Palm Oil Trade Fair & Seminar Shanghai China 15 September 2014 Malaysian Palm Oil: Assuring Sustainable Supply of Oils & Fats Into The Future BY Tan Sri Datuk Dr. Yusof Basiron Chief Executive Officer Malaysian Palm Oil Council
1. THE IMPORTANCE OF PALM OIL 2. PALM OIL AS A RELIABLE & AFFORDABLE SUPPLIER OF OILS & FATS 3. PALM OIL S ROLE IN FOOD SECURITY 4. BIODIESEL REQUIREMENTS 5. ASSURING SUSTAINABLE SUPPLY OF PALM OIL INTO THE FUTURE 6. M A L A Y S I A N P A L M O I L R O L E I N BIODIVERSITY 7. CONCLUSIONS
THE IMPORTANCE OF PALM OIL
OILS & FATS PRODUCTION 1990 2013 Rapeseed Oil 10% 1990 Sunflower Oil 10% Others 47% Rapeseed Oil 13% Soybean Oil 23% 2013 2013 Sunflower Oil 7% Others 27% Soyabean Oil 20% Palm Oil 30% Palm Oil 13% Source : Oil World SHANGHAI CHINA
OILS & FATS EXPORTS 1990-2013 Rapeseed Oil 7% Soyabean Oil 14% Sunflower Oil 9% 1990 Palm Oil 36% Others 34% Sunflower Oil 9% Rapeseed Oil 5% 2013 Others 15% Palm Oil 58% 1990 Exports : 23.1 million MT Source : Oil World Soybean Oil 13% 2013 Exports :75.75 million MT Ø Growth in population, income growth, low per caput consumption level Ø Against a backdrop of lack of arable land and reduced supply from competing soft oils, palm oil reliability in supply gives it the added advantage Ø Food and industrial demand: an increased application in the production of food and non food (oleo chemicals/bio diesel), especially in countries such China, India, Middle East, EU, America SHANGHAI CHINA
IMPORTANCE OF PALM OIL CONSUMPTION PALM OIL VS OTHER OILS 2013 Sunflower Oil 7% Rapeseed Oil 13% Others 27% Soyabean Oil 23% Palm Oil 30% TOTAL : 191.5 MILLION MT
IMPORTANCE OF PALM OIL & ITS DERIVATIVES 1. Source of food (global food security ): 80% 2. Oleochemicals: 15% 3. Biofuel : 2% 4. Renewable energy source: Potential Remains Largely Untapped through Palm Biomass Palm Oil Currently Accounts for 30% of Global Oils & Fats Supply Source : Oil World Rapeseed Oil 13% Soybean Oil 23% Sunflower Oil 7% Others 27% Palm Oil 30% SHANGHAI CHINA
MEETING FUTURE PALM OIL DEMAND IS DEPENDENT ON YIELD IMPROVEMENTS Limited land area for oil palm plantation expansion SHANGHAI CHINA
World s Growing Dependence on Palm Oil Will Boost Demand Further in the Future (Exports) 50.00 45.00 40.00 35.00 (Million MT) 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Source: Oil World Source: Oil World 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 Palm Oil Soybean Oil, Sunflower Oil & Rapeseed Oil
PALM OIL AS A RELIABLE & AFFORDABLE SUPPLIER OF OILS & FATS
MEETING FUTURE PALM OIL DEMAND Ø By year 2030, it is estimated that the world population will balloon by 1.4 billion people to 8.3 billion, up 20% (0.9% or 70 million people p.a.) from 6.9 billion today with most of the increase in South Asia, the Middle East and Africa Ø There is no doubt the growing and more prosperous world population will need more food. Ø To feed the projected 9 billion populations by 2050, global food production is expected to increase 70% beyond 2013 levels
GROWTH IN POPULATION Ever Growing World Population Results in More Mouths to Feed Future of palm oil is driven by growth in demand for food, oleo chemicals and biofuel due to population and economic growth The world population is projected to grow from 7 billion in 2011 to 9 billion by 2043, an increase of 29 percent. Food production must meet this rate of increase.
