Most 22

Malaysian Oil Science and Technology (MOST)
INTERNATIONAL ADVISORY COMMITTEE: COVER STORY

Dennis J. Murphy (Murphy Biotechnology
With agricultural land in Malaysia capped for about
Consultancy, United Kingdom) 50% forest preservation, demand growth has been
Harald Sauthoff (Cognis, Germany) met mainly by Indonesia [Bangun] whereby the
Kurt G. Berger (United Kingdom) present surplus of supply of palm oil is threatening
Paul Hovelmann (Cognis, Holland/Germany) prices. Apart from this, uncontrolled agricultural
expansion in Indonesia threatens the regions
Thomas Mielke (ISTA Mielke, Germany)
environment with fires and haze during dry seasons.
Yusof Basiron (MPOC, Malaysia) In good measure Indonesia's moratorium against
further deforestation and use of some fragile peat
EDITORIAL BOARD lands has now been in place. As projected Indonesias
Chairman production will be double that of Malaysias by 2020,
even as total production has been projected for
S.H. Goh 6012-363 1948
about 4% per yr growth to meet global needs.
603-7958 1391
614-31940825
chmgsh@yahoo.com At present the imbalance of supply and demand
chmgsh@gmail.com has caused palm oil to be priced much lower than
the other vegetable oils. The excess supplies will
Members: remain since maturing trees will be expected from
Tang Thin Sue Indonesia and at a time when palm bio-diesel was
S.F. Cheng slowly being excluded by the major users. Flagging
Chuah Cheng Hock economies have also considerably reduced the zeal
M.R. Chandran for alternative energy, bio-fuels biofuel mandates
S. Krishnan and mitigating climate change. Producers need to
Soon Ting Kueh have rapid policy responses in view of unfair trade
Zuriati Zakaria 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
MOSTA Council Member 2012/2013 diesel. It is up to the producer countries to exploit
this beneficially and put their infrastructure in place
President: Augustine S.H. Ong 603-7118 2062 to use B5 and B10 bio-diesel blends and at the same
Vice President: S. Krishnan 603-8736 5257 time remove surplus palm oil stocks for stabilizing
Hon. Secretary: C.H. Chuah 603-7967 4013 prices.
Hon. Treasurer: Christine Ong May Ee 603-7118 2062 It is well known that Malaysia can raise palm oil
Hon. Asst. Secretary: Cheng Sit Foon 603-8769 4400 production without opening more new agricultural
Editor: S.H. Goh 603-7958 1391 lands by improving yields. With available technology
and agronomic practices, replanting with marker-
assisted planting materials can improve the average
Council Members:
yield from below 4 to 5.4MT/ha/yr or better [Joseph
Choo Yuen May 603-8769 4400 Tek].
Soon Ting Kueh 603-7955 0576
Back Page: Picture of oil palm trees are from
Harisson Lau Lik Nang 012-3680 484 IJM Plantations and calculations that show GHG
Ng Mei Han 017-8783 092 emissions and sequestrations of tropical forest and
Zuriati Zakaria 603-8921 5424 oil palms are comparable [Yusof Basiron].
Cheng Sit Foon 603-7967 7172

Printing:
Tang Thin Sue 603-7731 4505 Percetakan Soon Lee Heng Sdn bhd
MR Chandran 603-2282 3080 No. 15, Jalan Besar, Selayang Baru,
68100 Batu Caves, Selangor
Soh Aik Chin 603-7118 2062
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 i

Malaysian Oil Science and Technology (MOST)
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ii 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
14 TESTING THE FLOOR OF THE PRICE BAND

James Fry
58 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
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 iii

E D I TO R I A L
Rising Populations, Energy Security and Social unrest, unemployment, economic slowdowns,
Climate Change forest fires and illegal movements of people appear to
be more of a threat to world security.
A miniscule rise in temperatures of oceans and melting
ice in the Artic had led to the belief of global warming Renewable Energy and Palm Oil
and that later climate change is going to engulf planet
earth. This plausibly could have been caused by GHG Despite the lack of evidence of the economic
emissions since as far back as the industrial revolution. sustainability of corn and rapeseed for bio-fuels,
While the sudden and soaring world population mandates have been put forth for the use of mainly
should be more of a concern than the increasing CO2 corn bio-ethanol in the US and rapeseed bio-diesel
emissions although together they pose a combined in the EU. Much of these were politically motivated to
threat to the fragile planets resources. However, reduce the increasingly costly dependence of foreign
anthropogenic activity on climate change pales in fossil fuels. The use of corn in the US was premature
comparison to the massive scale of natural geologic without cellulosic ethanol technology while in Europe
disasters and solar activities. Whatever the combined rapeseed bio-diesel LCA values on site-specific
causes of recently observed climate change and the situations are questionable for GHG savings. Both raw
threat posed by population explosion, it may be a materials need subsidies and redirected food material
time for ingenious solutions or just plain adaptation. to fuel.
One possible solution is in green energy and Europe Palm bio-diesel has also emerged and together with
has been a leader arising from the twin fears of an those from soyabean and rapeseed came into the
urgent threat of global warming and that of rising costs market and caused vegetable oils to be priced as
from the worlds diminishing fossil fuels. Recently it fuels correlating with crude petroleum. But palm oil is
seems that both of these speculations were wrong or different from temperate oils as it can be produced at
premature. Temperatures seem to be cooling in 2012- lower prices and sold not only without subsidies but
13, even if temporarily, while increasing CO2 emissions with extremely high taxes. Bio-fuels should benefit
are shown in the EU despite mandating for bio-fuels the palm oil industry but this was not to be as trade
for the last few years. New science (fracking, horizontal barriers were put up. In specifications, LCA of palm
drilling and Octopus technology) has led the US to a bio-diesel without and (better) with CH4-capture were
bonanza of fossil fuels light crude petroleum and superior to those of soyabean and rapeseed but at the
an excess of natural gas, so that worries about peak moment poor LCA values for palm bio-diesel, derived
oil may be premature. With much of the world trying from undesirable land-use change or from peat, were
to recover from the long recession, efforts towards used; these of course cannot meet the 20% GHG-
reducing GHG emissions appear to have receded from savings standard. Apart from this, stringent standards
all policy agendas. Much is left for science to learn of for winter-conditions would exclude the use of
the natural world even as problems from the worlds unblended or non-fractionated palm methyl esters. It
over-population seem to be of increasing concern. is fortunate that palm bio-diesel and blends can find
iv Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

EDITORIAL
a market in China due to lower prices compared to for CPO and PKO to fall below crude petroleum prices.
diesel. High production costs for petroleum will likely Crude petroleum surprisingly maintained slowly rising
maintain high prices of crude oil. The inter-relationship prices in response to a slight S<D situation, even with
of energy and oils will likely ensure a secure future for the large increases of US fracking productions. This is
palm oil. at a time of increasing CPO supplies especially from
Indonesias maturing palms as shown from resultant
record stocks from MPOB. The July high season showed
Palm Oil Prices and Implementing Usage a 18% increase of Malaysian CPO supply but fortunately
of B5 to B10 Bio-diesel Blends stocks recorded only a minimal 1% gain. With low
prospects for exports palm bio-diesel, CPO prices
Palm methyl esters were still sold (106,000 tonnes hopefully will remain supported by local use of B5 and
were exported) but in relatively small quantities while B10 (or even B20) bio-diesel even as the two major
in the complex of vegetable oils some substitutions producing countries struggle with infrastructure to
take place as wide price differences appear among provide blending facilities to all regions. Nevertheless,
the traded oils. For some time vegetable oil prices despite falling prices it is not expected that there will
have been traded in a higher band because of bio- be any palm oil producer reporting losses even if CPO
diesel competing with petroleum diesel and prices prices plunges to RM1,800. However it may be a time
continued until late 2012 when palm bio-diesel was when the industry can address the major outstanding
slowly excluded from the major users. It is a time problems, e.g. stagnant yields, replanting old palms,
when EU countries realize the enormous drain on over reliance on guest workers and lack of innovations
finances due to subsidies for renewable energy in the upstream and downstream.
face of a deep recession. By early 2013 palm oil prices
decoupled from the correlation band with petroleum Abbreviations. B5 & B10 = 5% & 10% bio-diesel
basically from barriers to palm bio-diesel and relatively blends with petroleum diesel; CO2 = carbon dioxide;
low CPO prices have prevailed as compared to other CPO = crude palm oil; EU = European Union; GHG =
oils. greenhouse gases; LCA = life cycle analysis; MPOB =
Malaysian Palm Oil Board; PKO = palm kernel oil; S&D
The present imbalance of oversupply of CPO supply vs = supply and demand
unrealized demand (especially palm bio-diesel) due to
economic pressures has caused relatively low prices
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 v

TESTING THE FLOOR TO THE PRICE BAND
James Fry
LMC International, Oxford
[Presented at the POC2013 Conference, Mar 2013, Kuala Lumpur]
Introduction: Outline of Presentation roughly where Rotterdam CPO prices are at the same
level as Brent North Sea crude oil prices.
Most of you are by now familiar with the price band
created by the use of oils in biofuels. Today, in view of 800
EU premium over diesel, US$ per tonne

1,600
the unprecedentedly high stocks of palm oil, I focus on Rapeseed Oil 700
NW Europe prices, US$ per tonne

1,400
how the floor to the price band is defended. In doing 600
500
so, I explain how government actions, which range 1,200
Soy Oil 400
from export taxes to biofuel subsidies, have played their 1,000
Palm Oil 300
part in creating a floor to the price band. The existence
800 200
of a price band for CPO is, I hope, well accepted by
600 100
now. Today I present new evidence of a similar price-
Brent Crude 0
stock relationship for PKO. Looking ahead, I end by 400
-100
describing how the prospects for crude oil and stocks 200 Sep-09 Mar-1
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
come together to generate the price forecasts for the
550
oil palm complex.
PKO + oil in PK stocks, '000 tonnes

Figure 1. Price band of vegetable oils and Brent 500
800
crude prices
Biofuels caused the emergence of the Vegetable 450
EU premium over Brent crude, US$/tonne
RSO
700
Oil Price Band 600800
400
EU premium over Brent crude, US$/tonne
RSO Average
The emergence of the price band [Fry (2012)] means 500700
350
we must focus on the premium for oils over Brent in 400

600 SBO Average 300
order to understand the behaviour of prices (Fig. 1). 300

500 SBO
250
Stocks
RSO and SO premia over Brent crude is seen to be 400 CPORSO

Average Jan-07 Jan-08
200 SBO
well above that of CPO which actually equalled Brent 300
100
for a very brief period in 2012. What is also needed is 200
CPO
0
to observe the average premia of the oils over Brent 100
crude, shown as horizontal lines. Note: All three major -100 0

CPO
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
vegetable oils, palm, soy and rapeseed, have recently -100
seen their premia over Brent below their historical CPO Average SBO Average RSO Average
average levels (Fig. 2) 300
Figure 2. Premia of vegetable oil prices over Brent
PME supply price discount on EU gasoil
crude
250
Implications of the Price Band
200
Once one acknowledges that a price band exists, it It is more appropriate to analyse the premium of each
US$ per tonne
follows that our analysis should concentrate upon the vegetable

150 oil price over Brent crude (Fig. 2). Even when
determinants of the differentials between vegetable Europe is not a big user of palm methyl esters (PME)
Gasoil premium over Brent
100
oil and crude oil prices to arrive at CPO price forecasts. the effect of prices can be seen. If CPO falls below the
Brent50 floor, it starts to become profitable to use PME
The period since October demonstrates that, just as in Europe without any need for government subsidies,
we saw in 2008, the floor to the price band in the EU is 0
with03/09/2012
PME traded
03/10/2012 as a direct
03/11/2012 alternative
03/12/2012 to fossil diesel.
03/01/2013 03/02/2013
Malaysian Oil Science and Technology

600 2013 Vol. 22 No. 1 2,750 1
500 2,500
Brent, $/tonne
400 2,250
MPOB Stocks
300 2,000
-150
Pr
-200
-250
03/09/2012 04/10/2012 04/11/2012 05/12/2012 05/01/2013 05/02/2013
CIF NW Europe FOB Belawan FOB Belawan - export tax
The Impact of Stocks on Prices

250
We all know and believe that there is a relationship
Premium over Brent, US$ per tonne

200
between stock levels and prices in the usual supply- 150
demand relationship. If you are sceptical about the 100
price band, see how closely the CPO premium is tied to 50

CIF NW Europe
stocks (Fig. 3). We can see one of the best examples of 0
FOB Belawan
inverse correlation - high stocks imply a low premium -50
and vice versa, with the average premium is given by -100 FOB Belawan
- export tax
the horizontal line. As the stocks come down begin -150
to come down we can expect increasing premium or -200
higher prices. -250

03/09/2012 04/10/2012 04/11/2012 05/12/2012 05/01/2013 05/02/2013
600 2,750
500 2,500
Figure 4. Freight costs and export taxes affect
EU premium over Brent, $/tonne
400 2,250 premium of CPO prices over Brent crude

MPOB Stocks, '000 tonnes
300 2,000
200 1,750 The Attractions of CPO as a Fuel in S.E. Asia

100 1,500
When EU CPO is at parity with Brent crude prices, then
0 1,250 SE Asian CPO stands at a discount to crude, by virtue of
-100 1,000 the freight costs to Europe.
Premium Average premium Stocks
The discount inside Indonesia is larger than that in
Malaysia, on account of its export taxes that hold down
Figure 3. Impact of stocks on price premium of local CPO prices. (Dont forget Malaysian export taxes
CPO over Brent crude moved above zero this March 2013)
Freight Costs and Export Taxes have This is why palm methyl ester has recently been a
price-competitive transport fuel in the local market.
Re-inforced the Floor to CPO Prices
If I were Petronas or Pertamina today, I would be
Freight costs have helped to hold the MPOBs daily local
rushing to buy local CPO to upgrade into biodiesel for
delivered CPO prices at a sizeable discount to Brent
blending with diesel, so as to hold down the costs of
crude oil since October. What is becoming increasingly
supplying motorists with their diesel fuel.
important is the impact of export taxes. With this in the
background, the floor to CPO prices, as approximated
in the top two graphs of Fig. 4, can be at a discount to 800
EU premium over diesel, US$ per tonne
UCOME
Brent crude. 700
600
Export taxes in Indonesia have pushed prices inside
500
Sumatra down to an even larger discount (Fig. 4,
400
lowest graph).
300
RME
200
SME
100
PME
0
-100
Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
Figure 5. Comparative prices of methyl esters
2 Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

550 1,500
EU PKO premium over Brent US$ per tonne

500 1,200
450 900
400 600
350 300
300 0
TESTING THE FLOOR TO THE PRICE BAND 250

Jan-07 Jan-08 Jan-09
Stocks
Jan-10 Jan-11 Jan-12
EU PKO premiun over Brent
-300
Jan-13
EU double counting of biofuels from waste oils has

550 1,500
changed local price relativities. We see that until

February PME was cheaper than diesel (Fig. 5).
EU PKO premium over Brent US$ per tonne

500 1,200
450 900
The supply price of PME exports from Indonesia (=
internal CPO price + $100 processing costs + export 400 600
tax) has been far below EU gasoil prices. (Fig. 6)

350 300
300 300 0
PME supply price discount on EU gasoil

250 -300
250
Stocks EU PKO premiun over Brent
200
US$ per tonne
150 Figure 7. PKO stocks and price premium over Brent

