ASIA PALM OIL CONFERENCE (APOC) 2013: INNOVATING THAILAND S PALM OIL INDUSTRY World Economic Uncertainty Affect the World Palm Oil Industry Dr Ahmad Fauzi Puasa Deputy Director, Malaysia Institute Economic Research Kuala Lumpur Maritime Park & Spa Resort, Krabi, Thailand 29 August, 2013
Content World Economic Outlook Oil & Fats Production & Consumption (Palm Oil) Palm Oil Price Malaysia & Indonesia Palm Oil Industry Economic Impact due to World Economic Uncertainty Conclusion
World Economic Outlook
Global Economic Developments The IMF, in its July 9, 2013 edition of the World Economic Outlook titled Growing Pains, had assessed the global economy to remain subdued. Appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as by a more protracted recession in the euro area. Downside risks to global growth prospects still dominate: while old risks remain, new risks have emerged, including the possibility of a longer growth slowdown in emerging market economies
World Economic Outlook Projections (% yoy) Projections Difference from April 2013 WEO published 2007 2008 2009 2010 2011 2012 2013 2014 2013 2014 World 5.0 3.1-0.7 5.3 3.9 3.1 3.1 3.8-0.2-0.2 Advanced Economies 3.2 1.7 1.2 1.2 2.1-0.1-0.2 United States 2.6 1.4-3.5 3.0 1.8 2.2 1.7 2.7-0.2-0.2 Euro Area 2.6 0.8-4.3 1.9 1.5-0.6-0.6 0.9-0.2-0.1 Japan 2.1-0.7-6.3 4.4-0.6 1.9 2.0 1.2 0.5-0.3 Developing Asia 10.6 7.6 7.2 9.7 7.8 6.5 6.9 7.0-0.3-0.3 China 13.0 9.0 9.2 10.4 9.3 7.8 7.8 7.7-0.3-0.6 India 10.6 6.3 3.2 5.6 6.3-0.2-0.1 ASEAN-5 7.0 4.5 6.1 5.6 5.7-0.3 0.2 World Trade Volume (goods and services) 7.2 2.9-10.7 12.9 6.0 2.5 3.1 5.4-0.5 0.1 Source: IMF's World Economic Outlook July 2013
Global Economy % growth 6 4 2 0 5.0 3.1 5.1 3.9 3.1 3.1 3.8-2 -0.7-4 -6 2007 2008 2009 2010 2011 2012 2013f 2014f World GDP US GDP% EU GDP% Japan GDP% Source: IMF January 2013 WEO Update
Unemployment Rate by Region Source: IMF The unemployment rates are estimated to be a decrease in US, Japan, CIS and LAC with US mark the most significant drop. EA is estimated to have the highest unemployment rate and also the highest rise among the others. US -United States EA -Euro Area MENA -Middle East and North America DA -Developing Asia CIS -Commonwealth of Independent States EE -Eastern Europe LAC -Latin America and the Caribbean
Some Vital Statistics of the Major Economies GDP GDP Inflation Jobless Govt. Debt to Country QoQ YoY rate rate Budget GDP USA 1.80% 1.80% 1.80% 7.60% -8.50% 101.60% Euro zone -0.30% -1.10% 1.60% 12.20% -3.70% 90.60% China 1.70% 7.50% 2.70% 4.10% -1.50% 23.00% Japan 1.00% 0.40% -0.30% 4.10% -9.20% 211.70% India 1.30% 4.80% 4.86% 3.80% -4.80% 67.57% Source: Trading Economics data extracted on 22 July 2013
Oil & Fats Production & Consumption (Palm Oil)
World Production of Palm Oil PO is the largest produced vegetable oil in the world. In 2012, PO production represented 33% of the world total vegetable oils production (160 Mil.T). Indonesia and Malaysia are the 1 st & 2 nd largest PO producers in the world, representing 85% of the world PO production (52.8 Mil.T) in 2012. With increase in PO production, PKO also similarly increased OP fruit can produce 2 types of oils.