MEETING FUTURE PALM OIL DEMAND Ø The world's current demand for oils and fats is being met by 17 major sources. Production of oils and fats totalled 189.9 million MT in 2013 of which palm oil and soybean production were 56 million tonnes and 43 million MT respectively, thus together accounting for more than 50% of the total Ø Production of palm oil has grown faster than that of any other oil or fat and overtook soybean as the most produced oil in 2005
AVERAGE ANNUAL GROWTH IN WORLD VEGETABLE OIL PRODUCTION (1990 2013) (Million MT) 60.00 50.00 40.00 30.00 20.00 Average Annual Growth (1990 2013) Palm Oil (7.03%) Rapeseed Oil (5.2) Soybean Oil (4.6%) Sunflower Oil (4.4%) Coconut Oil (- 0.01%) Palm Kernel Oil (6.3%) 10.00 0.00 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 Palm Oil Soybean Oil Sunflower Oil Rapeseed Oil Palmkernel Oil Coconut Oil Source: Oil World
FULFILLING OILS & FATS DEMAND OF NET IMPORTING COUNTRIES
MEETING OILS & FATS DEMAND
Total Oils & Fats Demand (million tonnes): Source: Oil World 2020 1996/2000 103.4 2001/2005 121.2 2011/2015 156.4 2016/2020 175.3
GLOBAL OILS & FATS PRODUCTION VS CONSUMPTION 1990 2013 ( 000 MT) 250,000 200,000 In 2013, ConsumpSon exceeded ProducSon 150,000 100,000 50,000-2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 Source : Oil World Production Consumption
GLOBAL OILS & FATS PRODUCTION Y-O-Y CHANGE 1990 2013 ( 000 MT) 10,000 9,000 8,000 Average Growth Rate 3.51% 7,000 6,000 5,000 4,000 3,000 2,000 1,000-2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 Source : Oil World ('000 MT)
OILS & FATS PRODUCTION VS CONSUMPTION 1990 2050 (F) 700,000 600,000 500,000 Oils & Fats Production Oils & Fats Consumption Linear (Oils & Fats Production) Expon. (Oils & Fats Consumption) 400,000 300,000 200,000 100,000-2050 2045 2040 2035 2030 2025 2020 2015 2010 2005 2000 1995 1990 Source : Oil World
NET IMPORTING & EXPORTING COUNTRIES FOR OILS AND FATS (2013) China India EU- 27 Source : Oil World North Africa Pakistan Bangladesh Iran Mexico Egypt Japan Turkey South Africa South Korea Nigeria Taiwan Brazil Philippines Russia Ukraine Canada Net Importers Net Exporters FAO estimates that by 2050, rising population and incomes will require 70 percent increase in global food production ArgenSna SHANGHAI CHINA Malaysia Indonesia -15000-10000 -5000 0 5000 10000 15000 20000 25000 000 MT Net exporters of oils and fats Asia Pacific (palm oil) & Americas (soybean) The rest of the countries are net importers
TOP 10 MAJOR DESTINATIONS OF MPO EXPORT IN 2013 No. Country Total (MT) 1 CHINA P.R 3,699,638 2 INDIA 2,325,386 3 NETHERLANDS 1,539,096 4 PAKISTAN 1,435,217 5 U.S.A 1,026,989 6 IRAN 635,258 7 JAPAN 501,452 8 VIETNAM 499,918 9 SINGAPORE 492,138 10 BENIN Source : MPOB 473,145
TOP IMPORTING COUNTRIES MALAYSIAN PALM OIL- BY DESTINATION : JANUARY JULY 2014 No. Country January July 2014 (MT) January July 2013 (MT) Change (Vol.) (MT) Change (%) Jan Dec 2013 (MT) 1 CHINA P.R 1,686,803 2,065,264 (378,461) (18.33) 3,699,638 2 INDIA 1,499,663 1,149,246 350,417 30.49 2,325,386 3 NETHERLANDS 880,647 778,153 102,494 13.17 1,539,096 4 U.S.A 476,769 667,306 (190,537) (28.55) 1,026,989 4 PAKISTAN 468,287 864,363 (396,076) (45.82) 1,435,217 6 VIETNAM 330,980 258,119 72,861 28.23 499,918 7 SINGAPORE 305,871 277,210 28,661 10.34 492,138 8 JAPAN 293,347 285,282 8,065 2.83 501,452 9 PHILIPPINES 272,026 98,812 173,214 175.30 206,871 10 IRAN 250,010 416,154 (166,144) (39.92) 635,258 TOTAL 6,464,403 6,859,909 (395,506) (5.77) 12,361,963 Source : MPOB
PALM OIL S ROLE IN FOOD SECURITY
WORLD ARABLE & PERMANENT CROP LAND PER CAPITA Source : FAOSTATS Per capita crop land has declined since 1960 thus more pressure on farms to increase yields SHANGHAI CHINA