Gasoil premium over Brent crude
100
50
The Lauric Price Floor is being Tested
0
03/09/2012 03/10/2012 03/11/2012 03/12/2012 03/01/2013 03/02/2013
The behaviour of PKO prices has many similarities to
that of CPO. When stocks are high, the PKO premium
over Brent crude is low and vice versa.
Figure 6. Gasoil and PME premia over Brent crude
So far, minimal amounts of PKO go to biofuel use.
However, you will start to see more PKME going to
Price Signals are giving Encouragement to the biofuel at current prices, as explained for CPO. Some
Use of Palm Methyl Ester as a Fuel in Direct blending of PKO with CPO may also occur.
Competition with Fossil Diesel.
In addition, todays prices for coconut oil, the other
We are seeing striking proof that markets work. Cheap lauric, should encourage its use in the Philippines in
palm oil in relation to crude oil does wonders for the both traditional food uses and in biodiesel. This support
use of PME as a fuel. Many factors have reinforced the for CNO demand will lift its price and, via substitution,
attractions of CPO as a competitive source of fuel in will boost PKO prices, too.
recent months. If this flexibility gets adopted in SE Asia,
considerable economic benefits can be expected.
What Does This Mean For Prices?
High stocks have kept the EU CPO price bouncing
along the floor to the price band; freight costs and There are More Imponderables than ever
export taxes create a sizeable CPO discount on crude In forecasting today, you must take account of the
oil in Asia; and now Uncle Sam has given PME a $300/ familiar factors, such as output cycles and the post-
tonne tax credit! 2006 relationship between stocks and prices.
Dont forget PME can use the worst (high FFA) CPO that New factors, notably the reaction of biofuel demand
has been overhanging the market and the PO industry to the competitiveness of PME against diesel fuel, also
could do well to respond to this. influence the pace of the drawdown in stocks.
Another big unknown is the way Malaysian export

The Price-Stock Relationship for PKO
taxes will affect the EU CPO premium over Brent. In
Plotting the PKO premium over Brent against PKO the past, it did not matter much whether we analysed
stocks, we see, as with CPO, that stocks and the BMD or EU CPO prices vs stocks, as they were linked by
premium move in opposite directions. (Fig. 7) freight. Now we have to take account of export taxes.
Is the link between stocks and the CPO premium over

Brent crude set on the BMD or in Rotterdam today?
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 3

The Knock-on Effects of Export Taxes What Does This Mean For Price Forecasts?
The likely sequence of events right now is as follows:
If there were no export taxes in SE Asia, MPOB stocks
(a) Initially, Malaysian export taxes widen the gap would have struggled to get below 2.0 million tonnes
between BMD and EU CPO prices. this year. With export taxes in place, stocks will fall to
1.8-1.9 million tonnes at their mid-year low point.
(b) This at first reduces BMD prices, but, as I will
explain, in current conditions the cost of the Peninsular delivered and BMD CPO prices will come
tax is likely to be passed eventually on to the together at M$2,625 by mid-year, if Brent is $105/bbl.
FOB and EU prices. by then. (I remain bearish on Brent, but accept that
the US money printing presses are creating a new
(c) This is because the more the export tax burden bubble.)
falls on producers, the greater will be the fall
in local prices. FOB CPO prices would then be $890 (near M$2,775) in
June/July taking EU prices within reach of $950.
(d) This makes PME more competitive in export
markets. EU PKO prices would rise a little faster to stand just
above $1,000 in mid-year, or $950 on an FOB basis.
(e) Higher PME exports will hasten the drop in
CPO stocks. Abbreviations
(f ) This reduction in stocks raises BMD prices. BMD = Bursa Malaysia Derivatives; CNO = coconut
oil; CPO = crude palm oil; EU = European Union; FOB
Thus PME exports help to counterbalance export = free on board; MPOB = Malaysian Palm Oil Board;
taxes. PKO = palm kernel oil; PME = palm methyl esters; RSO
= rapeseed oil; SBO = SO = soybean oil; UCO = used
cooking oil;
Reference
Fry J (2012) The world of oils and fats: Is smart

partnership the way forward? MOST 21(2): 38-42

PALM AND LAURIC OILS: 2013 PRICE OUTLOOK
WITH SPECIAL REGARD TO INDIA
Dorab Mistry
Godrej International Limited
[Presented at the POC2013 Conference, Mar 2013, Kuala Lumpur]
Introduction crop. This is in an environment of the big export push

of CPO from Malaysia and Indonesia. Palm oil remains
BMD turnover as well as attendance of this years extremely competitive. There are large stocks of
conference is up and as the organiser, BMD is to be imported and local oils 2 MMT 80% higher than the
congratulated for the palm oil industrys biggest year before. There have been record imports of palm
conference. oil in 2012-13.
Background India: Production, Consumption and Per Capita

I got it wrong last year and there is no excuse. Bio- Consumption
diesel demand actually shrank by 2 MMT in 2012. These data are summarised in Table 1. Production is up
CPO prices peaked at RM 3,268. As expected from the and consumption is rising sharply. The driving force in
fundamental law of economics high prices bring increasing per capita consumption is low prices.
about a strong supply response. So we find that the
cyclical commodity bull market is over. Table 1. Data of Indias production, consumption
and per capita consumption
2012 Highlights
India: Production/1000MT
Congratulations to the Malaysian Palm Oil Board 2012-13 2011-12 2010-11
(MPOB); timely and accurate data have been provided Estimate Actual Actual
second only to the USDA. Everyone should be proud Soya oil 1650 1575 1600
of MPOB. But there is a need to improve on data from Gn oil 160 400 500
Indonesia. It would be nice if all major oil producers Rape oil 2250 1770 2250
provide data on production, imports and exports Others 3040 3055 2800
rather than depend on analysts to give them such Total 7100 6800 7150
data. This includes India.
India: Consumption/1000MT
The listing of FELDA is also praiseworthy, for which we 2012-13 2011-12 2010-11
have to commend Dato Sabri who will be much missed Soya oil 2600 2600 2550
due to his retirement this year.
Gn oil 150 400 500
Rape oil 2200 1850 2250
India Palm 8330 7385 6750
Total 17550 16575 15820
As usual I shall provide an overview of crop production
in India. The late arrival of the monsoon affected the Per Capita Consumption
groundnuts and cottonseed. Fortunately the late 2012-13 2011-12 2010-11
monsoon saved the soybean crop. The poor summer Total/1000MT 17550 16575 15820
rainfall is usually compensated by a large winter rainfall. Population/M 1260 1240 1220
So India is going to harvest the biggest rapeseed crop Per Cap in kg 13.92 13.36 12.96
in living memory and there is also to be a big wheat

PALM AND LAURIC OILS: 2013 PRICE OUTLOOK WITH SPECIAL REGARD TO INDIA
Data of Indias S&Ds and composition of imports are There are going to be provincial elections in India
given in Table 2. Despite high production, Indias in rapeseed region of Chad and winds of change
imports continue to rise. Of special interest is the data expected to favour oilseed acreages.
for palm oil of which a record of more than 8.5 MMT
imports have been estimated. Palm oil will capture all
the increase in imports. In the face of the persistent
Global Scenario
lower premium for palm oil prices, there has been Palm Oil
speculation that the attractiveness of the discount
palm oil could make it substitutable for other oils. But Palm oil remains the most important oil and the low
this has already happened a decade ago so that any cycle in production which has started in February will
practical substitution would already have taken place be more benign because of better rainfall and will end
without further scope and market share will remain in September 2013. Malaysian CPO 2013 production
stable as there will still be international demand for is estimated at 19.5 to 19.7 MMT. Indonesia 2012
other oils as well. production at 28 MMT and with strong expansion
of acreage will see 2013 at 31.5 MMT. The profitable
Table 2. Indias S&Ds and composition of imports nature of palm oil has caused expansion of the oil palm
to Thailand, Colombia, parts of Africa and even India.
India: Production/1000MT The rest of the world with increasing mature acreages
2012-13 2011-12 2010-11 combined will produce an extra 700,000MT in 2013.
Estimate Actual Actual The total world growth in 2012 was at 3.9MMT.
Op Stks 1650 1325 1430
Production 7100 6800 7150 Taxes and Duties on Palm Oil
Imports 10900 10200 8665
There has been much concern of export taxes especially
Consumption 17550 16575 15820
in SE Asia. I believe that these will become irrelevant as
Stocks 2000 1650 1325 prices are going below the threshold. What is more of
interest is the Anti-Dumping Duty which EU is likely to
India Composition of Imports impose on Indonesian Palm Methyl Ester. This could
2012-13 2011-12 2010-11 be announced some time in 2013 but it will have
Palm 8550 7680 6665 retrospective effect from 2012. At this stage this anti-
Soya 1050 1080 1000 dumping duty has unfortunately not been considered
by our European speakers in calculating the scope
Sun 1000 1140 800
for palm methyl esters. This is especially relevant for
Laurics 300 200 200
Indonesian palm methyl esters but as policies have not
Total 10900 10200 8665
been announced, they are still work in progress.
Indian Import Duties

Rapeseed Oil
The Indian government is very concerned about food
Production in Canada has declined but acreage in EU
price inflation. Currently there is a 2.5% duty on crude
is going to expand. This year EU rapeseed would be
and 7.5% duty on refined oils. By May 2013 it will be
better than last year as the weather is normal. There
10% on crude and 17.5% on refined oils. The recent
will be some switch to rapeseed from sunseed in
Economic Survey of India (which gives the intentions
Ukraine. Previously I had mentioned that sunflower is
of the government for the next 12 months to 5 years)
a fragile crop and give unpredictable yields as it could
talks of supporting higher prices for oilseeds via high
be a bumper season one year but a disaster in the
import duties. One can conclude that by Aug-Sept
next. It would be reasonable for growers to switch to
2013, import duties could rise to 20% on crude and
more profitable and more reliable rapeseed. So there
27.5% on refined oils. These may seem high but in
is much scope for expansion for rapeseed and also for
India there were instances of duties above 100% at one
soybean at some stage.
time which had been whittled down to the present
values. Such figures given are doable as far as India is
concerned.

In India there will be a big crop with an extra 500,000MT disinterested; Spain is actually reducing mandates. The
rape oil. In Punjab and Haryana provinces, wheat use of used cooking oil and waste tallow and animal
areas can switch to rapeseed and mustard seed over fats has a double carbon count. This has put further
the next several years. India has the visionary ideas pressure on total vegetable oils used in bio-diesel.
under the influence in thinking of a New Dimension
in Agriculture. On the other hand there is the huge opportunity to use
palm methyl esters as crude petroleum prices remain
In India there is the influence in thinking of a New high. There is still initial infrastructure needs and in
Dimension in Agriculture. At present wheat cannot Indonesia the increased bio-diesel will have an overall
be exported because of infrastructure needs and the demand expansion of 1 MMT. The total world demand
policy is to switch to rapeseed or mustard seed so will be expanded by 4.5 MMT.
as not to import too much. This is a good reason to
eliminate or substitute wheat for rapeseed. Therefore
rapeseed prices needed to be supported or that India
Incremental Supply Growth
will increase duties on imported oil.
Total world supply will go up by about 4.35MMT from
palm and soybean with a minor contribution from
China has 3MMT of rapeseed in stock and the oil stocks
rape but a decline from sun oil (Table 2 ).
to be used need to be polished, refined and sold.
Table 3. Incremental supply growth of vegetable

Sunflower oils
Sunflower, as I did caution previously, is a fragile crop.
Period 2012-13 2011-12
Russia provided a cyclical high crop last year and
logically it is expected not to have a good crop this Soya oil + 1,100 + 600
year; so expect a lower crop. There will be some switch Rapeseed oil + 100 + 300
to other crops. Sun oil - 1,000 + 2,300
Palm oil +3,900 +2,500
Cottonseed and Groundnut will be a bit lower in 2013. Total increase + 4,350 + 6,200
Soybeans The complex of vegetable oil market is anticipatory.

Finally there can be the biggest supply response from Most of the major vegetable oils with the exception
S. American crops of 140MMT. This represents the of CPO are derived from oilseeds. S&Ds of oilseeds
biggest supply of soybeans 30MMT more than last affect the outlook and plantings of 6 months ahead
year. If weather permits expect a bumper crop in N. will be contributory. This year, unprecedented big
America as well. soya crops (from N. and S. America) and sunseed crops
(from Ukraine and Russia) will be harvested in Sept
Crush did not change much we only lower or raise Oct 2013. An as an anticipatory vegetable oil market,
stocks of beans. Currently there are problems of the effects will be expected to be shown from June
logistics in Brazil. These will get sorted out by April. onwards.
Argentina will also begin exports in April. US plantings
and weather will also be better known by April. On top of this the 2012-13 period has started with
the heaviest ever stocks. Current palm oil stocks are
historically highest everywhere. The current data of
Incremental Demand Growth MPOB give the impression that all CPO stocks are in
Malaysia. Indonesia can be expected to have far more
On the demand side world demand for food will (5MMT) CPO stocks.
grow by 3.5MMT, not the normal 2.5MMT mainly
due to lower prices. On biodiesel demand, the last
year bio-diesel growth actually shrunk by 2MMT and China
this year demand may grow by only 1MT. With most The State Reserve has handled the situation very
economies in poor shape governments have become judiciously, if we are to understand the worlds

largest consumer helping importers to avoid period will be critical and could get more bearish after
paying exorbitant prices. Currently almost 1 million an optimistic estimate from USDA August crop could
tonnes of rape oil will be released from reserves. More be a watershed. With this as well the ending of the
information will be available from the Beijing meeting low production cycle or the beginning of high CPO
on 22nd March 2013. production cycle even with the reduction of use of
fertilizers there could bearish pressure, but BMD will
not be expected to break RM1,800 unless Brent crude
Price Outlook breaks below US$80.
The biggest new factor is the booming US mineral oil
Even inefficient plantations produce CPO with RM1,500
production. That the US will be the greatest crude oil
all-in cost, so the good news is that in this bear market
producer is an economic game changer. One cannot
all plantations will always remain profitable. It appears
be too bullish on energy prices anymore from the US
that the days of easy profits are over, to allow necessity
expansion on natural gas production and increasing
to be the mother of invention. For a long time
amount of Canadian crude petroleum. This directly
inefficiencies and leakages are the rule and it is now
hits palms most bullish angle bio-diesel. Western
necessary for managements to stop all leakages and
countries are under dire financial circumstances and
increase productivity.
these countries, with the exception of Germany, are
cutting back on bio-fuel subsidies and targets. One may I believe soya is already at a discount to forward
assume that Brent crude remains in the $90 to $110 conditions. After April 2013, soya oil price is expected
range with a relatively stronger dollar and anticipating to break down to US$900 FOB Argentina from todays
no extreme weather conditions. $1,020. This value can fall lower if there is a decline of
Brent crude price to $80. Sun oil will stay at premium
Threats to Price Forecast to soya oil until September. Then it will be at a discount
as it will have to compete for markets. Rapeseed oil
These come from geo-political tensions. There will
remains as a premium oil on account of its greater
be back-tracking on existing bio-diesel mandates or
usage in EU bio-diesel but the outlook for laurics is
withdrawal of Blenders Credit, e.g. $1 per gallon in
bleak and by Sept 2013 will be at a discount to CPO
USA. A collapse of the US dollar will be a total disaster
for the world. A major weather problem such as a
revival of El Nino will be devastating enough to wipe Conclusion
all the worlds surplus.
The supply situation has given rise to a bear market
but this time around there is little danger to OP
Price Forecast Analysis plantations. Pure plantation companies will have
Price forecast can be made in three time frames. From to be patient; sometimes short time pain has to be
March to April 2013 prices cannot be bearish. PO stocks borne for long term gain. However, companies with
will be drawn down in the next 3 months will not be downstream activities that have branded cooking oils,
bearish. My previous forecast to the end of February margarine, speciality fats, oleochemicals, animal feeds,
2013, at RM2,300-2,600 had been spot on. Up to the beef & poultry will prosper because prices of their raw
end of April, expect prices at RM2,300 to 2,500 due to materials are coming down. As for the rest one may
stock drawdown period but can be volatile during the quote the Sage of Omaha Only when the tide goes
Malaysian general elections. out will we know who has been swimming naked
Abbreviations. BMD = Bursa Malaysia Derivatives;