World Production of 17 Oils and Fats ( 000 T) PO is the world s largest oil produced with annual growth rate of 6.5% from 2005-2012. In 2012, PO contributed 33% of the world prod. Of oils & fats. SBO is the 2 nd largest oil produced in the world with annual growth rate of 3.2% from 2005-2012. Groundnut, coconut & linseed oils recorded negative annual growth rates for the 7 year period. Oils and Fats 2005 2010 2012 Growth Rate (%) 1. Palm Oil 33,952 45,858 52,814 6.52 2. Palm Kernel Oil 3,989 5,236 5,931 5.83 3. Soyabean Oil 33,567 40,250 41,751 3.17 4. Cottonseed Oil 5,007 4,611 5,134 0.36 5. Groundnut Oil 4,513 4,193 3,851 (2.24) 6. Sunflower Oil 9,821 12,476 14,924 6.16 7. Rapeseed Oil 16,292 23,995 24,206 5.82 8. Corn Oil 2,136 2,351 2,684 3.32 9. Coconut Oil 3,255 3,628 3,244 (0.05) 10. Olive Oil 2,940 3,338 3,349 1.88 11. Castor Oil 534 610 689 3.71 12. Sesame Oil 866 872 868 0.03 13. Linseed Oil 637 643 635 (0.04) Total Vegetable Oils 117,509 148,061 160,080 4.52 14. Butter 6,673 7,169 7,580 1.84 15. Tallow 8,389 8,348 8,347 (0.07) 16. Fish Oil 976 895 951 (0.37) 17. Lard 7,544 8,019 8,274 1.33 Total Animal Oils 23,582 24,431 25,152 0.93 Grand Total 141,091 172,492 185,232 3.97 PO vs. Oils and Fats 24% 27% 29% Source: Oil World & MPOB
World Major Producers of Palm Oil ( 000 T) No. Country 2005 2006 2010 2011 Growth 2012 rate(%) 1 Indonesia 14100 15900 22100 24100 26300 9.31 2 Malaysia 14962 15881 16994 18912 18785 3.30 3 Thailand 700 780 1380 1530 1600 12.54 4 Nigeria 800 815 885 930 940 2.33 5 Colombia 673 708 753 941 970 5.36 6 Ecuador 319 345 380 495 550 8.09 7 Papua New Guinea 310 272 500 560 530 7.96 8 Cote d'ivorie 290 265 330 400 360 3.14 9 Others 1798 1767 2536 2690 2779 6.42 TOTAL 33952 36733 45858 50558 52814 6.52 Source: Oil World & MPOB Since 2006, Indonesia is the world s largest PO producer. PO production in Indonesia increased significantly with annual growth rate of 9.3%. Malaysian PO production increased marginally with annual growth rate of 3.3% from 2005-2012. Overall, world annual growth rate for PO prod. was 6.5% (2005-2012)
World Export of Vegetable Oils PO is the world s largest traded vegetable oil. In 2012, world PO export contributed 59% of world export of vegetable oils (68.8 Min T). Soyabean & Sunflower oils were the 2 nd & 3 rd largest vegetable oils traded in world market in 2012. These two oils represented 23% of the world vegetable oils traded in 2012.
World Export of 17 Oils & Fats ( 000 T) Oils and Fats 2005 2008 2009 2010 2011 2012 Growth Rate (%) 1. Palm Oil 26,511 33,730 36,221 36,536 39,069 40,757 6.34 2. Palm Kernel Oil 2,099 2,714 3,042 3,065 3,087 3,017 5.32 3. Soyabean Oil 9,779 10,093 9,278 10,192 9,321 8,995 (1.19) 4. Cottonseed Oil 173 143 155 152 195 208 2.67 5. Groundnut Oil 170 147 207 201 192 192 1.75 6. Sunflower Oil 3,115 4,081 5,176 4,758 5,342 7,116 12.53 7. Rapeseed Oil 1,425 2,331 2,578 3,443 3,737 4,173 16.59 8. Corn Oil 816 725 689 636 849 890 1.25 9. Coconut Oil 2,295 1,882 1,857 2,358 1,881 1,975 (2.12) 10. Olive Oil 748 741 716 782 833 878 2.32 11. Castor Oil 306 367 309 448 402 511 7.60 12. Sesame Oil 39 38 35 38 35 38 (0.37) 13. Linseed Oil 113 86 90 100 95 97 (2.16) Total Vegetable Oils 47,589 57,078 60,353 62,709 65,038 68,847 5.42 14. Butter 747 677 781 727 713 784 0.69 15. Tallow 2,070 2,200 2,000 2,140 1,902 1,679 (2.95) 16. Fish Oil 633 733 861 803 787 909 5.31 17. Lard 131 139 113 120 125 122 (1.01) Total Animal Oils 3,581 3,749 3,755 3,790 3,527 3,494 (0.35) Grand Total 51,170 60,827 64,108 66,499 68,565 72,341 5.07 Source: Oil World & MPOB