SCARCITY OF ARABLE LAND Year 1922 1975 2005 2030 2042 World s populason (bil) 2.0 4.0 6.6 8.0 9.0 Arable land per capita (x10-3 km 2 ) 7.50 3.75 2.27 1.88 1.67 Need to Use Land Wisely World populason increasing Arable land resource decreasing Source: Freeworld Academy & University of Michigan Arable land per capita (ha) 0.75 0.38 0.23 0.19 0.17 The FAO has called upon governments to pay urgent abenson to the needs of agriculture and to increase investments in agricultural pracsces. Sustain ability Team Discussion Paper- March 2010- Dexia Asset Management
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DISTRIBUTION OF AGRICULTURAL AREA Livestock, 71.27% Oil Palm, 0.31% Oilseeds, 5.25% Other Crops, 23.17% Total Agricultural Area : 5 Billion Hectares Source : FAOSTATS
Population growth drives preference for palm oil as food, avoiding more land conversion to other oil seed crops Year Population (billion) Projected Additional Palm oil to be supplied by Malaysia (m MT) Estimated Additional land needed for palm oil cultivation in Malaysia (m ha) Additional land needed to cultivate Rapeseed to offset this oil palm cultivation (m ha) Additional land needed to cultivate Sunflower to offset oil palm cultivation (m ha) Additional land needed to cultivate Soybean to offset oil palm cultivation (m ha) 2025 7.9 2040 8.5 2080 9.1 2.7 5.3 7.7 0.7 1.4 2.1 4.5 9.0 13.4 5.7 11.3 17.0 7.2 14.4 21.6 7-11 times more land needed if other oil crops were to substitute Malaysian palm oil to meet future demand. 21.6 m ha of land needed for soybean cultivation in 2080 is equivalent to 2/3 of land area of Malaysia.
HIGH LAND PRODUCTIVITY OF OIL PALM YIELD PALM OIL VS OTHER OILSEEDS 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 0.36 0.42 Soybean Oil Sunflower Oil Seed Oil Palm Oil 0.59 Rapeseed Oil 3.68 (Kernel Oil) Palm Oil Productivity of oil palm is: 11x more than soyabean 10x more than sunflower 7x more than rapeseed Source: * FAO ** Oil World *** MPOB
THE GROWING MIDDLE CLASS A REAL CONCERN Ø There is a concern about the growing middle class in the world which is expected to reach 2.9 billion by 2030 attributed by China and the USA Ø This growing middle class will fuel demand for food as increasing affluence will change dietary habits Ø Demand for protein and meat will increase and food production will have to increase by as much as 250 million MT to 470 million MT Ø FAO predicts that the food production must increase by 37% to meet this demand Ø Land will inevitably be a shrinking resource as the current rate of 4.5 persons / hectare will increase to 6.5 persons /hectare
A VOTE FOR FOOD SECURITY Ø At the Rio+20 Conference, State Parties affirmed the definition of sustainable development Ø It balances the interests of economic growth and environmental sustainability Ø Delegates accepted the green agenda and embraced the need to address global food security and alleviating poverty Ø P a r t i e s r e f u s e d t o e n d o r s e t h e Environmental NGOs position on zero deforestation stating that deforestation is inevitable but must be in a sustainable manner
A VOTE FOR FOOD SECURITY Ø Land clearing is key component of economic growth and all agree that agriculture is a proven path for economic development Ø A significant portion of the world s poor in rural areas depend on agriculture as a source of income Ø Thus the emphasis to revitalise the agricultural and rural development in an economically, socially and environmentally sustainable manner