CPO Price Forecasts for April 2013 CPO = crude palm oil; Gn = groundnut; M = million;
Onwards MMT = million metric tonne; MPOB = Malaysian Palm
Oil Board; MT = metric tonne; PO = palm oil; S&D
Prices are expected to get bearish from April 2013 as = supply & demand; sun = sunflower; USDA = US
supplies increase from S. America and Europe and Department of Agriculture
put prices under pressure. BMD futures of CPO could
break RM2,200 or even go below. The July-August

GLOBAL PALM OIL BUSINESS PROSPECTS AND
CHALLENGES
A.H. Ling
Ganling Sdn Bhd
[Lecture presented to MOSTA on 22nd June 2013, Kuala Lumpur]
Introduction Palm oil provides a crucial source of food, oleochemicals

and energy to the developing world consumed in
The phenomenal growth of the global palm oil more than 150 countries, e.g. China, India, EU, Pakistan,
business its success story and challenges ahead will Indonesia, USA, etc. It is a versatile oil and used in
be discussed according to the following: thousands of everyday products. It also provides an
alternative fuel source: bio-diesel
y Dynamic growth of palm oil in the global oils
and fats complex
The Oil Palm: Unique and Most Efficient
y Palm oil supply dynamics and future Producer of Vegetable Oil Per Unit Land Area
prospects
y The oil palm produces 6 to 10 times more oil
y Demand growth and prospects during global than most oilseeds per unit area of land
economic uncertainties
y Uniquely produces two types of oils from the
y Emerging bio-diesel demand and its complex same tree: palm oil and lauric oil (10:1)
linkages with crude oil and other oilseeds
y Total annual oil yield of 5.0-7.0 MT/ha from
y Challenges ahead price cycle and S&D estates as compared to most oilseeds which
imbalance, improving productivity and fading provides less than 1 MT/ha
bio-diesel growth
The implications are that it takes less land to produce
each tonne of oil (only 1/5 or less land) as compared
Dynamic Growth of Palm Oil in the Oils and
to the other oilseed crops. This is highly desirable
Fats Complex considering the limited and diminishing land resources
Palm oil is one of the 16 major oils and fats in the world worldwide.
together with soybean, rapeseed, sunflower and
other oils. Over a period of about 5 decades palm oil Palm Oil Supply Dynamics and Future
has transformed into a world class commodity:
Growth Prospects
y 1960s nowhere and a relatively unknown
vegetable oil Global Palm Oil Production Dynamic Supply
Growth
y 1980s rapid expansion of plantings in
Malaysia and Indonesia Fig. 1 illustrates the recent production growth of palm
and soya oils. As seen palm oil:
y 2000 10% share of global production (113
MMT) y Is the fastest growing edible oil in the world
y 2006 overtook soyabean oil as the No. 1 with production doubling over 10 years
edible oil y Has average growth of 7.8% per annum as
y 2012 33% share of the global production of compared to soybean oils 4.2%
164 MMT

GLOBAL PALM OIL BUSINESS PROSPECTS AND CHALLENGES
y Will have supply estimated to touch 56 MMT Rapid Area Expansion in the Last Decade
in 2013 Boosts Global Palm Oil Supply
y Will surge ahead in production and widen its Planted area growth between Malaysia and Indonesia
supply gap against soya oil are compared below:
Malaysia Indonesia
3.7 to 5.0 Mha 5.1 to 8.9 Mha
Avg of 3.5% or 150,000 ha pa Avg 6.7% or 420,000 ha pa
CPO production growth are compared below:
Malaysia Indonesia
12.0 18.9 MMT 9.6 to 23.9 MMT
Avg 5.4% or 0.7 MMT pa Avg 11.0% or 1.6 MMT pa
With very rapid area expansion, Indonesias production

had surged ahead to more than double
Figure 1. Global palm oil and soyoil production

growth
Global Palm Oil Production Key Producing

Countries
Fig. 2 illustrates that growth is concentrated mainly
in South-East Asia (88%) with the worlds production
coming from Indonesia (47%) and Malaysia (38%).
Thailand with 3% is the third largest producer. Malaysia
and Indonesia are still the key determinants of palm oil
supply to the world. In Malaysia oil palm is found in Figure 3. CPO production growth and planted area
Peninsular Malaysia (55%), Sabah (31%), Sarawak (14%) in Malaysia and Indonesia
while in Indonesia the regions are Central Sumatra
(38%), North Sumatra (22%), South Sumatra (19%) and Moving Forward Palm Oil Supply
Kalimantan (18%).
Dynamics to Change?
The era of very rapid area expansion may be ending

new planting to slow down, as shown in Fig. 4.
In Malaysia estimated new plantings are to be less

than 100,000 ha pa and the total planted area is
estimated to reach a maximum of 5.6 Mha. Replantings
will temporarily limit production growth. There will
be limited or stagnating production growth from
Malaysia.
In Indonesia new plantings have been declining since

2009. The cut back in expansion has been due to
Figure 2. Palm oil producing countries stringent statutory and sustainability requirements,

a two-year government moratorium on forest and The keys to future organic supply growth are (a)
peatland conversion (from 2011) and more difficult improving oil palm age profile and (b) replanting to
(logistically) and marginal areas. An estimate of new boost supply growth in Malaysia.
plantings of 150,000 to 250,000 ha pa leading to a total
planted area to reaching 11.5 Mha by 2020? A slower
area expansion in Indonesia will structurally cap supply
growth from 2018 onwards.
Figure 5. CPO yield performance in Malaysia and

Indonesia
Improving Oil Palm Age Profile for Future

Organic Supply Growth
Fig. 6 illustrates the yield distribution by age of the oil
palm.
Figure 4. Planting growth in Malaysia and

Indonesia
% Total Immature Young Prime Ageing Old

Organic Yield Growth to Drive Future Supply Planted 0-3 yrs 4-8 yrs 9-18 yrs 19-23 yrs 24-28 yrs
Growth Malaysia 16 19 39 19 7
Indonesia 23 26 37 9 5
CPO yield performances in Malaysia and Indonesia
over the last 11 years are depicted in Fig. 5. It is seen Figure 6. Yield distribution by age of oil palm in
that Malaysian CPO yields per ha increased from 3.5 to Malaysia and Indonesia
4.1 MT/ha (+17%). The yield appears to have stagnated
at about 4.0 MT/ha in the last 5 years. Improving Oil Palm Age Profile in Indonesia to
Drive Global Supply Growth
Indonesian CPO yield per ha improved from 2.8 to 3.6
MT/ha (28%) but yield still lag Malaysian yield by 0.6 T/ The very rapid expansion of planting from 2005-09
ha. Is there scope for CPO yield growth in Indonesia? has resulted in a relatively young age profile (23%

immature and 26% mature palms). Indonesia will Table 2. Palm oil consumption growth and
continue to enjoy very high production growth over changing key drivers
the next 3-5 years. Years 2013-18 will be the golden
era for growth. The strong organic production growth Period Uses Key Drivers
in Indonesia will drive global supply growth in this 1960-1980 Food Population growth
decade. On the other hand there is an imminent risk: 1980-2000 Food 1. Population growth
the supply growth may be too fast in the short term. Oleochemicals 2. Emerging economies
2000-2010 Food 1. Population growth
Replanting to Boost Supply Growth in Malaysia Oleochemicals 2. Strong economic growth from
Replant or Perish? BRIIC countries
Biodiesel 3. New markets like USA, central Asia
The high proportion of ageing (19%) and old (7%) 4. Bio-fuel mandates and linkage to
oil palms result in a declining yield trend (Fig. 6). energy sector
Replanting with high yielding planting materials and 2010 -2020 Food 1. Population growth
improved agro-management technologies will boost Oleochemicals 2. sustaining economic growth?
oil yield from the current national average of 4.0 to 5.0
Biodiesel 3. stronger biofuel usage?
MT/ha. There is the need to replant at least 150,000
to 200,000 ha pa to sustain supply growth of 3-5%.
Replanting will temporarily restrict supply growth in
Palm Oil Consumption is Growing But Growth
the short term.
is Lagging Supply
Palm Oil Output Forecasts 2015-2020 Fig. 7 summarises supply and demand growth for
recent years. Demand growth may not be growing as
Global palm oil output forecasts are given in Table fast as supply growth due to weak economies in USA
1, where prospects for palm oil growth are expected and EU and the slowdown in China. The 2013 forecast
to be good. Oil supply will grow at an average of 3.3 shows an excess of supply and production over
MMT or 7% pa to reach 78 MMT by 2020. The strongest consumption.
growth will be provided mainly by Indonesia.
Table 1. Palm oil output forecasts
2010 2015 2020 Average

MMT (F) (F) Growth
MMT MMT MMT/YR
Malaysia 16.99 19.77 21.19 0.42
Indonesia 21.90 32.73 43.43 2.15
Others 6.74 9.69 13.64 0.69
Total 45.63 62.19 78.26

Average growth 3.31 3.28 3.26
MMT/YR
Dynamic Demand Growth for Palm Oil
Palm oil consumption growth and the changing key

drivers are sumarised in Table 2.
Major consuming countries of palm oil are India (14%),

Indonesia (13%), China (12%), EU (12%), Pakistan (7%),
Malaysia (5%) and others (37%)
Figure 7. Global supply and demand growth for
palm oil

Complex Linkages to Oilseeds, Biodiesel

and Crude Petroleum and Impact on Prices
Bio-diesel
The initial trend of bio-diesel demand had been
increasing steadily until 2012 (Fig. 8).. This was
supported by increasing use in mandatory blends, e.g.
EU, Brazil (6%), Argentina (7%), USA (RFS2), Indonesia,
Thailand and recently Malaysia. With uncertain tariff
barriers in the EU, bio-diesel production growth had
declined in 2012. Will there be scope for growth in
developing countries when the premium drops in
relation to the price of petroleum crude?
Figure 9. Linkage between CPO and Brent crude oil
prices
There is scope for more usage in the energy sector,

either direct fuel or as biodiesel. Malaysia and Indonesia
must step up domestic bio-diesel usage to manage
price volatility during times of excess production and
discount to soya oil.
Huge Discount of CPO to SBO to Stimulate

Demand for Palm Oil
SBO has had a huge premium over CPO in excess of
US$400/MT (Avg US$130/MT). The SBO premium has
remained stubbornly high due to poorer soybean
Figure 8. Global supply and demand growth for harvests in S. America and USA and demand for
palm oil biodiesel production (Fig. 10).
Tight seed oil supplies in 2013 due to poor weather

Malaysia to Expand Usage of Biodiesel in in Argentina and low US stock should mean greater
2013/14 dependency on palm oil. The demand for palm oil
should remain due to competitive prices and fuel
Mandates are B5 for automobiles and B10 for demand.
commercial vehicles. Blending plants are in central
Peninsular Malaysia (presently 6 in PD, Melaka and
Klang), another 3 in the southern region by July 2013
and 4 in the northern region by October 2013. The
total consumption of biodiesel will be 680,000 MT pa.
There is a need to increase domestic usage as there is
an excess of supply of PO and there is little premium
over Brent crude oil (BCO).
CPO Prices are Lower than Crude Oil Scope for

More Usage in the Energy Sector
Since 2007, there is a price band between CPO and BCO
due to the linkage to bio-diesel usage. CPO is usually
higher than BCO by about US$25/barrel. The present
prices are now lower than BCO prices (Fig. 9). Figure 10. Soyabean oil premium over CPO prices

Emerging Challenges Going to 2020 Productivity Challenge
The present scenario involves the price cycle, productivity, In Malaysia the first problem is stagnating oil yield
biodiesel mandates, trade tariffs and sustainability issues. per ha due to the high proportion of ageing palms
with declining yields, Ganoderma disease, and acute
shortage of labour especially of skilled harvesters.
Price Challenge Managing S&D Imbalance
The challenge is to replant with high yielding
The CPO price trend for 1996 to 2013 is given in Fig. 11, planting materials to boost oil yield from 4.0 to 6.0
where it may be summarized that high prices encourage MT/ha, i.e. need to replant 150,000 to 200,000 ha per
new plantings, increased supply leads to low price cycle, year to sustain 3-5% growth. The labour shortage
presently the trend is entering the low price cycle, and is serious. Plantations may be losing up to 15-20%
subsequently there will be a downturn in the palm oil of production due to the lack of skilled harvesters.
business. There is a need to mechanize harvesting involving
serious R&D solutions.
In Indonesia, the cost of production remains high

due to low labour productivity and escalating
minimum wages, poor infrastructures (roads) and
port facilities.
Biodiesel Challenge Growth not in Tandem

with Palm Oil Production
Supply growth of CPO is out-stripping demand
growth creating the potential for prolonged build-
up of palm oil inventories. Palm oil producers are
Figure 11. CPO price trend 1996-2013 acting as distressed sellers. There is a need to
increase demand for palm oil through bio-diesel
Huge Palm Oil Stocks Pressure CPO Prices usage. Increase in domestic biodiesel usage by key
producing countries must have an efficient and
Malaysian palm oil stocks reached a record high (Fig. 12)
sustained system of bio-diesel usage (B5 or B10
of 2.6 MMT in Dec 2012 due to the sharp supply recovery
blends). Malaysia and Indonesia need to manage the
and weaker demands especially from China and EU.
CPO export tax regimes speedily.
Indonesian inventories were reported to be very high (est.
3.5 MMT). Storage capacities stretched to its maximum
Abbreviations. B5 = blend of bio-diesel containing
limit and inadequate year ended with very high stocks
5% methyl esters; BCO = Brent crude oil; CPO = crude
which may only return to normal after the end of Q1
palm oil; EU = European Union; ha = hectare; MMT
2013.
= million metric tonne; MN T = million tonne; MT =
metric tonne; pa = per annum; PD = Port Dickson;
PO = palm oil; Q1 = quarter 1; R&D = research and
development; RFS2 = US Renewable Fuel Standard;
S&D = supply and demand; SBO = soybean oil; Y-O-Y
= year over year
Figure 12. Malaysian palm oil inventory levels and

CPO prices

INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING:
IS THE GAME NOW CHANGING?
Chris de Lavigne
Frost & Sullivan
[Lecture presented at POC2013 Conference, 4-6th Mar 2013, Kuala Lumpur]
Bio-diesel Market Statistics 25
20
Much of bio-diesel production have been in EU during
Production (MMT)
2006-08 but other countries have joined in after 2008 15
until global production reached almost 23 MMT in
2012 (Fig. 1). The increase from 20 MMT in 2011 to 10
22.9 MMT in 2012 was almost 15% driven mainly by 5

significant increases in USA, Indonesia and Argentina.
EU sia esia entina d Chi
na nes strali
a zil ia
USA lay ndon ilan ppi Bra mb
Ma I Arg Tha li Au Col
o
Phi
Capacity Production
20
Sources: EBB, NBB, OECD, USDA, FAS
Figure 2. Biodiesel production and capacity by

Production (MMT)
15
country in 2012
10 Usage of Rapeseed, Soybean and Palm Oils in

Bio-diesel
5 The biodiesel market has made a significant impact in
terms of volume usage of vegetable oils (14%), though
palm oil usage in this sector has remained low (Fig.
2006 2007 2008 2009 2010 2011 2012 3). In 2011/12 just under a quarter of global rapeseed
oil production was used in biodiesel production, and
Sources: EBB, NBB, OECD, USDA, FAS
about 18% of global soybean oil production. Biodiesel
accounts for about 5% of global palm oil production.
Figure 1. Global bio-diesel production 2006-2012 Rapeseed oil forms the major feedstock in the EU
and accounts for two thirds of total input. The use of
Global Bio-diesel Capacity and Utilization soybean and palm oil is limited by the EU bio-diesel
standard DIN EN 14214. Soybean-based bio-diesel
With a global capacity of bio-diesel production of
does not comply with the iodine value prescribed by
50 MMT, the utilization in 2012 was only under 40%
this standard (iodine value functions as a measure for
(Fig. 2). The largest countries in terms of capacity are
oxidative stability). Palm oil-based bio-diesel does not
the EU, USA, Indonesia, Brazil and Argentina. Capacity
provide enough winter stability particularly in northern
utilization in most major countries is typically 35-40%
Europe. However, it is possible to meet the standard by
in 2012. There are well over 600 bio-diesel plants
using a feedstock mix of rapeseed, soybean and palm
globally, with the largest number in the EU (250+) and
oils. The vast majority of soybean oil is used in Spain,
the USA (150+).
France and Italy.

INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING: IS THE GAME NOW CHANGING?
Bio-diesel Imports and Exports A Complex and Dynamic Palm Oil Market
The EU accounts for virtually all global imports, mainly We can see how this has transpired over the last few
sourced from Argentina and Indonesia which have years and how complex and dynamic the palm oil
been profitable due to preferential taxes (Fig. 3). The market can be, making price forecasting difficult. The
EU is the only significant importer of bio-diesel, with chart as illustrated in Fig. 4 represents a simplified
Argentina and Indonesia the main exporters. Following version of when certain factors had a blatant influence
anti-dumping legislation, exports from USA have on the price of palm oil. Had we decided to do this
significantly declined. Imports in 2011 are estimated over the last 5 years and shown quarterly or even
at 3.3 MMT, mainly from Argentina and Indonesia. monthly volatility, then it would be possible to see the
confluence of multiple factors coming together at any
Bio-diesel Impact on Palm Oil Pricing one time. Overall the palm oil market has become a
lot more volatile since 2006, and a far more complex
Palm oil pricing is a complex matter that is influenced one to analyse, whereby far more parameters need to
at any given time by one or a multitude of factors which be taken into consideration when calculating pricing,
can then cause significant volatility at times. Some of as well as to what importance or weighing to give to
the key factors are outlined in Table 1 with explanatory them over the course of time.
notes. No level of impact or weightage is offered here.
R apes eed Oil

6 6 %
Figure 3. Use of vegetable oil feedstocks in bio-diesel production
Table 1. Multitude of factors influencing palm oil prices
Demand vs Supply Stock to Usage Ratio New Markets for Bio-diesel Import/Export Taxation
1. S&D of all veg oils 1. Stock/usage of PO 1. Bio-diesel can be considered 1. Major impact on markets &
2. S&D of PO 2. important when stocks as such complex
> 2 MMT 2. Other future new uses for 2. Higher the tax, the higher the
PO (Feed?) price of oil
Land Usage & Energy Prices Global Economic Health Particular Events (War)
Switching
Switch in and out Crude oil prices will prop Sentiments based on Wars can create major shocks to
of crops based on the price of veg oils due to economics and stock market commodities in terms of demand
incentives/profits their usage as energy crop impact the prices of veg oils and pricing
Logistics and Storage Regulations Commodity Speculation Asset Allocation Strategies
Logistics prices and Regulation such as Commodities across the board Around $600 bn is allocated to the
mode of transportation product specifications can are highly speculative, and oils commodities sector, up 10x since
will impact commodity influence product prices are part of this complex 2000
prices

been more expensive than crude oil barrel prices (Fig.

6). CPOs price competiveness to soy-oil and crude oil
is now at its best since the previous economic crisis in
2008. CPOs 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 Source: Frost & Sullivan
oils. Since 2007, it is clear that palm oil is trading in a
new band, driven by bio-diesel which is now more to Figure 6. CPO price vs SBO vs Brent oil crude price,
the energy complex than it was prior to 2006. 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 Bio-

diesel Usage
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
Source: Frost & Sullivan
so-called 20/20/20 mandatory goals for 2020, one of
which is a 20% share for renewable energy in the total
Figure 5. Average palm oil price (US$), 1991-2012
EU energy mix (Fig. 7). Part of this 20% share is a 10%
minimum target for renewable energy consumed in
CPO Prices Fall Below Brent Petroleum Prices the transportation sector. This goal is to be achieved
by all EU Member States and, in practice, is the driver
Bio-diesel (methyl esters), has until recently not been
behind demand for biodiesel and ethanol.
profitable as palm prices on a per barrel basis have

Under the EU system, bio-fuels must meet certain future decision to apply import tariffs as a result of an
criteria to count against the 10% goal. The Renewable ongoing anti-dumping proceeding against countries
Energy Directive (RED), which is part of the CCP, lays may be applied retroactively. The proceeding will be
our specific sustainability requirements. These include due by May 2013, any tariff would be decided on the
minimum greenhouse gas (GHG) emissions reductions basis of the findings of the investigation.
as well as economic and social criteria, which focus on
food price impacts, and adherence to International
GHG Emission Savings of Different Biofuels
Labour Organisation conventions. The RED entered
into force on June 25, 2009 and was to be transposed Certain bio-fuels do not have a high enough default
into national legislation by December 5, 2010. However, value to count towards the GHG emissions target and
in most EU Member States, full implementation is must be RSPO compliant. While bio-diesel produced
expected to drag out at least through 2011 and from most major feed-stocks appear to meet the
possibly longer. current default GHG emissions savings target of 35%,
palm bio-diesel was not accepted unless methane
In late 2012, the European Commission (EC) has capture has been installed at the palm mill. This
approved palm-oil based bio-diesel for the renewable therefore makes palm bio-diesel ineligible towards the
fuels standard provided it is certified under the GHG emissions target. Soybean oil based bio-diesel is
Roundtable for Sustainable Palm Oil (RSPO). To date, also not meeting the target.
RSPO certified palm oil currently accounts for 14% of
the global palm oil market, where the EU is worlds
largest buyer of RSPO-certified palm oil and the second Price Forecast for Palm Oil
largest importer of palm oil.
Several factors are likely to weigh heavily on the prices
of palm oil in 2013, and we see more downside catalysts
ECs Bio-diesel Anti-dumping Proceeding all inter-linked than the upside ones. Table 2 outlines
Progresses to Registration of Imports some of the key factors with explanatory notes but no
level of impact or weightage is offered here.
Since 2013, EU require all bio-diesel imports from
Argentina and Indonesia to be registered, so that any
Figure 7. Scheme of legislation based on Directive 2009/28/EC and Directive 2009/30/EC

Table 2. Factors likely to weigh heavily on prices of palm oil in 2013
Oil Demand vs Supply Stock to Usage Ratio New Markets (bio-diesel)

1. S&D of all vegetable oils 1. Stock to usage ratio of palm oil 1. Bio-diesel can be considered as such.
2. S&D of palm oil 2. Important when stocks are > 2 MMT 2. Other future new uses for palm oil
(e.g. Feed?)
Land Usage and Switching 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 Asset Allocation Strategies

Regulation such as product Around $600 bn is allocated to the
specifications can influence product commodities sector, up 10x since 2000
prices
Soy Crops in US and Brazil Indonesia still has a significant amount of immature
land to come into production, its rate of new plantings
A strong soy crop in US and Brazil coupled with very
has slowed in recent years. In Malaysia, growth has
strong production of palm oil both in Malaysia and
slowed as suitable new land for planting is diminishing
Indonesia will cause high stocks in palm oil. Due to a
rapidly.
firm soybean price and declining soybean crop, palm
oil has been trading at a heavy discount to soybean The edible oil market is now short over a million
oil (Fig. 8). With a low Malaysian export tax in Q1 2013, planted palm oil hectares (ha) over the next decade
palm oil has enjoyed some additional volume though due to the slowdowns in Malaysian and Indonesian
stock levels continue to remain high. This is likely to plantings (Fig. 9). In 2012, the Ministry of Agriculture
continue to be the case over the next few months. Malaysia commented that Malaysias planted area
If Malaysia and Indonesia have a bumper crop as is will only increase by approximately 400,000 ha in
expected, then palm oil will continue to trade at a the coming years this implies less than 4 years of
heavy discount. planting at the current rates. Meanwhile, Indonesias
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 Figure 9. Estimated new hectarage of oil palm,
oversupply, and this will take time to alleviate. While 2000-2030

Palm Oil Prices Loses Correlation to Crude Oil and help put some floor under prices. Indonesia is
Prices also increasingly using biodiesel but it is expensive
compared to subsidised fuel. But so much money has
Palm oil no longer seems to enjoy the correlation that already gone to waste where killed plants are now
it has had to crude oil prices in the last 6 years due to
mostly scrap.
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, Will Downstream Industries Benefit form lower
showing a clear link. Currently, at the end of February CPO and Lauric Prices?
2012, that has decoupled and is now standing at CPO
One argument is that the downstream will benefit
$784/Nymex Crude $92 = 8.5 (all figures rounded) as
from lower CPO/Laurics prices but is there too much
shown in Fig. 10
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? Bio-
diesel 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 bio-
diesel woes. This could provide a boost to the market
*Assuming
biodiesel export
equals biodiesel
production.
** Estimated
Malaysian bio-
diesel production
if B10 programme
is implemented as
planned.
Sources: CIMB, MPOB, MPOPC

Figure 11. Estimated bio-diesel production in Figure 12. Global production and estimated
Malaysia to 2014 capacity increases for fatty acids and alcohols

New Applications for Palm Oil Needed to Meet A Mini Slump in Palm Oil Prices for 2013
the Increased Supply
Until excess CPO supply can be taken up, we could
Malaysia and Indonesia may need to find new possibly see another mini slump in prices in 2013, taking
applications for palm oil in order to take up the slack us closer to a mid range in prices between the last 6
caused by increased CPO supply, less bio-diesel. year highs and lows. Prices will depend on whether a
Malaysias palm oil industry currently accounts for low tax can clear stocks and whether demand can pick
~RM50 billion annually. With limited land available, the up enough of the supply coming into the market. Even
country will need to enhance upstream productivity if this does happen, it will take some time before CPO
and exploit the full potential of downstream settles. If not CPO has a real chance of taking another
opportunities. The Palm Oil NKEA is targeted to reach correction again during 2013 (Fig. 14)
RM178 billion by 2020 and 98% of funding will be from
the private sector.
With regards to oleochemicals, Malaysias 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
2013 is likely to be another very challenging year for

CA G R ( 02-' 07 ) CA G R ( 09-' 14)
palm oil prices .......
Abbreviations. B10 = 10% methyl ester bio-diesel in

diesel mix; Bn = billion; CCP = climate change package;
CIMB = commercial international merchant bankers
of M alay s ia s prod uc tion berhad; CPO = crude palm oil; EBB = Economic Bulletin
is f oc us ed on
b as ic oleos 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 Co-
operation and Development; RED = renewable energy
directive; RM = ringgit Malaysia; RSPO = round table
Figure 13. Malaysias plan for future downstream for sustainable palm oil; SBO = soybean oil; USDA = US
growth Department of Agriculture

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 and others (34%). By 2012 total world exports were at
72.34 MMT being contributed by PO (56%), SBO (12%),
y Importance of palm oil in the global supply SO (10%), RSO (6%) and other oils (16%).
scene
Growth in exports was due to global population growth,
y Palm oil global market challenges income growth and low per caput consumption level.
Against a backdrop of lack of arable land and reduced
y The opportunities for palm oil in the future
supply from competing soft oils, the reliability of palm
growth of oils and fats
oil supply gives it the added advantage. In food and
y Conclusion industrial demand there was increasing applications
in the production of food and non-food products
The Importance of Palm Oil & Its (oleochemicals/bio-diesel), especially in countries
such as China, India, Middle East, EU and US
Derivatives in the Global Supply Scene
The palm oil industry has been synonymous with Palm Oil Global Market Challenges
Malaysias economic development. The industry
has contributed tremendously towards providing a All of the palm oil production comes from utilization
continuous supply to the global market. In 2012, palm of 5 Mha of land which contributes only 2% of the
oil and palm oil products contributed RM71.39 bln total hectarage of over 200 ha used in oils and fats
of exports to the global market. These numbers form production in the year 2012. Given the small footprint
10.4% of Malaysias total merchandise exports. The compared to the worlds agricultural planted area,
importance of the palm oil industry is given due focus the oil palm is the most efficient oil-producing crop.
as one of the NKEA of the NTP to transform Malaysia to Oil palm in Malaysia produces an average of 4.01 MT/
a high income nation. 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.
Production of Palm Oil and Other Oils 1990
However, despite high yields and low acreages palm
2010
oil has been the target of critics. Many of the critics
Malaysia contributed significantly towards the oils and come from developed temperate countries facing
fats market. In 1990 palm oil accounted for 12% of the high production costs and low yields. Many may recall
total production of 80.7 million metric tonnes (MMT) the campaign against palm oil due to its relatively
together with contributions of soyabean oil (20%), high saturated fat content and as a result the health
rapeseed oil (10%, sunflower oil (10%) and other oils of temperate oil users suffered from the detrimental
(47%). By 2012 palm oil (PO) accounted for29% of the health effects of trans fats, resulting from partial
production of 185 MMT together with contributions of hydrogenation of polyunsaturated fats to obtain many
SBO (23%), RSO (13%), SO (8%) and other oils (27%). desirable properties of saturated fats. Today the same
groups are using other ways to discriminate against
palm oil.
Oils and Fats Exports 1990 2012
Despite the competitive advantages of palm oil, the
In 1990 PO accounted for 36% of the total exports of
prices have been fluctuating poorly in the backdrop
23.1 MMT together with SBO (14%), SO (9%), RSO (7%)
of supply/demand situation. In 2012 much of the

MARKET CHALLENGES AND OPPORTUNITIES FOR PALM OIL IN 2013 AND BEYOND
developed world suffered from economic crisis which Market Challenges Growth in World
led to high stocks of CPO and resulting low prices. Population/Food Security
The Malaysian government has introduced counter
measures to meet the challenge. Restructuring the The world population is projected to grow from 7 bln
export taxes of CPO and increasing incentives for in 2011 to 9 bln in 2043. Food production must meet
replanting old palms helped to reduce the high stocks. this rate of increase. This alone is sufficient to exert
At a time when managing volatility of commodity pressure on commodity prices. By 2043, per capita oils
prices is essential, Bursa Malaysia Exchange has & fats consumption will reach (0.5kg x 32yr) + 24 kg =
provided a creditable and robust futures market 40 kg; world demand of oils & fats will be 40 kg x 9 bln
of CPO and derivatives for international traders. = 360 MMT. This is an increase of 184 MMT in 32 years
The maturity of BMD has made the exchange the or 5.75 MT per annum.
guardian of price discovery and benchmark for palm
oil prices. With regional integration of capital markets If increased demand is to be fulfilled by soyabean
and international collaboration BMD is on course to oil with a crop yield of 0.5 MT/ha, it will require
provide exciting and easily accessible trading for palm an additional 11.8 Mha of land/year. The world is
oil and derivatives. 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.
Summary of Challenges Ahead
1. Ideology Threat Developed countries (already Market Challenges Growth in World
deforested) promoted to play the role of supplying Population/Food Security
food, whereas developing countries to play the
role of forest ranger to preserve their forests Nearly all the population growth will occur in
and importers of food, leading to anti-growth developing countries. Sub-Saharan Africas population
movements. is expected to grow the fastest (up 108%; 910 M
people), and East and SE Asias the slowest (up 11%;
2. Growth in world population/food security
228 M people). In 2012, there are still 870 M hungry
ever-growing world population resulting in
people worldwide, down 1,000 M 20 years ago; or
more mouths to feed. Growing economies and
one out of eight people goes hungry every day. There
improving incomes will increase per capita
is an unequal distribution of food supply with the
demand for oils and fats.
developed countries having excess and insufficient
3. Scarcity of land/policies expansion vs productivity supplies in Central Africa, India, Mongolia and isolated
vs environmental pressure areas of Central S America and SE Asia (Laos and
4. Food vs fuel higher crude oil prices encourage Cambodia).
greater use of food products such as corn,
vegetable oil and sugar in the production of bio- Net exporters of oils and fats are from Asia Pacific (palm
fuels, plus higher cost of production unless offset oil) and Americas (soybean). The rest of the countries
by the effect of fracking shale gas. are net importers (Fig. 1).
5. Global warming/climate change the impact of
climate change on weather variability and crop China
Net Importers
EU-27
yields. India Net Exporters
North Africa
FAO estimates that by 2050, rising population and incomes
Pakistan
will require70 percent in crease in global food production
Market Challenges Ideology Threat Bangladesh
Iran
Concept: make developed countries as food granary & Mexico
Indonesia
Egypt
keep undeveloped countries for forest conservation. Japan
Malaysia
Argentina
This is a wrong ideology on land use policy, denying Turkey
Brazil
developing countries from developing their agriculture South Africa
Ukraine
South Korea
sector. Correct ideology should be to choose crops that Nigeria
Canada
Philippines
produce most foods with least land area: need for UN Taiwan
Russia
Sustainable Agriculture Initiative. Developed countries -15000 -10000 -5000 0 5000 10000 15000 20000 25000
have limited new land for agriculture. Oil palm is a Source: Oil World, Dec 2012
perennial crop and yields about 10x more than annual
crops on the same land area. Figure 1. Importers and exporters of oils and fats