World Major Consumers of 17 Oils and Fats In 2012: In China, P.R. was the largest consumer of 17 oils & fats (19%) with annual consumption growth rate of 4.2% for the past 7 years. EU & India were the 2 nd & 3 rd largest consumers of 17 oils & fats (27%). Indonesia recorded the highest annual consumption growth rate of 10.43% from 2005-2012. Only Japan recorded negative annual consumption growth rate of -0.64%. ( 000 T) No. Country 2005 2010 2012 Growth Rate (%) 1 China, P.R. 25,728 32,435 34,280 4.18 2 EU 24,449 30,938 29,780 2.86 3 India 13,100 17,811 18,856 5.34 4 USA 15,367 15,392 17,837 2.15 5 Brazil 4,593 7,537 7,834 7.93 6 CIS 5,534 6,751 7,224 3.88 7 Indonesia 4,180 6,349 8,371 10.43 8 Malaysia 3,267 3,751 4,026 3.03 9 Pakistan 3,299 3,776 3,905 2.44 10 Japan 2,845 2,709 2,720 (0.64) 11 Nigeria 1,834 2,397 2,505 4.55 12 Turkey 2,033 2,129 2,260 1.52 13 Canada 1,331 1,369 1,408 0.81 14 South Korea 1,099 1,240 1,291 2.33 15 Other 30,660 37,369 41,284 4.34 TOTAL 139,319 171,953 183,581 4.02 Source: Oil World
Major Importing Countries of PO PO is the most competitively-priced amongst vegetable oils like soya bean, rapeseed & sunflower oils in the world market. Demand for PO comes from both developed and developing countries. Major PO importing countries include India, China, P.R. and EU. Despite India & China having their own vegetable oil crops like soya bean & rapeseed, however, their production is insufficient to cover domestic demand hence the need to import vegetable oils.
World Major Consumers of PO ( 000 T) In 2012: PO prod. at 52.81 Mil.T & 98% was consumed. India was largest PO consuming country (15%) with an annual growth rate of 12.5% for 7 years. Indonesia was the 2 nd largest PO consuming country, i.e. consuming 17% out of its total PO production. M sia consumed 11% out of its total PO production. PO annual consumption growth rate was 1.0%. No. Country 2005 2010 2012 Growth Rate (%) 1 India 3,309 6,714 7,562 12.53 2 China, P.R. 4,340 5,903 6,050 4.86 3 EU 4,368 5,724 5,821 4.19 4 Indonesia 3,546 5,419 7,030 10.27 5 Malaysia 1,965 2,065 2,108 1.01 6 Pakistan 1,546 1,895 2,033 3.99 7 Thailand 654 1,230 1,308 10.41 8 Nigeria 1,107 1,665 1,760 6.85 9 USA 376 864 956 14.26 10 Colombia 454 794 950 11.12 11 CIS 315 823 733 12.82 12 Egypt 591 595 541 (1.25) 13 Japan 478 564 584 2.90 14 Turkey 431 400 450 0.62 15 Other 10,175 11,914 13,606 4.24 TOTAL 33,655 46,569 51,493 6.26 Source: Oil World
Source: US Department of Agriculture This statistic shows the global consumption of vegetable oils from 1995/1996 to 2012/2013, by different oil types.
Palm Oil Industrial Domestic Consumption Annual Growth Rate by Country Year of Estimate: 2013 Source: US Department of Agriculture
A Brief Picture of World Palm Oil Market Palm oil : production, export, import & consumption (for food & non-food purposes) in 2011/2012). All figures are in Million tonnes Source: The AOCS Lipid Library, accessed at http://lipidlibrary.aocs.org/market/palmoil.htm.