A VOTE FOR FOOD SECURITY Ø In 2012, the UN estimates that the world will need at least 50% more food by 2030 Ø The NGOs claim that global food production can be met by simply by improving crop yields and productivity but there are limits to this such as soil degradation Ø The Rio+20 Conference recorded strong vote for the rights of developing nations to expand their agricultural sector on a sustainable basis
BIODIESEL REQUIREMENTS
PROJECTED WORLD REQUIREMENTS FOR FOOD & BIOFUELS (MT) Source 2015 2030 Food 147.2 160.7 Biofuels 57 102 TOTAL 204.2 262.7 Source: Legge
BIODIESEL OUTPUT FROM VARIOUS FEEDSTOCKS Source : Fulton, et.al SHANGHAI CHINA
Source : FAO, EIA, US DOE and the USDA SHANGHAI CHINA
Source: USDA FAS 1. Increasing biodiesel consumption mandates in Brazil and Argentina along with robust European demand continues to divert South American soybean oil into the fuel market. 2. While the United States has seen some gain in soybean oil exports as a result of the limited South American supply, most of the offset has been in larger global exports of palm oil. 3. Further growth in biodiesel production is expected as capacity expands in response to additional consumption mandates SHANGHAI CHINA
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KEY FINDINGS IN THE INTERNATIONAL ENERGY AGENCY S CLEAN ENERGY PROGRESS REPORT LAUNCHED IN APRIL 2011. Biofuel for transport 1.Global biofuel production grew from 16 billion litres in 2000, to more than 100 billion litres in 2010. 2.This biofuel provides around 3% of the world s fuel for transport. (In Brazil, biofuel provides 21% of all transport fuel, compared with 4% in the US and 3% in the European Union) 3.The US currently leads spending on biofuels public research, development and demonstration projects, with USD 189 million in 2010. On a per capita basis, this represents 60 cents per person per year in 2010. SHANGHAI CHINA
ASSURING SUSTAINABLE SUPPLY OF PALM OIL INTO THE FUTURE BY MALAYSIA
THE PRODUCTION OF SUSTAINABLE PALM OIL Ø Consumer demand for palm oil requires it not only to be safe and high quality but also sustainable Ø The EU demand for CSPO will be fully met as there are ample supply of CSPO Ø Customers are always right to this end Malaysia will meet and supply what the customers want
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MALAYSIAN PALM OIL DEDICATED PRIMARILY FOR FOOD SUPPLY WHILE BIOFUEL USE IS MINIMAL Year CPO production (t) Biodiesel production (t) Biodiesel production as % of total CPO production Source : MPOB 2008 17,734,441 197,610 1.11% 2009 17,564,937 238,469 1.36% 2010 16,993,000 190,374 1.13% 2011 18,911,520 173,220 0.09% 2012 18,785,030 249,213 1.32% 2013 19,216,459 472,129 2.45%
MALAYSIAN PALM OIL PRODUCTION EFFICIENT USE OF LAND Year Matured Land Area ('000 Ha) Production ('000 MT) Efficiency Ratio 1985 1,480 4,133 1: 2.79 1990 2,030 6,095 1: 3.00 2000 3,370 10,840 1: 3.22 2005 4,050 14,961 1: 3.69 2013 4,526 19,216 1: 4.24 Source : MPOB SHANGHAI CHINA
MALAYSIAN SUSTAINABLE PALM OIL (MSPO) Ø The Malaysian Sustainable Palm Oil (MSPO) standard is being tested by the industry before its implementation by the end of this year Ø MSPO was developed to address the grouses of midrange and smallholder oil palm cultivators who face difficulty complying with the principles and standards of the Roundtable on Sustainable Palm Oil (RSPO) certification due to exorbitant charges, conflicting views of inspectors and changing criteria Ø A pilot run for seven palm oil mills and seven estates have been completed. Ø 20% of the local palm oil industry adheres to the voluntary RSPO certification
MALAYSIAN PALM OIL ROLE IN BIODIVERSITY