The FAO Food Price Index and the FAO Commodity Table 1. Estimated future population and land
Price Indices are given in Fig. 2. For 2012 as a whole, needs
the food price index averaged 212, 7 % less than that
of 2011, with the sharpest declines registered by sugar Year Worlds Arable land Arable land
(17.1%), dairy products (14.5%) and oils (11.7%). The population per capita per capita
(bln) (x10-3 km2) (ha)
2012 price fall s were much more modest for cereals
(2.4 %) and meat (1.1%). For 2012 as a whole the oils/ 1922 2.0 7.50 0.75
fats index averaged 225 which compared with 252 in 1975 4.0 3.75 0.38
2011. The main reason for the fall in December is the
2005 6.6 2.27 0.23
continued build-up of large global inventories of palm
oil as abundant production in SE Asia coincided with 2030 8.0 1.88 0.19
a protracted weakness of import demand.
2042 9.0 1.67 0.17
Source: Freeworld Academy & University of Michigan

FAO Food Price Index FAO Food Commodity Price Indices
The world cultivated areas for oil crops and comparative
2002-2004=100 2002-2004=100
250
data are given in Tables 2&3 which show that 5.25 % of
250
2011 total land area has been planted with oil seeds. Only
Sugar
2010 0.29% of the worlds agricultural land has been used
220 220
for palm oil and Malaysian palm used only 0.09%.
2008 Cereals
2012
190 Table
190 2. World cultivated areas for oil crops
2009
Oils & Fats
Land Use Type Dairy Total Area As % Area
160 160
(Mha)
Meat
Total Agricultural Land 4911 100
130 130
J F M A M J J A S O N D
OilDSeeds
J F M A M J J A 258.03
S O N D 5.25
2011 2012
Soyabean 103.88 2.12
x FAO Food Commodity Price Indices Rapeseed 33.28 0.68
2002-2004=100 Sunflower 25.83 0.53
250
Oil Palm 14.14 0.29
Sugar Coconut 9.76 0.2
2010
220
Other Oil Seeds 57.8 1.18
Cereals Malaysian Oil Palm 4.32 0.09
190
2009 Sources: FAO (2011), Oil World, MPOB (2012)
Oils & Fats
Dairy
160
Meat Table 3. Comparative planted acreages and oil

yields
130
S O N D D J F M A M J J A S O N D
2011 2012
Oil Crop Pro- % of Total Total % Average Oil
duction Pro- Area Area Yield T/ha/yr
Source: FAO duction Mha [Rel Yield]
MMT
Figure 2. FAO food price index and food Soyabean 41.75 22.54 103.88 40.26 0.40 [1.00]
commodity price indices
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]
Market Challenges Scarcity of Arable Land Oil Palm * 66.96 36.15 14.14 5.48 4.73 [11.8]
With the scarcity of arable land in the world, there is Total ** 160.21 258.03
a need to use land wisely. The FAO has called upon
Notes: * Total for palm oil and palm kernel; ** For 7 major oils
governments to pay urgent attention to the needs of
(groundnut, coconut, cottonseed and above oils)
agriculture and to increase investment in agricultural
practices (Table 1).

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 17.9%
developing countries
Food vs Fuel: Price Protection for Farmers

Higher crude oil prices encourage greater use of food
products such as corn, vegetable oil and sugar for the Figure 4. Total world energy demands and the
production of bio-fuels. Petrol additives such as ethanol contribution of bio-fuels
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 bio-
fuels 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.
The current worlds 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 site- Figure 5. US corn subsidized for use as bio-ethanol
specific values have been questioned) are likely to
be non-sustainable. Current financial problems in EU Price, US$ per tonne
EU countries are causing them to revise policies on 1800.00 CPO Soybean Oil Rapeseed Oil Brent Crude Oil 160
alternative energy initiatives. 1600.00 The era before biofuels 140

drove prices
1400.00
120
The use of US corn for bio-ethanol with subsidies seems
1200.00
a little premature in terms of available technology 100
1000.00
as cellulosic ethanol has not yet been proven to be 80
800.00
economically viable. Meanwhile corn could be better
60
used feed to millions of people rather than cars 600.00
40
(Fig. 5) 400.00
200.00 20
Vegetable Oil Price Movements Before and 0.00 0

Jan-03
Apr-03
Apr-04
Jan-05
Apr-05
Apr-11
Apr-12
Jul-03
Oct-03
Jan-04
Jul-04
Oct-04
Oct-05
Jan-06
Apr-06
Jul-05
Oct-06
Jan-07
Apr-07
Apr-08
Apr-09
Apr-10
Jul-12
Oct-12
Jul-06
Oct-07
Jan-08
Jul-07
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Jan-11
Jul-11
Oct-11
Jan-12
After the Demand for Bio-fuels

Source: World Bank, Oil World, MPOB
As illustrated in Fig. 6 vegetable oil prices follow
their own S&D but with the advent of bio-fuels price Figure 6. Vegetable oil price movements before
correlate to volatile movements of petroleum crude and after the demand for bio-fuels

Market Challenges Trade Protectionism? Labelling of Food Quality and Nutrition
Deteriorating economic conditions are beginning Major food retailers in Europe and other developed
to give rise to trade protectionism. According to the countries have used old and new forms of
latest data, the EU has become the most protective protectionism. There have been movements to remove
region amid rising debt-ridden crisis concerns .. palm oil from foods, claiming that oils with saturation
Since July 2011, new protectionist measures have higher than local temperate oils are unhealthy or
outnumbered liberalisation measures by nearly three otherwise environmentally unfriendly or even the
to one. As the vast majority of these initiatives are not country origin may be objectionable.
traditional trade defense measures or tariff increases,
but new forms of protectionism [10th Global Trade Market Challenges Weather Phenomenon.
Alert]. Countries ranked (as of 2010) according to
their protectionism are as follows in decreasing order Weather risks are a major source of uncertainty in
as: Russian Federation, United States, Brazil, India, agriculture. In recent years drought severely affected
Argentina, China, Indonesia, France, Germany, United crops such as corn and soya bean. It is rare for droughts
Kingdom, Canada, Japan, Italy, South Africa, Mexico, or floods not to occur in India, China, USA, Brazil or
Republic of Korea, Australia, Saudi Arabia and Turkey. 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
Discriminating Directives Against Palm Oil get worse as GHG emissions from US and China, each
The EU and US EPA have used threshold values of GHG emitting 7 billion tonnes, remain unabated.
savings that will not be met with some uncertified
Severe drought is also disastrous for the oil palm. El
palm methyl esters. LCA values for certified methyl
Nino in SE Asia, the last severe one being in 1997-8,
esters, especially with CH4 capture, are superior to
seems like a distant memory even though it caused
those of rapeseed and soyabean bio-diesels. Fig. 7
forest fires and decimated palm oil production but
illustrates the thresholds set against palm bio-diesel in
gave rise to record prices.
worst-case scenarios, even though there are national
(ISPO) and international (RSPO) certified palm oils.
Fossil Fuel Usage and Climate Change
Despite all its positive attributes, the palm oil industry
is subjected to certifications, while other oilseed Excepting natural geologic disasters, the use of fossil
producers are not required to, or have yet to adopt fuels has been considered the main contributor to
certifications. Efforts to implement the requirement climate change. In decreasing order contributions
for certification must be mandated for all vegetable oil are from fossil fuel (57%), deforestation (17%), CH4
producing countries, to ensure a level playing field. 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

negligible carbon foot print of 0.015% of the global 3Ps of the Palm Oil Industry
total GHG emissions. If sequestration is included the
There is much care for the planet based on the
industry is a net remover of CO2.
3Ps principle of the palm oil industry care for the
people, planet and profits. Malaysian palm oil wildlife
Malaysias Greenhouse Gas Emission and conservation fund was set up for the local palm oil
Removal industry to actively participate for conservation and wild
life diversity in Malaysia. In addition to national parks
A previous study on Malaysias GHG emissions indicated and forest reserve areas, there are other sanctuaries
that at an estimated level of < 50 MMT net CO2 emission for orang utans. There are involvements of WWF, WCF
pales into insignificance compared to those of US and and WFP. In Malaysia there are sustainable palm oil
China. The positive contribution by the oil palm in the certification schemes RSPO, MSPO and MARESPO
removal of CO2 has been determined (Fig. 8).
Opportunities for Palm Oil Solution

NGOs/Environmental Pressure Groups Provider
There are policies emerging, proposed or imposed
The future is full of opportunities to exploit for more
either by developed nations or activist groups that
value from the oil palm. These may be summarized as
issue misrepresented statements under the misguided
follows:
concern for the protection of the environment. These
may lead to unnecessary export controls such as: bans, y Branding
embargoes, quotas and taxes, enforcement of unfair y New Palm Oil Frontier Africa
certifications which distort or mislead the consumers y Product Innovations Aviation biofuel, Fast Pyrolysis
and disrupt the growth of vegetable oils, its production Bio-Oil for Renewable Energy, Virgin Red Palm Oil,
and supply potential. Smart Balance Blended Oils for Specific Nutritional
Needs, The Palm Factory for Ethical Genetically-
Pressure groups are sometimes government Engineered Products, Reduction of Post Harvest
sponsored or funded by entities that are threatened by Losses
the presence of better, more viable vegetable oils and
fats products. They have become anti-growth agents Product Innovation and Diversification
to prevent developing countries from expanding
The Malaysian Palm Oil Industrys experiences in global
their agricultural production. The real culprits with
marketing shows the wide spectrum of opportunities
devastating deforestation records are the countries
and applications as summarized in Table 4. Palm oil
where these green NGOs are coming from, e.g. UK
and derived products are channeled into worldwide
(11% forest left), France (29%), US(33%) and Australia
industrial and commercial activities to churn out food
(19%) compared to Malaysia (56% forested).
products as well as non-food applications.
Figure 8. Malaysias GHG emissions moderated by forests and oil palms

Table 4. Product innovation and diversification for the palm oil industry
Upstream Midstream Downstream Consumer Products

Processing
Activities
Seed production Trading Refining Packaging
Nursery CPO bulking Fractionation Food products
Cultivation Oleochemicals Non-food products
Harvesting Esterification
Milling Refined product
storage
Products
DxP seeds DxP seeds RBD palm oil Cooking oil, frying fats
FFB FFB PFAD Margarine
CPO CPO RBD Palm Olein Shortening
Palm kernel Palm kernel RBD Palm Stearin Vanasparti
Biomass (EFB, kernel shell, fronds) Biomass (EFB, kernel shell, fronds) RBD PK Olein Ice cream, non-dairy
creamers
45,000 RBD PK Stearin Candles, soap
40,000 CBE Emulsifiers
35,000
CBS Vitamin E supplements
30,000
CBR Confectionery
25,000
20,000
Fatty acids, alcohols, Bakery fats
15,000
amines, amides
10,000 Glycerine Bio-diesel
5,000 Palm methyl esters Energy generation
0 Tocotrienols Animal feed
65 00
7
64
/19 6/2
Organic fertilizer from
19 0
20 biomass
Branding Areas of Opportunities Opportunities Africa the Next Frontier in Oil

Palm Cultivation
Dispelling Myths by NGOs through Branding
Waves of private investments have gone to Africa and
1. Branding through product diversification and accumulated data is summarised in Fig. 9. Future GDP
differentiations (e.g. Malaysian Responsible growth of African countries will catch up with those of
Palm Oil Brand) to focus on quality control Asia. There is a clear 21st century African land rush as
and assurance, health, environment and worldwide 115 M acres are leased to foreign investors
production sustainability. Responsibly with the bulk of that in Africa. Food security and the
produced palm oil provides key values from push to produce bio-fuels drive the land rush. Table 5
Brand Promises community relationships, provides some comparative data from FAO.
environmental responsibility, 100% licensed
activities and responsibility of rights. After expanding at a rate of 5% a year in the past two
years (2011-2), Africa was officially branded the second
2. Aggregate Compliance Approach similar fastest growing economy on the planet at the 43rd
approaches used successfully in other World Economic Forum Annual Meeting (23-27 Jan.
countries e.g. Aggregate Compliance 2013, Davos, Switzerland). The continent is predicted
Approach in Canada for bio-fuels to EPA to grow by 5.3% in 2013.
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.

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
LARGE LAND ACQUISTIONS IN SELECT COUNTRIES

Area Domestic
Country Projects Notes
in M acres share*
Sudan 132 9.8 78 *Proportion of area held by domestic investors
Mozambique 45 6.6 53
Liberia 17 4.0 7
Ethopia 406 2.9 49
Cambodia (Asia) 61 2.4 70
Nigeria 115 2.0 97
KEY COMMODITIES DRIVING LAND USE CHANGE, 1990-2007

Change % of
Area 2007 Key Contributors
1990-2007 Large-Scale
Commodity M acres (% of net increases)**
M acres Operations
Corn 390 67 52% China (29), US (29), Nigeria (11%)
Oil palm 36 20 55 Indonesia (50), Malaysia (26), Nigeria (1%)
Rice 385 22 4 Myanmar (38), Thailand (21), Indonesia (18%)
Rapeseed 74 30 85 Canada (32), India (15), France (8%)
Soybean 222 81 78 Argentina (33) Brazil (28), India (19%)
Sunflower 67 10 90 Russian Federation (41), Ukraine (38), Myanmar (10%)
Sugarcane 57 15 55 Brazil (47), India (29), China (9%)
Forestry 343 91 n.a. China (35), US (18), Russian Federation (12%)
** Changes in crop area may include substitution for other crops
Source: FAO

Opportunities for Product Innovation Potential of Further Uses of Oil Palm Biomass
Aviation Biofuels and POME
Sustainable aviation bio-fuel has been a world-wide Based on 2012 statistics large amounts of biomass
quest because of stringent specifications and the and POME waste have not been exploited for value-
need to mitigate the high carbon foot print. Boeing added applications. A summary is given in Fig. 12 on
and many research centers around the world are the huge amounts of oil palm biomass available; use of
focusing on providing answers. Acting as catalyst, biomass for bio-fuel is more acceptable when supplies
many airlines are carrying out trials on experimental of palm oil are needed for food.
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) ].
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 Figure 12. Oil palm biomass available for value-
diagrammatically in Fig. 11 added applications