THE WORLD CONSUMPTION OF MAJOR VEGETABLE OIL IN 2007/8 Source: Wikipedia 2013
WORLD POPULATION 2012
Palm Oil Price
World Palm Oil Price (Nominal USD) Source: World Bank, http://www.worldbank.org
Palm Oil Price Forecast (Nominal USD) $/mt 1100 1080 1050 1000 950 970 900 900 879 859 850 869 800 800 750 2012 2013 2014 2015 2016 2017 2018 2019 2020 2025 Palm oil price forecast Source: World Bank, http://www.worldbank.org
Source: Benny Lee (2012) CRUDE PALM OIL ANALYSIS: TREND ANALYSIS SHORT-TERM
CRUDE PALM OIL ANALYSIS: TREND ANALYSIS LONG-TERM Source: Benny Lee (2012)
CRUDE PALM OIL ANALYSIS: FACTOR AFFECTING PALM OIL PRICE Source: Benny Lee (2012)
PERCENTAGE PRICE CHANGE OF MALAYSIAN PALM OIL & US SOYBEAN OIL The price of palm oil in recent years correlate highly with the price of soybean Source : USDA
Source: MPOB
Malaysia & Indonesia Palm Oil Industry Economic Impact due to World Economic Uncertainty
Source : USDA, Foreign Agricultural Service, PS&D Online
World, Regional and Domestic Economic Outlook Malaysia/Indonesian Palm Oil Export Export Value Output IMPACT ON MALAYSIA AND INDONESIAN ECONOMY Income Employment
LEONTIEF INVERSE MATRIX ECONOMIC IMPACT ANALYSIS: Y = (I A ) -1 Where: Y - Output/Household Income/employment Economic Impact I Identity matrix A Coefficient Matrix
As predicted by the IMF, palm oil export is expected to shrink 19% in the future (July 2013)
Exchange rate RM 3.19727 : US$1.00 Rupiah 10,255: US$1.00
ANALYSIS OF RESULTS
TOTAL OUTPUT EFFECT FOR MALAYSIA (US$) Sector 10% 15% 19% 20% 1.Oils and Fats 1,042,506.42 1,563,759.63 1,980,762.20 2,085,012.84 2.Oil Palm 369,660.48 554,490.71 702,354.90 739,320.95 3.Wholesale and Retail Trade 151,740.68 227,611.01 288,307.28 303,481.35 4.Petroleum Refinery 51,318.78 76,978.16 97,505.68 102,637.55 5.Banks 42,727.71 64,091.56 81,182.64 85,455.41 6.Crude Oil and Natural Gas 21,571.52 32,357.28 40,985.89 43,143.04 7.Electricity and Gas 21,012.36 31,518.55 39,923.49 42,024.73 8.Motor Vehicles 20,846.42 31,269.62 39,608.19 41,692.83 9.Communication 19,967.71 29,951.56 37,938.64 39,935.41 10.Fertilizers 17,539.67 26,309.50 33,325.37 35,079.34 11.Others 94,710.49 142,065.73 179,949.93 189,420.98 Total 2,061,044.71 3,091,567.06 3,915,984.95 4,122,089.42
TOTAL HOUSEHOLD INCOME EFFECT FOR MALAYSIA (US$) Sector 10% 15% 19% 20% 1.Oil Palm 104,678.60 157,017.90 198,889.34 209,357.20 2.Oils and Fats 22,743.72 34,115.59 43,213.08 45,487.45 3.Wholesale and Retail Trade 17,488.23 26,232.35 33,227.64 34,976.46 4.Banks 5,498.24 8,247.37 10,446.66 10,996.49 5.Land Transport 3,315.34 4,973.01 6,299.14 6,630.68 6.Restaurants 3,018.26 4,527.38 5,734.68 6,036.51 7.Professional 2,253.04 3,379.56 4,280.78 4,506.08 8.Communication 1,742.77 2,614.15 3,311.25 3,485.53 9.Residential 1,399.74 2,099.61 2,659.50 2,799.48 10.Education 1,371.17 2,056.76 2,605.23 2,742.35 11.Others 7,549.12 11,323.68 14,343.32 15,098.23 Total 187,592.91 281,389.36 356,426.52 375,185.81
TOTAL EMPLOYMENT EFFECT FOR MALAYSIA (PERSON) Sector 10% 15% 19% 20% 1.Oil Palm 28 43 54 57 2.Wholesale and Retail Trade 4 6 8 8 3.Oils and Fats 4 6 7 8 4.Restaurants 1 2 2 3 5.Land Transport 1 2 2 2 6.Paddy 1 1 2 2 7.Residential 1 1 2 2 8.Banks 0 1 1 1 9.Special Trade Works 0 0 1 1 10.Education 0 0 1 1 11.Others 5 8 10 10 Total 47 70 89 93