CONSERVATION OF FOREST / BIODIVERSITY Malaysian Oil Palm Industry Is Land Conservation Friendly Malaysian palm oil area Parameter Area or % Malaysian agricultural land area Total world land area for vegetable oils Total world agricultural land area Malaysian palm oil as % of total Malaysian agricultural land area Malaysian palm oil as % of total world land area for oil bearing crops 5.23 million ha 6.89 million ha 244 million ha 5,660 million ha 70% 2.0 % Malaysian palm oil as % of total world agricultural land area Malaysian palm oil s contribution to global oils & fats supply 0.09% ( of 5,660 million ha) 11.4%
TREND IN LAND USES AS A PERCENTAGE OF TOTAL LAND AREA IN MALAYSIA 100% 90% % of land area 80% 70% 60% 50% 40% 30% 20% 10% 0% Other land uses (urbanisation- industrial, housing, etc) Forest area Agricultural land Oil palm planted area 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: FAOSTAT (2014); Source: Malaysian FAOSTAT Palm (2014); Oil Malaysian Board (2013); Palm World Oil Board Bank (2013) Data (2012)
DISTRIBUTION OF FOREST IN MALAYSIA VERSUS OTHER COUNTRIES 100 90 % 80 70 60 50 Palm Oil & Rubber Plantations 20 Permanent Forest 40 30 20 10 0 19 12 28 31 60 35 52 64 Source : FAO
GREENHOUSE GAS EMISSION Ø The Malaysian Palm oil industry has negligible carbon foot print of 0.015 % of global total GHG emission Ø Doubling the planted area does not cause any significant increase in emission Ø Durban climate change meeting did not achieve any immediate GHG reduction commitments. Canada withdrew from Kyoto protocol to reserve its right to mine tar sand and continue to generate GHG Ø Why must palm oil be penalized now with GHG reduction commitments through RSPO, RED, and EPA s RFS2, when the world will only talk seriously on GHG emission in 2020? Ø Green protectionism? Green colonialism? Vested Interests?
Impact of Oil Palm Forest on CO2 emission MALAYSIAN GREENHOUSE GAS EMISSION AND REMOVAL CO 2 MT 350 300 Total Co 2 Removal by LULUCF 249.8 Total Co 2 Emission 223.1 Total Co 2 Emission 292.9 Total Co 2 Removal by LULUCF 247 250 200 150 167 Forest 147 Emission by Energy Sector 217 147* Forest 100 50 0 82 Palm PlantaSon * Trend EsSmate Emission by Others 40.5 Emission by LULUCF + 49 Agriculture (Rice) Sectors 35.6 26.9 2000 2007 100* Palm PlantaSon
CONSERVATION OF BIODIVERSITY IN PROTECTED RAINFORESTS (PRFS) Ø Tropical rainforests of Malaysia are very complex ecosystems Ø Malaysia is committed to protect its PRFs and biodiversity Ø Pledge made at Earth Summit in Rio (1992) Ø This commitment manifested since 7 th Malaysia Plan (1996-2000) until now
CONSERVATION OF BIODIVERSITY IN PROTECTED RAINFORESTS (PRFS) Ø Malaysia is also a signatory to Convention on Biological Diversity Ø Importance of Biological Diversity conservation accorded high priority Ø National Policy on Biological Diversity adopted in April 1998
CONSERVATION EFFORTS OF MALAYSIAN PALM OIL INDUSTRY Malaysian Palm Oil Wildlife Conservation Fund (MPOWCF) Ø Launched in 2006 Ø RM 20,000,000:- RM 10m from Malaysian palm oil industry Ø R M 1 0 m a s g r a n t f r o m Malaysian government Ø MPOWCF welcomes donations & grants Ø Matches third party funding on a 1:1 basis
ORANGUTAN CONSERVATION Ø A 33% permanent forest definition for sustainability may be sufficient for meeting the conservation needs of the orangutans and other wildlife Ø This appears as the NORM practiced in developed countries Ø Oil palm cultivation also provides a food source for animals which is an added advantage Ø Over production of animals (crowding) has to be managed by culling as done in developed countries. Ø Land is needed to produce food and raw materials for over populated metros in Calcutta, Bombay, Cairo and many more where human tragedies due to food shortages are the norm, and priority should be given to help them.
