651 NEW ZEALAND 795,642 640,296 225,543 SOUTH KOREA 470,156 462,169 CHINA P.R 202,580 TURKEY 2001 1,000,766 1,559,852 1,534,492 O T H E R S 56,054 43,524 83,027 23,842 COUNTRIES TOTAL 2,667,096 2,445,393 2,034,000 1,809,430 Diﬀerence 2013 -‐ 2001 MPOC s eﬀorts to inform end users of PKC s use for animal feed which is economically feasible PKC Advantages Ø  PKC total metabolizable energy per USD is higher than soymeal, rapeseed and sunﬂower meal. Ø  For every USD spend on PKC, the energy value is 52.7 MJ which is 29.5%-‐108% higher than that of soya, rapeseed and sunﬂower meal. Ø  For crude protein, PKC has 22.1%-‐33% lower protein content compared to rapeseed and sunﬂower meal Ø  However, the crude protein content that can be obtained per USD is the same for soyameal and PKC. Ø  PKC crude ﬁbre content is high at 17%. Ø  The high crude ﬁbre content is said to be more suitable for ruminants than non-‐ruminants. NutriFve and cost advantage of PKC CP ME TDN Kg/USD (MJ/USD) (Kg/USD) PKC 0.81 52.7 3.57 Soymeal 0.81 25.3 1.42 Rapeseed meal 1.21-‐1.27 33.6-‐40.7 2.42 Sunflower meal 1.04 29.0 2.27 Based on cif Ro]erdam price 2013 Price : PKC –USD199/MT, Soymeal – USD590/MT Rapeseed meal – USD297/MT, Sunﬂower meal – USD286/MT CP : Crude protein, ME : Metabolizable energy, CF – Crude Protein TDN : Total Digestable Nutrients PALM BIODIESEL •  At low CPO rela3ve prices, biodiesel is viable, small subsidy by government, helps increase demand and prices of CPO-‐ beneﬁcial to government /country revenue •  High prices, biodiesel is less viable, subsidy is higher but government can reduce blending ra3o, but s3ll beneﬁt from high palm oil prices to aﬀord the subsidy/ good for country revenue •  Thus B5, B7 or B10 or B3 are possible op3ons, and na3on wide applica3on is possible by July 2014. ApplicaFons of Oil Palm Biomass • 
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PROPERTIES OF OPT, OPF & EFB FIBRE BUNDLES Fibre quality Fibre morphology Fibre proper3es Usable fibre fractions
PAPER PULP & PAPER PRODUCTS Chemical pulp Semi-‐mechanical pulp Mechanical pulp Moulded paper products Soilless plan3ng medium OIL PALM BIOMASS FIBRE REINFORCING COMPOSITES •  Agrolumber •  Plas3c composite • 
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BOARD OF VARIOUS KINDS MDF Plywood Moulded par3cleboard Sawn lumber
OTHER PRODUCT TYPES Oil palm heart Carbon products Carboxymethyl cellulose Fine chemicals 19
Palm Wood Furniture MPOC started Palm Wood Promo3on Scheme in 2012. For Furniture China 2012 exhibi3on, conﬁrmed sales were at RM1,500,000 while Furniture China 2013 had RM1,000,000 conﬁrmed sales.
3. Malaysia s own sustainability system (MSPO) •  Standards for MSPO by SIRIM/ MPOB are ready and RSPO can be launched soon •  May be useful to establish MPOCC (CerFﬁcaFon Council) to implement the MSPO cerFﬁcaFon process •  What are the opportuniFes? WORLD LAND AREA & DRIVER OF DEFORESTATION 2012 Oil Palm (A Thin Line) 0.10% Balance 64.90% Grains & Oilseeds 10.00% Ca]le 25.00% WORLD LAND AREA & DRIVER OF DEFORESTATION 2050 Balance 34.80% Oil Palm (SFll A Thin Line) 0.20% Grains & Oilseeds 15.00% Ca]le 50.00% DistribuFon of Agricultural Area Livestock , 71.27%
Oil Palm, 0.31%
Oilseeds, 5.25%
Other Crops, 23.17%
Total Agricultural Area : 5 Billion Hectares EXISTING CERTIFICATION SYSTEMS FOR PALM OIL
SYSTEM Interna3onal FOOD BIOFUELS Roundtable on RSPO RED Sustainable Palm Oil (RSPO) ISCC PLUS PO Manifesto? Interna3onal Sustainability & Carbon Cer3ﬁca3on System (ISCC) Na3onal (Indonesia) Indonesian ISPO Sustainable Palm Oil (ISPO) WHICH CERTIFICATION SYSTEMS SHALL MALAYSIA FOLLOW? Type of system Systems used Comments Interna3onal 1) Use RSPO cer3ﬁca3on if sell for 1) Extra cost involved as pay food for 2 cer3ﬁca3on systems 2) Use ISCC cer3ﬁca3on if sell for 2) May need other biofuel cer3ﬁca3on schemes 3) Some companies cer3fy using both approved by EPA if wish systems if they sell both food and to enter US market biofuel Na3onal ISPO 1) Indonesia s na3onal system. 1.  Malaysia: continues to use international systems
2.  These systems do not cater for needs of Malaysian palm oil industry
3.  Come up with Malaysia s own system which must solve some of the
complexities of RSPO & ISCC especially to be inclusive of independent
smallholders, less laborious and cheaper
MALAYSIAN SUSTAINABLE PALM OIL (MSPO) •  Na3onal Standard or Malaysian Standard •  MS 2530-‐1Part 1: General principles for Malaysian sustainable palm oil •  Part 2: General principles for independent smallholders •  Part 3: General principles for oil palm planta3ons and organised smallholders •  Part 4: General principles for palm oil mills Will be voluntary scheme Cer3ﬁca3on needed MSPO++ as a Branding Plauorm Ø  Sustainability is no longer an op3on but a necessity for Malaysian palm oil. (based on Survey results) Ø  For MSPO to represent Malaysian Palm Oil, it must be applied to all Malaysian palm oil Ø  We propose sustainability is men3oned in terms and condi3ons of licenses of all license holders just like in the EU so that all operators are deemed to cross comply to operate responsibly and sustainably, indirectly making sustainability mandatory