TOTAL OUTPUT EFFECT FOR INDONESIA (US$) Sector 10% 15% 19% 20% 1.Food products, beverages and tobacco 910,419.30 1,365,628.94 1,729,796.66 1,820,838.59 2.Agriculture, hunting, forestry and fishing 353,709.88 530,564.82 672,048.77 707,419.76 3.Wholesale & retail trade; repairs 104,479.59 156,719.39 198,511.23 208,959.19 4.Finance & insurance 43,500.05 65,250.07 82,650.09 87,000.09 5.Chemicals excluding pharmaceuticals 39,585.35 59,378.03 75,212.17 79,170.70 6.Coke, refined petroleum products and nuclear fuel 38,588.80 57,883.21 73,318.73 77,177.61 7.Other community, social & personal services 37,648.25 56,472.38 71,531.68 75,296.50 8.Mining and quarrying (energy) 35,415.95 53,123.93 67,290.31 70,831.91 9.Land transport; transport via pipelines 31,367.22 47,050.83 59,597.71 62,734.44 10.Hotels & restaurants 31,224.41 46,836.61 59,326.37 62,448.81 11.Others 27,452.43 41,178.64 52,159.61 54,904.85 Total 1,907,501.86 2,861,252.80 3,624,253.54 3,815,003.73
TOTAL HOUSEHOLD INCOME EFFECT FOR INDONESIA (US$) Sector 10% 15% 19% 20% 1.Food products, beverages and tobacco 89,550.87 134,326.31 170,146.66 179,101.75 2.Agriculture, hunting, forestry and fishing 61,052.20 91,578.30 115,999.18 122,104.40 3.Wholesale & retail trade; repairs 19,372.77 29,059.16 36,808.27 38,745.55 4.Finance & insurance 8,288.57 12,432.85 15,748.28 16,577.13 5.Other community, social & personal services 7,697.54 11,546.31 14,625.33 15,395.08 6.Coke, refined petroleum products and nuclear fuel 5,715.28 8,572.92 10,859.03 11,430.56 7.Land transport; transport via pipelines 5,390.77 8,086.16 10,242.46 10,781.54 8. Hotels & restaurants 4,995.84 7,493.76 9,492.09 9,991.68 9.Chemicals excluding pharmaceuticals 4,556.35 6,834.53 8,657.07 9,112.70 10.Other Business Activities 4,550.11 6,825.17 8,645.21 9,100.22 11.Others 3,627.11 5,440.66 6,891.50 7,254.22 Total 248,371.38 372,557.06 471,905.62 496,742.75
TOTAL EMPLOYMENT EFFECT FOR INDONESIA (PERSON) Sector 10% 15% 19% 20% 1.Food products, beverages and tobacco 99 148 188 198 2.Agriculture, hunting, forestry and fishing 67 101 128 135 3.Wholesale & retail trade; repairs 21 32 41 43 4.Finance & insurance 9 14 17 18 5.Other community, social & personal services 8 13 16 17 6.Coke, refined petroleum products and nuclear fuel 6 9 12 13 7.Land transport; transport via pipelines 6 9 11 12 8.Hotels & restaurants 6 8 10 11 9.Chemicals excluding pharmaceuticals 5 8 10 10 10.Other Business Activities 5 8 10 10 11.Others 41 62 78 82 Total 274 411 521 548
Conclusion
IMF predicts that in the future there will be a 19% drop in export of palm oil & palm oil products. As the effect, Malaysian economy is expected to experience a reduction of : 10% 15% 19% 20% Output (US$) 2,061,044.71 3,091,567.06 3,915,984.94 4,122,089.42 Income (US$) 187,592.91 281,389.36 356,426.52 375,185.81 Employment (person) 47 70 89 93 While for the Indonesian economy, the expected impacts are as follows : 10% 15% 19% 20% Output (US$) 1,907,501.86 2,861,252.80 3,624,253.54 3,815,003.73 Income (US$) 248,371.38 372,557.06 471,905.62 496,742.75 Employment (person) 274 411 521 548
Based on the price analyses, the palm oil price will eventually increased due to i) World PO consumption is increasing at 6.26% ii) the World GDP is expecting to increase to 3.1% 2013 and 3.8% 2014 iii) the World trade is also expecting to increase to 3.1% 2013 and 5.1% 2014 as well. iv) Palm oil is an important for source of foods which is relate to world population (1.8% growth rate).
Here comes your footer Page 49 THANK YOU THANK YOU Dr Ahmad Fauzi Puasa Deputy Director, MIER Kuala Lumpur E-mail:fauzi@mier.gov.my H/P: +6012-2183422
Source: IMF s World Economic Outlook April 2013