PROGRAMMES Satellite-tracking, Population Dynamics, Ecology And Conservation Of The Bornean Banteng In Sabah MPOC s Collaboration w i t h t h e D a n a u Girang Field Centre of Cardiff University, UK to conserve unique and rare wildlife
PROGRAMMES A j o i n t e f f o r t between SWD and MPOC to establish the Borneo Elephant Wildlife Sanctuary (BEWS). This is aimed to protect and conserve the Pygmy Elephant. BEWS will ultimately become a r e s e a r c h a n d reference centre for the Pygmy Elephant. Active participation and investments from oil palm sector is anticipated to realize this objective for the long term!
IMPACT OF LABOR AND LAND SHORTAGE Ø Overseas investments by Malaysian palm oil companies to mitigate the labour and land shortages, thus continue to be a sustainable supplier of palm oil globally Ø Malaysian plantation companies started this expansion initially to Indonesia where currently close to 20 per cent of land there is being cultivated by Malaysian companies Ø Malaysian plantation companies like IOI, KLK, Felda Holdings and Sime Darby are now venturing further afield to Indonesia, Thailand, Cambodia, Papua New Guinea and increasingly to West Africa
GLOBAL OILS & FATS SUPPLY & DEMAND SCENARIO ( 000 T) 2009 2010 2011 2012 2013 2014F Opening Stock 19,780 21,287 22,989 24,768 28,422 26,635 Production 164,928 172,312 179,409 186,845 189,902 192,228 Import 63,592 66,007 66,856 71,929 75,088 73,977 Export 64,156 66,545 68,315 72,302 75,524 74,991 Consumption 162,856 170,073 176,171 182,818 191,253 192,224 Ending Stock 21,287 22,989 24,768 28,422 26,635 25,625 Stock Usage Ratio 13.07% 13.52% 14.06% 15.55% 13.93% 13.33% Source : Oil World MPOC EsSmates
TRACKING CPO PRICES AGAINST STOCK USAGE RATIO 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 SUR vs CPO Price 2006 2007 2008 2009 2010 2011 2012 2013 2014F 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% SUR Forecasted CPO Average Forcasted CPO Lower CPO Price Forecasted CPO Higher
CONCLUSIONS Ø Palm oil will continue to be a major source of oils & fats that is required to meet global food security demands Ø Oil palm cultivation is shown to require less land to produce each unit equivalent of edible oil Ø When arable land is limited, it makes sense to choose palm cultivation over other oilseeds given the higher yields from oil palm Ø Higher yield projections increasing stepwise from 4MT/ha to almost 12MT/ha will make palm the oilseed crop of choice in many countries aspiring for greater food (oils) security
CONCLUSIONS (con't)) Ø Malaysia is a signatory to UN sponsored biodiversity agreements & honors these pledges even while seeking economic advancements Ø Limited land and labour availability will require Malaysian palm oil industry to conserve land and move towards responsible cultivation practices Ø Malaysia has pledged at least 50% of country s land under forest cover Ø Certification is voluntary and mostly welcome by the industry that has clearly demonstrated its ability to meet international standards, despite low offtakes and negligible premium offered by buyers Ø Sustainability is not an issue for Malaysian palm oil, but made an issue by the western environmental NGOs.
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