FIG 11?
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
Figure 13. Renewal energy from oil palm biomass
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 BTL Liquid Bio-oil
Biomass Strategy 2020, MPOB; [Wicke et al, (2011)] The processing, yields and feed-stocks for BTL bio-oil
is diagrammatically in Figs. 14 and Table 5. EFB can be
Liquid biomass (POME) will increase from 60 MMT in practical for BTL bio-oil which can be blended for use as
2010 to as high as 110 MMT in 2020. 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 Yields For Various Feeds
F uel MJ/ BTU/ US G allon Biom ass F eed Typical pyrolysis b io
L itre oil yield, wt% of D ry
F eedstock
H ardwood 70-75
Pyrolysis b io 19 . 9 71, 500 S wood 70-8 0
oil H ardwood Bark 6 0-6 5
So wood Bark 55-6 5
Corn F ib er 6 5-75
H eav y F uel 4 2. 2 151, 3 00 Bagasse 70-75
O il # 6 W aste paper 6 0-8 0
Palm Kernel Cake 50-6 0
Em pty F ruit Bunch 50-6 0
Source: Jin, 2022

Market Opportunity for Oil Palm Biomass BTL inside and out. Red palm oil contains 30% -carotene,
Bio-oil 60% -carotene, 1% lycopene and 9% other nutritional
components. Importantly there are 70% tocotrienols
There is a large potential of biomass resources to offer in the vitamin E mixture.
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
Nutritional Oil Blends with Palm Oil
for bio-energy production that is still underexploited. Innovative oil blends containing palm oil are now used
Large availability of marginal or degraded land with as heart-healthy food products; various food products
abundantly available palm biomass allows for ready contain smart blends.
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 Discussion Summary
kernel oil and a potential of 8 MT of bio-oil per ha
per year. These values are more than other oil crops. The palm oil industry has vast opportunities for future
Opportunities exist in R&D, development of new exploitation to increase revenue. Challenges are
technologies and in providing specific expertise. manageable and world demand for food, food and
Multiple investment incentives are to be given for bio- fibre remains strong. Palm oil is increasing its dominant
energy development. Locally developed technology is role as net supplier for almost oil/fat needs. It has to
available for bio-oil production. address short term imbalance issues.
Liquid Bio-oil Market Demand Tracking CPO Prices Against Stock Usage Ratio
US Energy Policy: Energy Independence & Security Act This is given in Fig. 15. The present CPO prices are
(2007) and Renewable Fuel Standard 2 (2010) project under pressure.
cellulosic and other advanced bio-fuel planned
production of 21 MMT/yr by 2015 and 126 MMT/yr by
4,000 13.20%
2022.
3,500 13.00%
European Union Energy Policy: The target of producing 3,000 12.80%
20% of total EU energy consumption from renewable
2,500 12.60%
energy sources by 2020 as well as measures for
promoting renewable energy sources in the electricity, 2,000 12.40%
bio-fuels, heating & cooling industries. 90% of aviation 1,500 12.20%
fuel to be bio-fuel blends by 2050.
1,000 12.00%
Indonesia Energy Policy (National Energy Mix 2025) 500 11.80%

projects a target of producing 17% energy usage from 0 11.60%
renewable energy sources by 2025. Bio-fuel utilization 2006 2007 2008 2009 2010 2011 2012 2013F
with 5% mix of 22 MMT/yr by 2025.
SUR CPO Price Forecasted CPO Average
Forecasted CPO Higher Forcasted CPO Lower
The governments of Japan and Korea committed to
a minimum 2% replacement with biomass-based
Figure 15. Tracking CPO Prices against Stock
resources for power generation in all power plants
Usage Ratio
which run by fossil fuels.
Chinas Oils & Fats Consumption 1993 2012 (E)

Product Innovations
China has remained an important consumer of palm
Miracle Fat: Red Palm Fruit Oil oil and an almost linear projection of consumption
can be projected (Fig. 16). Malaysias data on palm oil
Well-known red palm oil is now rediscovered by the production, stocks, and exports are given in Fig. 17. The
Americans. Dr Ozs first miracle solution of 2013 is red recent excess supply imbalance leads large amounts of
palm oil, an amazing oil that helps stop signs of ageing stocks resulting in a depressive effect of CPO prices.

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 bio-
diesel blends in all parts of Malaysia is required.
Steps to Supply Rationalisation

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

Figure 16. Projection of Chinas palm oil remove high FFA palm oil from the market
consumption
y These issues must be addressed collaboratively
in Malaysia and Indonesia
3 , 000, 000
2, 500, 000
2, 000, 000
( 000 MT)
1, 500, 000
1, 000, 000
500, 000
0
ec
ct
ct
Jun
ec ' 2012
Sep
Jun
Sep
Jul
Jul
Mar
Aug
Mar
Aug
Apr
Apr
Jan ' 2011
Jan ' 2012

May
May
Nov
Nov
F eb
F eb
O
O
D
Stock Export Production
Figure 17. Malaysian monthly production, export

and end stock
Supply rationaliz ation

EU Price, US$ per tonne needed to prevent
1800.00 CPO Soybean Oil Rapeseed Oil Brent Crude Oil prices decoupling 160
1600.00 140
1400.00
120
1200.00
100
1000.00
80
800.00
60
600.00
40
400.00
200.00 20
0.00 0
Apr-11
Apr-12
Apr-08
Apr-09
Apr-10
Jan-12
Apr-06
Apr-07
Jan-10
Jan-11
Jul-12
Oct-12
Jul-10
Oct-10
Jul-11
Oct-11
Apr-03
Apr-04
Apr-05
Jan-06
Oct-06
Jan-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jul-06
Jul-07
Jan-03
Jan-04
Jan-05
Jul-03
Oct-03
Jul-04
Oct-04
Jul-05
Oct-05
Source: World Bank, Oil World, MPOB
Figure 18. Correlation of vegetable oil prices with petroleum crude

Conclusions France. Deforestation has been rampant in developed

countries where the green NGOs are coming from
Increasing Dominance of Palm Oil. Palm oil continues but they choose to focus on preventing developing
to be an attractive long term commodity for producers countries from developing their agriculture. Unlike
and consumers. Investment in oil palm cultivation the developed countries, the developing nations have
should continue in the long term better record in practising sustainable development.
Solution Provider. Consumers get strategic solutions Abbreviations. ASTM = American Society for Testing
from palm oil: food-secutrity, trans-free fat products and Materials; bln = billion; BTL = biomass to liquid
and competitive prices. oil; CBE = cocoa butter equivalent; CBR = cocoa butter
replacer; CBS = cocoa butter substitute; CPO = crude
ENGO as Part of the Palm Oil Industry. Palm oil palm oil; DxP = Dura x Pisifera; EFB = empty fruit
continues to be attacked by ENGOs on issues of bunches; ENGO = Environmental NGO; FFB = fresh fruit
deforestation but this is not a problem in Malaysia. branches; ETP = economic transformation programme;
Malaysia has more than enough forest conserved FT = Fischer-Tropsch; MARESPO = Malaysian responsible
to meet any standard imposed by the developed palm oil; MMT = million metric tonnes; MT = metric
countries. tonne; MSPO = Malaysian sustainable palm oil; NGO =
non-governmental organization; NKEA = national key
Anti-Palm Oil Campaign. Last years (2012) ENGOs economic area; pa = per annum; PFAD = palm fatty
campaign has no significant impact on palm oil exports acid distillate; PK = palm kernel; PKO = palm kernel
to the EU which actually increased by 10-12%. oil; PO = palm oil; POC = palm oil conference; RBD =
refined, bleached and deodorized; RFS2 = renewable
Old Health Issues. Issues like saturated fats have been
fuel standard 2: RSO = rapeseed oil; RSPO = roundtable
recycled in France but these have been overcome
on sustainable palm oil; SBO = soyabean oil; SO =
previously in the US. Over 90% of saturated fats
sunflower oil; WCF = wildlife conservation fund; WFP =
consumed in the EU comes from animal sources.
world food programme; WWF = world wildlife fund; z.
B. = e.g. in German
Branding for Improved Assurance and Added Value.
Malaysia must complement its traditional way of
promoting palm oil through branding and give a References
national identity for Malaysian palm oil as being
responsibly produced. Opportunity exists to work Peter Berdy (2012). The next gold rush. http://www.
with stake holders keen to have fully certified palm oil scribd.com/doc/93294496/Biofuels-The-Next-Giold-
exported from Malaysia. Branding and full certification Rush
of Malaysian palm oil can allay unfounded common
fears of ENGOs and consumers. Branding differentiates Mckin Lee Byung Jin (2012). Lipochem BTL
Malaysian palm oil as being responsibly produced with International Sdn Bhd. 2nd Korea-Malaysia Friendly
strong forest conservation commitment, and highly Workshop for Energy Cooperation, 20 Sept 2012,
regulated supply chain through comprehensive (100%) Kuala Lumpur
licensing and enforcement capability by MPOB.
Darrin Morgan (2008). Boeing, mongabay.com www.
ENGOs and Deforestation. ENGOs who are supporters news.mongabay.com/2008/1027-aviation.html
of certification systems should promote products that
they produce i.e. certified palm oil, and not demonise B. Wicke, R. Sikkema, V. Domburg, A Faaij (2011).
other products that they are not involved in producing Exploring land use changes and the role of palm
e.g. non-certified palm oil. Negative promotion puts oil production in Indonesia and Malaysia, Land Use
fear into consumers resulting in avoidance of palm Policy 29(1): 193-206. http://www.sciencedirect.
oil (including certified oil) as recently attempted in com/science/article/pii/S0264837710000633

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: Palm oil contributes to more than 30% of the worlds
y Indonesias role in the worlds palm oil vegetable oil consumption. Indonesia produces
y Indonesian palm oil market about 50% of the worlds palm oil production in 2013.
y Trade barriers and challenges Therefore, Indonesian palm oil market will have a
y Dynamics of palm oil export significant impact on prices in 2013.
y Impact on international oils and fats market
y Price outlook Indonesian Palm Oil Market
Introduction Data estimated for 2013 are given below in 1000 MT

as follows:
World Palm Oil Production and Consumption Beginning Stocks 2,500 Ending Stocks 2,300
The worlds vegetable oil consumption (2011) is Production 28,000 Domestic Use 9,200
summarized as follows: palm (33%), soyabean (28%), Export 19,000
rapeseed (15%), sunflower (9%), palm kernel (3%) and Domestic uses: for Food 5,700; for Industrial Uses
other oils (12%); [ IndexMundi/USDA ] 3,500 including bio-diesel 2,400, from 1,600 in
year 2012
The estimated 2013 production of palm oil is [Sources of data: IndexMundi/USDA, IPOB and BPS ]
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
Estimated figures for domestic uses and for export are
countries 3.317 MMT [ IndexMundi/ USDA, Oil World,
as follows:
MPOB ]. The total production at 54.7 MMT is slightly
rectified from the above after communication with Domestic uses for food 5,700, up from 5,377 in 2012
other speakers. Domestic industrial uses including bio-diesel 3,500,
up from 2,493 in 2012
Palm oil consumption is given in Table 1 where the
Export of processed products is 13,000
total forecasted for 2013 is marginally higher than
total production. It is noted Indonesias consumption Total exports are at 19,000
will exceed that of India in 2013.
Table 1 Global consumption of palm oil in 1000 MT

Palm Bio-diesel [ Data from Ministry of Energy, Republic
Country 2012 2013f of Indonesia ]
India 7,950 8,350
The estimated export will increase to 1.55 M kL
Indonesia 7,870 9,200
from 1.15 M kL in 2012.
China 6,400 6,720
EU27 5,070 5,270 The estimated domestic use will be 1.1 M kL vs
Malaysia 3,604 3,780 0.669 M kL in 2012 (current blending is 7.5%)
Pakistan 2,195 2,300 Total bio-diesel production in 2013 is estimated to
Others 18,695 19,630 be 2.65 M kL which is equivalent to 2.4 MMT of CPO
Total 51,784 55,250 feedstock.
Source: USDA, IPOB

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 AIPH of Ivory Coast won a court case in Tribunal de
duties and import taxes. The EU has the Renewable Commerce in France against a retailer company for
Energy Directive (EU-RED).The US-EPA issued the advertising against palm oil. IPOB joins hands with
Notice On Data Availability (NODA) for Renewable IPPA of Nigeria and the AIPH to watch and address
Fuel Standard (RFS). There were campaigns and advertisements and campaigns against palm oil. IPOB
advertisements against palm oil, e.g. in France sans supports the implementation of ISPO. The country is
huile de palme and a proposal to increase palm oil tax making more efforts toward sustainable palm oil (ISPO,
by Euro300 per tonne. forest moratorium) which will hopefully be accepted
by APEC in the category of environmentally friendly
products. Indonesia is working together with Malaysia
Indonesias Palm Oil Market
to improve the image of palm oil.
Versions of data estimates differ widely; traders have
their own estimates. Anti-palm oil campaigns in
Price Outlook
Europe, notably in France, cause a negative impact
to the market. The victory of Ivory Coasts oil palm World demand slightly exceeds supply. There will
farmers in the court case at Tribunal de Commerce in be increasing domestic demand in Indonesia for
Paris is a positive sign. IPOB of Indonesia joined hands downstream and biodiesel industries. Increased use
with IPPA of Nigeria and AIPH of Ivory Coast to watch for biodiesel in EU since certified palm by ISCC and
and counter against anti-palm oil campaigns. also RSPO is acceptable. Price ratio of PO/Petroleum is
seen to have passed the lowest level, and will likely go
The US-EPA issued NODA and has yet to confirm
up (Fig. 1).
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-diesels emission reduction savings
is higher than the 20% threshold.
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%. J a n 12 A pr i l 12 J ul y 12 O c t 12 J a n 2013
There are significant differences in rates for crude and
processed products. www.indexmundi.com/commodities/?commodity=palm-
oil&months=60
In Indonesia since Feb 2013, at USD 800-850 for CPO, Figure 1. Price ratio of PO over petroleum crude
tax is at 9% and RBD Olein at 3%; at USD 850-900 in Mar (WTI)
2013 taxes were 10.5% and 4% respectively. In Malaysia
till Feb 2013 there was no tax on CPO. In Mar 2013 with Last years low price was caused by decline of
CPO at RM2250-2400 the tax was 4.5%. The intention of petroleum price and weak PO demand in China and
the Indonesian government was to boost downstream India due to economic crisis in the Eurozone. Now (Mar
industry especially for Sei Mangkei, Dumai and Maloy. 2013) demand for palm oil is strengthening; petroleum
As unintended consequences, difficult times were crude price increased to USD 93/bbl (Nymex) and USD
experienced by refineries outside Indonesia. 114/bbl (Brent).