CriFcal Issues Ø  MSPO as currently proposed may s3ll be burdensome for industry to implement; a simpler and cheaper way is needed for maximum par3cipa3on Ø  Cross compliance and aggregate compliance approaches (MSPO++), like they do in the EU, USA and Canada for their oilseed crops and oils may need to be used at a later stage a>er the launch of MSPO Ø  For other oilseed crops and cafle, they are far behind in sustainability capability, yet they design schemes to overcome their problems. Ø  For example, we can deﬁne sustainability at a na3onal level by having more than 35% forest and using less than 35% of land for agriculture. Ø  The 35:35 criterion for sustainability can be easily achieved by Malaysia, Indonesia and other tropical developing countries but not by most developed countries. Ø  In reality, sustainability is a macro measure and not a micro issue 4. MSPO++ system 1.  35:35 Principle: Oil palm is grown in a country that complies to this Principle. 35:35 principle states that a country is deemed sustainable if it maintains a minimum 35% land mass under forest and use of land for agriculture does not exceed 35% 2.  First plus: licensees must operate responsibly to ensure sustainability . Cross compliance to licensing terms for all. 5.  Second plus: Aggregate compliance for those no longer involved in deforestaFon while abiding to laws and good pracFces. MSPO++ system •  Company that is already cerFﬁed under other sustainability schemes •  Admifed into MSPO++ through cross compliance approach a)  Apply to Malaysian Palm Oil Cer3ﬁca3on Council (MPOCC). the new cer3ﬁca3on body/organiza3on that needs to be set up b)  Provide evidence that the company opera3ons is currently cer3ﬁed under one or more of MPOCC recognized sustainability schemes , namely MSPO, RSPO, ISCC and/or ISPO MSPO++ system •  Company that is not yet cerFﬁed under other sustainability schemes Category 1: company with land that is already planted with oil palm, no longer involved in deforesta3on (deﬁne cut-‐oﬀ year) Category 2: company with land that is being/will be planted for ﬁrst 3me with oil palm, including on peat. MPOCC will admit these Category 1 companies, into MSPO++ cer3ﬁca3on through Aggregate Compliance Approach as they are no longer involved in deforesta3on. They will be judged to see if they also comply to legal and good agricultural prac3ce elements. MSPO++ system 4.  Statutory compliance: Company must comply to all laws of country during conduct of business 5.  Good agricultural and management pracFces: Company uses good agricultural & management prac3ces during produc3on process MPOCC to issue cerFﬁcaFon and recognise cerFﬁcaFon schemes such as RSPO, ISCC, MSPO, ISPO etc Those operaFng using any of the recognised schemes , cross comply and those falling under the aggregate compliance can be issued cerFﬁcates of compliance (95 % of all players) Remaining (5%?) Category 2. involved in new planFng must comply to licensing condiFon (sustainable and responsible) and can choose to be cerFﬁed by any of the recognized cerFﬁcaFon schemes eg MSPO or RSPO UFlizaFon of World s Agricultural Land Other crops, 23.17% Oilseeds, 5.25% Oil Palm, 0.29% Livestock, 71.27% Total area: 4.911 bil ha
Source: FAO (2011), Oil World, MPOB (2012) Livestock industry uses the most land and therefore is the main driver for global
deforestation. Oil palm has been made a scapegoat
MSPO++ system No deforestaFon: Applies to companies that are plan3ng oil palm on land for ﬁrst 3me at 3me of applica3on. Such companies have to undergo a sustainability cer3ﬁca3on. Free to choose any cer3ﬁca3on system recognized by MPOCC. PlanFng on peat: Applies to companies that are plan3ng oil palm on peat land for ﬁrst 3me at 3me of applica3on. Such companies have to undergo a sustainability cer3ﬁca3on. Free to choose any cer3ﬁca3on system recognized by MPOCC. 5. MSPO++ as a Branding Plauorm Ø  As for Branding of Malaysian palm oil, the proposed brand tag line is Malaysia Palm Oil, Responsibly Farmed . Ø  Responsibly Farmed is claimable based on the licensing infrastructure of the Malaysian palm oil industry. Ø  Sustainable claim is tricky as sustainability is subject to diﬀerent deﬁni3ons in the EU. This issue must be carefully analyzed going forward. BRAND LOGO Once Branding Scheme
launched, responsibly
produced Malaysia
Palm Oil
will be given a
Brand name and logo
6. CONCLUSIONS
•  CPO price has retreated from its high. Long term, prices have been remunera3ve •  MPOC con3nues to look for opportuni3es to boost palm oil trade •  Some examples of MPOC facilita3ng the capitaliza3on of such opportuni3es to strengthen markets, ﬁnd newer markets and tapping on new opportuni3es are shown •  Need to have an overarching system such that all Malaysian Palm Oil can be claimed to be sustainably or responsibly produced •  MSPO is ready to be launched and MSPO++ can be added subsequently •  MSPO++ can fast-‐track 100% cer3ﬁca3on of Malaysian palm oil, and Branding of Malaysian palm oil will have a strong uniﬁed plaiorm for brand support. •  Branding can facilitate trade and afract a premium of Malaysian palm oil THANK YOU
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