INDONESIAN PALM OIL MARKET AND ITS IMPACT ON PRICE IN 2013
CPO price outlook is forecast to slowly but steadily Conclusion

move up:
As the largest palm oil producer, Indonesias supply
USD 870-900/T by June and
impacts significantly the international palm oil price.
USD 900-940/T in the second half of 2013 Although supply is adequate, demand is also increasing
and will marginally exceed supply and thus stocks will
The CPO price, cif Rotterdam for the last two years is be reduced in the first half of 2013.
given in Fig. 2
Campaigns against palm oil should be watched and
addressed by all PO producing countries otherwise PO
price will be depressed relative to other oils.
Abbreviations. AIPH = International Association

of Horticultural Producers; APEC = Asia-Pacific
U S D / M T
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
F e b 201 1 J ul y 201 1 J a n 201 J ul y 201 J a n 2013
= Indonesian national private company that holds
physical commodity market with Indonesian National
Figure 2. CPO Prices cif Rotterdam, Feb 2011- Jan Standard; RED = EU Renewable Energy Directive; RFS
2013 = Renewable Fuel Standard; RSPO = Round Table on
Sustainable Palm Oil; T = tonne; USDA = US Department
Recent (2013) Palm Oil Prices CIF Rotterdam 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)

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 bio-diesel growth rates (Fig. 1). With no increase of
following supply and demand fundamentals until 2005 growth estimated for 2012-13, lauric oils (which are
and 2006 when biodiesel came into the picture. Lauric not used for methyl esters in the bio-diesel energy
oils became part of the massive energy commodity sector) will be back to follow the supply and demand
mix but the relatively high prices obtained may be fundamentals.
coming to an end with the winding down of the global
Figure 1. Bio-diesel growth rates in %, y-o-y

LAURIC OIL MARKETS ARE BACK TO FUNDAMENTALS . . . FOR NOW
2500
2400
2300
2200
2100
2000
1900
1800
1700
1600
1500
1400
USD/mt
1300
1200 Soybean Oil FOB mi
1100
1000
900 Palm Oil CIF Rdm
800
Lauric Oil CIF Rdm
700
600
500
400
300
200
100
0
Jan 07
Jan 08
Jan 09
Jan 10
Jan 11
Jan 12
Jan 13
Source: H. Sauthoff, BASF
Figure 2. Major EU vegetable oil prices
Review for 2012 supply and lower prices have not stimulated demand.
Oversupply situation of palm kernel has caused
Year 2012 was not the year for agricultural commodities. coconut to assume its own pricing premium according
While corn and soybean saw modest price rises of 4% to its own S&D and to recover its market share.
and 15% respectively, losses were recorded for soy oil
(- 6%) and palm oil (- 22%). Laurics which are not used
Price Forecasts for 2013
in the methyl esters of bio-diesel became the collateral
damage product suffering a 66% price decline. The Forecast of prices are given in the Table 1 below:
severe price decline, especially in 2011 and 2012, is
illustrated in Fig. 2. Table 1. Forecast prices of Laurics and CPO
Outlook For 2013 Product Range Average
Laurics, cif Rdm, US$/MT 720 900 830

In a poor economic environment there is less political
will to impose mandates and provide subsidies. The Palm Oil Futures, MR/MT 1950 2500 2200
increasing vegetable supplies expected in 2013 will Palm Oil, cif Rdm, US$/MT 690 890 780
continue to depress prices.
Eurozone rebounds strongly but only for the first part Abbreviations. cif = cost, insurance and freight; CPO
of 2012 and then consolidation followed. = crude palm oil; EU = European Union; MT = metric
tonne; Rdm = Rotterdam; MR = Malaysian ringgit; POC
There has been cautiousness in investment support for = palm oil conference; S&D = supply and demand;
commodities especially for agricultural commodities. y-o-y = year over year
Weather risks seem to be gone and the correlation with
crude oil seems to be weakening so that the general [ The paper was summarized by S.H. Goh of MOSTA ]
picture needs to be watched carefully.
For laurics demand growth suffered because of the

economic situation. Demand has not kept up with

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 Historical Advantage in Plantation

Agriculture
The agriculture story is now different from past years
with a world running out of arable land coupled Malaysia has a long plantation history and now has a
with populations soaring beyond 7 billion people. reasonably good infrastructure to collect, transport,
Successful small plantations (~100 ha) to large ones process and export palm oil products. Palm oil has
(~millions ha) can impact and dominate global remarkable versatility and has multiple uses for food
businesses. Malaysia has over centuries tried a and non-food products. Apart from its wide uses in all
variety of crops spices, pepper, tea, coffee, banana, basic food as well as culinary creations, non-food uses
pineapple, cocoa, coconut, rubber and oil palm (Fig. also dominate on account of its chemical stability and
1). Perhaps we have found the holy grail for agriculture diverse fatty acid types. Its recent introduction as use
in this part of the world. 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
Socfins 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.
Oil Palm the Highest Oil Yielding Crop

Figure 1. Why SE Asia is optimally suitable for oil
palm agriculture The greatest advantage of the oil palm is its yield
advantage over the other oil producing crops.
The tropical climate with good sunshine and high Benchmarking edible oil yields is given in Fig. 2 and
rainfall is highly suitable for the oil palm. Though a comparison of the worlds highest oil producing
there is the need for workers, the crop needs little companies are given in Fig. 3. The Malaysian oil yield
maintenance care and an operational worker/area average is low (~ 4 MT/ha) due to small holdings with
ratio can be found in developing countries. aged palms. On the other hand agronomically well-
managed plantations with optimally mature palms
can provide higher yields, e.g. IJMP 5.49 MT/ha.

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
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
Figure 2. Oil yield benchmarking for edible oils delivering only detached loosed fruits from field to mill
(see front cover) has to be explored. Harvesting still needs skilled labour
as compared to pruning and loose fruit collection.
Oil Yield FFB Yield OER Mature Area

(ml/ha) (ml/ha) (%) (ha) Oil Palm High Density Planting
1 IJM PLANTATIONS 5.49 26.5 20.7 24,041
BHD (M) High density planting could be relooked in view of
2 UNITED PLANTATIONS 5.48 25.1 21.9 28,680 the present need of replanting aged trees. This is
BHD (M)
summarized in Fig. 5.
3 FIRST RESOURCES 5.40 23.0 22.3 98,181
LTD
4 GOLDEN AGRI- 5.27 23.3 22.6 416,309
RESOURCES LTD
5 REA HOLDINGS PLC 5.20 22.4 22.9 26,688
6 KIM LOONG 5.19 23.8 21.8 12,740

RESOURCES BHD
7 UNICO-DESA 513 25.0 20.6 9,889
PLANTATIONS BHD
8 IOI CORPORATION 4.86 23.2 21.0 138,892
BHD
9 SIME DARBY BHD 4.77 22.5 21.2 277,070
10 HAP SENG 4.65 21.9 21.3 30,456

PLANTATIONS BHD
11 KUALA LUMPUR 4.63 21.3 21.7 152,829
Figure 5. High density planting
KEPONG BHD
Source: Review of Annual Reports to May 2013 Harvesting Tools and Mechanisation
Figure 3. Worlds highest oil-yielding companies
Fruit harvesting has remained the most difficult to solve
by mechanization. Evolutionary improvements provide
Despite relative low prices in 2013, there is reasonable
light long poles, better knives and sharpening tools.
profitability due to low cost of production of palm oil.
The motorized Cantas has been successful to improve
Among the reasons have been the well-organized
harvesting efficiency but this is insufficient to serve
plantation culture, good planting materials and good
the industrys needs and much more research and
agronomic practices. The introduction of weevils has
funding may be needed to find solution. Meanwhile
reduced labour costs while the availability of guest
site-specific & cost effective mechanized vehicles are
workers remains the main operational challenge to the
now available, e.g. mechanized weeding, mini FFB
industry. The yield productivity trend averaging19.84
grabber, crane & net for collecting and transferring
MT/ha/yr FFB in Malaysia remains stagnant over 35
fruits, and the Huka system for transporting fruits.
years with only a slight up-spike around 1984 with the

OIL PALM: THE HOLY GRAIL OF PLANTATION AGRICULTURE
Curiously the buffalo cart seems a worthy innovation Plantation Business of the Future
as an all-weather and all-terrain transporter.
As expected, business has to be economically
The present state of technology can provide sustainable but with shared responsibility to people
wheelchairs and exoskeletons to assist natural human and planet. Corporate social responsibility (CSR)
abilities. Perhaps the exoskeleton technology can be has been popularized in all businesses, and this
used to provide a solution to assisted fruit harvesting. supposedly leads to Creating Shared Value (CSV) in
ways to reinvent capitalism. An example of shared
value wealth distribution is given in Fig. 6.
Enhancing Product Development
Going forward it has to be the use of science and
The use of palm oil had been at least 5000 years old as
technology to provide the tools for greater productivity
found in jugs of Egyptian Pharoahs tombs. Yesteryears
and growth. Businesses led by forward thinkers will
products include Palmolive made from palm and olive
acquire and keep talent where there can be innovation
oils. Recent use of blending temperate oils with palm
and productivity. The world will remain much the
oil seems to provide acceptable oils for perceived
same and it will remain the survival of the fittest
nutritional needs.
only quality and profitable products remain. Learning
There are potential uses of biotechnology and from history remains paramount as complacency and
nanotechnology to further marketable products absence of innovation allows alternatives to take the
from palm oil, palm oil fractions, nutriceuticals, lead or supplies swamp demand in the absence of
nutraceuticals and non-food cosmeceuticals. Useful safety nets.
health products include medium chain triglycerides,
Abbreviations. FFB = fresh fruit bunches; FGV, KLK
carotenoids, Vitamin E tototrienols, phenolics, etc
and IOI = Major oil palm companies; ha = hectare; IDT
Meanwhile there are opportunities for biomass = interdisciplinary team; IJMP = oil palm plantation
utilization as 90% of the oil palm can provide woody company in Sabah; MT = metric tonne;
materials, pyrolysis oil and pyrolysis chemicals.
Figure 6. An example of shared value wealth distribution system

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 Steady genetic improvement in maize grain yield is
of the industry of was of the thick shell dura. Through demonstrated to be 1-3% per year (Fig. 1). Corn yield
breeding and understanding of the mechanism in the 1930s and 2000s were 4.8 tonnes/ha, and 10.2
lying behind the shell thickness, the current oil palm tonnes/ha, respectively. The difference was 5.4 ton/
commercial planting material is the thin-shell tenera. ha. 60% of the difference was attributed to genetic
The premium plating planting material is clone. improvement and the remaining 40% being attributed
When all these materials were put into perspectives to improved agronomic practices. [Lee & Tollenaar
to quantify for genetic improvement, oil palm (2007), Duvick et al. (2005)]
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.
= Canadian yield; = US yield
Superior Cultivars to Feed 9.1 Billion in
Figure 1. Corn yields during pre-hybrid era (1865-
2050 1938) followed by the hybrid era
World population is expected to reach 9.1 billion by
2050. This set the stage to challenge plant breeders for Breeding Efforts to Produce Commercial
superior cultivars as food production by then will need Oil Palm Planting Material
to nearly double especially in developing countries. In
this challenge of food security, there are more hurdles The oil palm industry is a relatively young industry
ahead, which include that 40% of the worlds arable as compared to other cultivated crops. The industry
land, degraded to some degree, and will be further started in the early 1900 in South East Asia. The
affected by climate change [IFAD (2013)]. Rise of disease commercial planting material then was Deli dura with
continues to pressure upon current cultivar. Current thick shell characteristics. Components that make up an
wheat cultivars are subjected to Fusarium Head Blight. oil palm fruit are kernel, shell, mesocarp and pericarp.
Oil palm is subjected to Ganoderma Basal Stem Rot. The pericarp is the thin waxy outer layer of the fruit,
Both situations have no varieties that are immune to which is insignificant in practice. Therefore, in practice,
the disease. the fruit components described are kernel, shell and

GENETIC IMPROVEMENT AND CHOICE OF OIL PALM PLANTING MATERIALS
mesocarp. The fruit characteristics of Deli dura are Innovatively, both the modified recurrent selection
defined as 30% of shell and 62-63% of mesocarp. The and the modified reciprocal recurrent selection could
ratio of oil:bunch of Deli dura is 16-18%. The fresh fruit be combined (Fig. 4). The oil palm breeding program
bunch (FFB) production was 100 kg/palm/year [Corley could be initiated with the modified reciprocal
& Tinker (2003)]. This translates to oil yield of 16 18 kg/ recurrent selection to reduce entries and to exploit
palm/year. Deli dura was used as commercial planting General Combining Ability and Specific Combining
material until the 1960s. Ability, and then followed by modified recurrent
selection to cream for the superior pisiferas and duras
To achieve the performance of current commercial and reduce genetic variability of commercial DxP. The
oil palm planting materials, the oil palm breeders best tested DxP families could be reproduced in bulk
have bred the oil palm following either the modified using the semi-clonal seed approach. The parental
recurrent selection (more commonly known by the oil dura of the best tested DxP families are cloned to
palm breeders as Family and Individual Palm Selection) increase the number of individuals to be served as
or modified reciprocal recurrent selection. The steps clonal mother palms. The clonal mother palms are
of modified recurrent selection are show in Fig. 2. The then pollinated with the tested pisifera, resulting seeds
selected pisiferas (by DxP test) and the duras (by dura that are termed semi-clonal seeds. Semi-clonal seeds
performance per se) are used to produce commercial are defined by seeds produced by having one ramet-
DxP seeds. parent and a sexual parent.
D1
X D4
X X X X D1
X
X T1 D2
X
X T2 D2
X
X T2 t reduce entries
D2 D5 D3 D6 T1 T3 T2 T4 t exploit GCA &
SCA
Modified
Reciprocal
Best Performance
D3xT3 selfing Recurrent
D1xD4 D2xD5 B est
B est F amily D
I D3xD6
ndividuals T1xT3 B Pisiferas
est F amily
T2xT4 D1xT1 D2xT2
Selection
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 Comm. DxP seeds Modified Selected
Selfed DD selfed P selfed T selfed D
4 . Select best d u r a ind. Recurrent
DxP Selection
w ith in best family & DxP t identify superior Pis.
(FIPS) Clone/self
identify p i s i f e r a w ith in & dura (creaming)
best family DxP DxP Dx P t reduce genetic
5 . DxP progeny test to variability in comm.
select p i s i f e r a DxP
DxP seeds (uniform)
DxP
6 . Comm. Seed Production Commercial Planting
Clone/Self D Commercial DxP seeds
Figure 2. Modified recurrent selection (FIPS)

Figure 4. AAR Selection scheme
The steps of modified reciprocal recurrent selection
Apart from genetic improvement through breeding,
are illustrated in Fig. 3. Commercial DxP seeds are
another important aspect for commercial planting
produced by crossing between the selfed duras and
material is the ability to reproduce the legitimate
the selfed pisiferas.
superior cultivar. This involved a stringent field aspect
of controlled pollination to avoid foreign pollen and
efficient seed production system.
X X X
D1 T1 D2 T2 D3 T3
Clone: The Premium Commercial Planting
Material
D1xT1 D2xT2 selfing B est D3xP3
Performance
D3xT3 selfing
There is another oil palm planting material that deserves
further discussion tenera clones. The aim of cloning
1. Assemble of d u r a
2. Assemble of
is to reproduce superior genotypes from the selected
3. DxT Testing individuals (ortet) that were superior among the DxPs.
4 . I dentify best family Selfed D selfed P selfed T selfed D
The current DxPs produced are not F1 hybrid, therefore
5 . Self parental D & parental T
6 . Production of seeds for sales Commercial DxP seeds
individuals within family and among families are not
homogenous; genetic differences occur. Hence, the
approach of cloning tenera for genetic improvement
Figure 3. Modified reciprocal recurrent selection
is justified.

Current oil palm cloning approach is only possible this challenge. One of the approaches in biotechnology
through micropropagation; tissue culture. The current that could be incorporated in oil palm breeding is
oil palm cloning could be achieved through tissue molecular marker assisted selection.
culture process of gel- or liquid-system. The latter
is a more efficient process because the embryoid The general scheme of marker-assisted selection is
maturation and shoot development are synchronized, illustrated in Fig. 5. Step 4 (create genetic maps) and
which lead to better productivity because subculturing 5 (identify trait) could be eliminated if the approach
process that occur in the gel-system is significantly uses no genetic maps e.g. Genomewide Selection or
reduced. The tissue culture liquid-system also opened Genomic Selection. In short, marker assisted selection
the avenue of artificial seed production which could is a form of indirect selection using molecular markers.
lead on to the possibility of direct germination in the Integrating marker assisted selection into classical
non-sterile environment. One of the main advantages breeding program (Fig. 6) shall enhance its efficiency
of the approach is making tissue culture economically because selection can be carried out prior flowering
viable, because laboratory time is further reduced. and with no long duration phenotypic recording is
required [Wong and Bernardo, (2008)]
Tissue culture process is a propagation process,
yet, genetic improvement of the clones shall rely
O il Palm G enetic Iden.
on accurate ortet selection and ultimately on field Pop. DN A
Math model
maps mol.
tQ T L link ag e
performance testing of the clones. Clones that are +
A dv . Stats
map
mark .
superior, defined after performance testing, are then T y pes of

C om. Prog . tH D Q T L
link ag e map
Mol.
recloned. At this juncture, SIRIM specifies that primary Molecular + tA ssociation
A ss.
Mark er map
ortet (palm that is not reclone) must meet oil:bunch tRFL P Ph enoty pic tetc. Sel.
tA FL P Records
minimum 27% and oil yield minimum 50kg/p/year. tRA PD (traits of
interest)
tSSR N o G enetic
The clonal ortet (ortet selected from clones) must tDA rT maps
tG enomew ide
tDA rT - N G S
meet oil:bunch minimum 28% and oil yield minimum tSN P selection
tG enomic
55kg/p/year [SIRIM MS 2099:2008]. Results published selection
by Soh et al (2011), showed that clones were 18% higher

in oil yield as compared to DxP at that juncture.
Figure 5. General scheme of marker-assisted
selection
Current Genetic Yield Improvement of the Oil
Palm
Y ear
Cycle
The three planting materials, i.e. Deli dura, DxP tenera,

0 0 (N )
and tenera clones shall be put in perspective. Using Step 1: M ark er- trait associations
(Genotyping)
the minimum oil yield standards of DxP tenera (42.5 Cycle
kg/p/year) and tenera clones (55 kg/p/year) defined by 19 1
SIRIM, compared against the early planting materials Ph enoty pic

selection
G enomew ide
selection
Deli dura (18 kg/p/year), the difference was 24.5 kg/p/ (N o mark ers) (All mark ers)
Step 2: mark er- based
year and 37 kg/p/year. The difference between the Cycle
selection (1st cycle)
25
clones (year 2009) and the Deli dura (year 1930) is two 2
folds. If 60% of the difference was due to genetics, then 31 Cycle
selection (2nd cycle)
the yearly genetic improvement is averaging about

3
selection (3rd cycle)
1.8% per year. Indonesia oil palm estate yield records 37
Cycle
Cycle
4
(DxP Unggul Socfindo Brochure) also demonstrated 38 2 (N ) Source: W ong & Bernardo, 2 0 0 8
that the genetic improvement in oil palm oil-yield by

classical breeding is 1 2 % per year. 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 A Mohd Din et al. (2011) reported that Malaysia Palm
improvement needs to exceed 2.5% per year in order to Oil Board breeding program has identified oil palms
meet the expected world population then. Therefore, with following traits: high oleic, high Iodine Value, low
integration of biotechnology tools is necessary to meet lipase, high carotene, high vitamin E, high linoleic,

thin-shell tenera, high bunch index, large kernel, large Awareness and Discernment of Various
fruit, long stalk and low height (Fig. 7). These traits Planting Materials
could be grouped into three general groups; high
oleic, high iodine value, low lipase, high carotene, high Commercial oil palm planting materials currently
vitamin E and high linoleic could be grouped as traits available in the market could be characterized by the
for oil quality; thin-shell tenera, high bunch index, large method they are produced, hence, do not indicate
kernel and large fruit could be grouped as traits for oil performance. They are mix DxP seeds, near-single-
yield, long stalk and low height could be grouped as cross DxP seeds, semi- and bi-clonal DxP seeds, and
traits for management efficiency. However, these traits tenera clones. The degree of uniformity increases
were insufficient, as discussed early in this manuscript, according to the listed sequence. Detail discussions on
that there are needs for traits including high efficiency each type were presented by Wong et al (2011).
in nutrient used, abiotic stress tolerance and disease
tolerance. Some diseases that are major threats to oil Current oil palm planting materials show potential FFB
palm include Ganoderma basal stem rot in South East greater than 30 t/ha/year and oil yield greater than 7
Asia, Bud rot in South America and Fusarium wilt in t/ha/year (commercial oil palm seed brochures from
Africa. various reputable producers in Malaysia, Indonesia &
Thailand).
H igh oleic Th in- sh ell t e n e r a
H igh I odine V alue H igh bunch index Some of the key questions shall be useful for buyers to
L ow lipase L arge k ernel
determine their choice could be as follows:
H igh carotene L arge fruit
H igh vitamin E L ong stalk
H igh linoleic L ow h eigh t
1. Do you have an active breeding program?
Manag ement
oil q uality oil yield E fficiency
2. Who are the people that conduct the
breeding research?
3. What are your breeding approaches?
4. Where is your breeding program

Source: A Mohd Din et. al., 2011 conducted? Any multi-locational trials?
Figure 7. Other traits of interest in OP breeding
5. What are your progenitors / parents /
The general approach in breeding for Basal Stem Rot ortets? Are all the parents (e.g. dura &
(Ganoderma boninense) disease tolerance oil palm pisifera) progeny tested?
reported could be summarized in Fig. 8 [PIPOC 2009
6. How are the progeny test results? And their
& 2011, IOPC 2010]
characteristics?
General approach in breeding for Basal Stem Rot
(Ganoderma boninense) disease tolerance oil palm 7. What oil palm planting materials are you
producing? Mix DxP seeds, near-single
O rganiz ations E arly screening (e.g. nursery screening) for cross DxP seeds, clonal DxP seeds, semi - /
e.g. F elda, M PO B , G a n o d e r m a b o n i n e n s e tolerance O P
CI R AD, Socfindo, bi -, or clones?
SumB io
O rganiz ations Deploy molecular tools to develop biomark ers 8. Who are the people that produce the
e.g. F elda, M PO B
planting materials?
O rganiz ations F ield screening (h ot spot / endemic area)
e.g. M PO B , CI R AD, results to identify G . b o n i n e n s e tolerance O P 9. What quality control measures are in place
Socfindo, SumB io
to produce the legitimate oil palm planting
O rganiz ations materials?
F urth er breeding for disease resistance
e.g. F elda, M PO B ,
SumB io or
R elease of commercial G . b o n i n e n s e 10. What after sales service will you provide?
O rganiz ations
e.g. CI R AD, Socfindo
tolerance DxP
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

Conclusion References
In conclusion, in order to meet the challenge of the IFAD (2013), The future of world food and nutrition
increase of world population and remain competitive security. http://www.ifad.org/hfs/index.htm
among other crops, oil palm breeders need to aim accessed July, 2013
for higher genetic improvement. Role of molecular
biotechnology is important to be integrated in oil Beirnaert A and Vanderweyen T (1941); Contribution a
palm breeding program, increasing oil palm breeding letude genetique et biometrique des varieties dElaeis
efficiency, e.g. selection prior flowering, hence allowing guineensis Jacq.; Publ. INEAC; Serie Scientifique 27
quick turnover of breeding generation. Tissue culture
continues to be an important tool to accelerate the Corley RHV and Tinker PB (2003); The Oil Palm (4th
exploitation of new and improved planting materials. Edition); Blackwell Publishing
Strong awareness among the planters about oil palm
planting materials is essential in making the right Duvick DN (2005); The contribution of breeding to
choice meeting their needs. yield advances in maize (Zea mays L.); Adv Agron
86:83-145
Abbreviations. AAR = Applied Agricultural Resources
Sdn Bhd; AFLP = Amplified Fragment Length Lee EA and Tollenaar M (2007); Physiological Basis of
Polymorphism; D = dura; DArT = Diversity Arrays Successful Breeding Strategies for Maize Grain Yield;
Technology; DArT-NGS = DArT-Next generation Crop Sci 47:S-202-2-215
sequencing; F1 = Filial 1; FFB = fresh fruit bunches;
ha = hectare; HD QTL = Heading Date Quantitative Malaysian Standard MS 175: 2005
Trait Locus; P = pisifera; QTL = Quantitative Trait Locus;
RAPD = Random Amplified Polymorphic DNA; RFLP = Malaysian Standard MS 2099:2008
Restriction Fragment Length Polymorphism; SIRIM =
Standards and Industrial Research Institute of Malaysia; Meunier J and Gascon JP (1972); General scheme for oil
SNP = single-nucleotide polymorphism; SSR = simple palm improvement at IRHO; Oleagineux 27:1 12
sequence repeat; t = tonne; T = tenera
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)

TA L K I N G P O I N T S
Recession is still around in the short and middle terms around the world as even now mortgage insurers are
and the Fed, despite hints of tapering of QE, would feeling the impact of defaulting loans.
still do whatever it takes to prop up the economy
and keep interest rates low. The EU will do likewise to US Economic Turn-around? US have cheap
support the Club-Med-problem countries while Japans energy to attract investments to kick-off a revival of
similar enhanced QE stimulation has showed signs of manufacturing. There is the hype that 3D printing
sputtering. China is struggling to get real growth while can almost manufacture anything first results are
India and Indonesia may drag the rest of Asia to go the seen in producing human tissues and some industrial
recession path. products. US will return to sustainable growth as a
competitor, not a consumer as there will be cheap
We cant solve problems by using the same type of energy, competitive exchange rates and the countrys
thinking we used when we created them. -- Albert dominance in technology. In US and UK all major
Einstein indicators point to slow but firming economics.
Germany shows stabilization of growth while in France
Obfuscating Creative Fed-Talks Continue is negative until recently. In earnest, Japan and Brazil
Quantitative easing (QE) is supposed to solve problems show potential emerging growth. But China, India,
of the economy, unemployment and deflation arising Canada and Russia show growth below trend. The
from sub-primes and derivatives. But the problems still puzzling trend of why emerging markets (the worst
remain after three QEs although these provided for rising being the Shanghai market which even lags behind
stock markets, mild inflation and falling bond yields Greece) have not emulated the records of the Dow,
although in the horizon mortgage insurers can face may be pointing to the reindustrialization of the worlds
loan defaults. The Fed-talk solution to this conundrum biggest economy.
is unclear. Operation Twist, ZIRP (zero interest rate) or
maybe dove-nado will continue until a QE tapering Forest Fires
tantrum (Septapering?) may shock markets while by
the end of the year the US will be faced with another Whether in Australia or in America forest fires constitute
fiscal cliff and will need more sequestrations. one of the largest single source of CO2 emissions. In
SE Asia tropical forest fires spreading to peat become
Give me control of a nations money and I care not insidious because of polluting haze. The development
who makes its laws. Mayer Amschel Rothschilda of Asias tropical regions has resulted in almost yearly
problems of haze during the hot dry seasons. As this
The only financial innovation useful to the country can cause serious health and economic problems
in the last 20 years is the ATM. Paul Volcker SE Asian countries have finally agreed to address the
problem. While it is easy to locate the areas using
Next Financial Crisis. In the world of stock market satellite technology, the mitigating measures must be
trading there is High Frequency Trading (HFT) and Dark in place to rapidly control and stop illegal slash & burn
Pools. Run by mega computers, these programs are for land clearing. The recent fires were outside forest
buying and selling stocks, commodities and currencies areas; with as much as 27% from timber plantations,
by the microsecond. Its a mysterious and shady world 20% from palm oil concession areas, 4% from protected
of programmers mixed together with traders and areas and 1% from logging areas. As plantations have
brokers. Any error or rogue-trader could unleash a the zero-burn policy, it is likely that there has been
tsunami of disaster among connected banks. arson and that land clearing contractors or small
holders have taken the easy option of burning. It is
Or it could be the opportunistic currency clear that emergency fire fighting measures across
speculators involving banks where there is pressure for national boundaries have to be employed and fire
profits and growth, putting short positions to damage bans enforced during hot seasons for countries on the
small and vulnerable nations. Speculative money in way to developed status.
derivatives massively dwarfs that of the real economy
and where risks can arise as potential rogue-traders The Future May Not Be So Green Economic
hazard speculative gambles to cover simple errors. pressures from the on-going Global Financial Crisis are
providing for second thoughts about the renewable
Or a contagion can spread from bank-runs starting energy revolution and CO2 as the cause of climate
inconspicuously from small countries. Or a sovereign change. Hard economic realities from US and Med-
debt default will cause chain reaction panics on banks Club nations as well as the austerity fatigue spreading
vi Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

TALKING POINTS
into core EU nations, which are bearing the financial High Fat Mediterranean Diet Plus Nuts (A-diet)
cost burden, have now reached the point that each beats High Oive Oil Mediterranean Diet (B-diet) but
country reluctantly abandons or postpones the once- both high-fat diets demolish Low Fat High Carbo
zealous commitment to renewable energy, carbon Diet (C-diet). The clinical study (on a group with
credits and bio-fuels. cardiovascular risk) was stopped prematurely due
to obvious experimental facts: 3.8% (96 events) of
The EUs great leap into renewable energy now those on B-diet and 3.4% (83 events) of those on
seems like an economic and green political debacle A-diet suffered a heart attack, stroke or death from
causing an increasing drag on nations in recession. cardiovascular disease. By comparison, 4.4% (109
Green energy subsidies and bio-fuel mandates have events) of members in the control group (C-diet)
distorted markets besides causing unnecessary suffered the worst outcome. The differences in
economic pain. There has been a substantial transfer the risk of stroke were statistically significant. The
of wealth from poor to rich as the rich can benefit differences in the risk of heart attack werent, possibly
from subsidies while the average has to cope with because of the low incidence of heart attacks among
increasing electricity bills. More seriously the rapid people in the study. The results indicate the merits
expansion of green energy has eroded Germanys of a Mediterranean diet high in sea-food, fruits and
competitiveness in the global economy. Governments vegetables improved with nuts (possibly those with
should be concerned with consumers grievances more 3 fatty acids and micronutrients).[R Estruch
of rising energy costs and the threat to Europes et al (2013) N Engl J Med 368:1279-1290]. A previous
industrial base at a time when the cost of energy is study has shown that it is additional nuts that are best
only one third of Germanys. against metabolic syndrome. [Salas-Salvad J, et al
(2008). Arch Intern Med 2008; 168: 2449-2458].
In the US, subsidizing food for fuel
prematurely before support of practical science and Obesity and Diabetes have been found linked to
technology has become an inconvenient financial environmental plastic chemicals. The common Di-
drain. While bio-fuels may be useful for energy 2-ethylhexylphthalate (DEHP) and Bis-phenol A (BPA)
security to decrease dependence on Middle East fossil found in urine closely tied to teenagers chance of
petroleum, the unexpected bonanza from fracking developing insulin resistance.
gas and oil has slowly changed from mitigating CO2
emissions to one of adaptation to climate change. In Obesity-heart disease paradox: overweight and
Australia, costs and climate change are still topics of obese patients have a better prognosis, an observation
simmering debate, the financial burden of the carbon that is not understood. It may be that these obese
tax may well decide on the outcome of the coming patients exercise more or constantly seek medical
elections. help although they do not lose weight. BMI may not
be a good health marker.
Food and oil-crop producing nations will also have
to face coming political and climate-change realities. A Free Market without Farm Subsidies has been
Palm oil, which could be the most sustainable of crop advocated by Jeff Siegel [DR (2013)] to fight Obesity.
bio-diesels from cost and LCA considerations, is now The current obesity epidemic among the younger
in surplus due to protectionist import restrictions. set has been the long term effect of cheap calories
Being temporally below the price of petroleum crude, (600 more calories per person) produced from highly
it is up to the producing countries to substitute it for subsidised farming since 1980. Sugary beverages are
diesel consumption. commonplace and unknowingly subsidised indirectly
and it will be of little consequence in trying to ban the
Heavy rains and floods (Aug 2013) may wipe out sale of large cups or containers of sweetened drinks.
>30% agricultural crops in South Carolina. Drought in
February of 2013 was considered the worst in 50 years Labelling Europe now questions the accuracy of
but this had been followed by many months of good labelling because of the complex way food travels on
weather allowing for good harvests. Vegetable oil the way to consumers. Horse meat in beef investigation
prices have been generally weak from liquidation and show the complex network of slaughter houses,
better harvests in N. America and Asia. August dry- suppliers and processors and handlers to the dinner
season stress on other US soybean crops is providing table and the controls governing food transported
a relief to falling palm oil prices. across borders. Can consumers rely on food labels on
what they are eating?
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 vii

TALKING POINTS
New Australian Dietary Guidelines 2013 Drink a Microbatteries owe their high performance to their
lot of water and 5 major nutritious foods (vegetables, internal 3-D microstructure. Design has been possible
beans and legumes; fruits; reduced amounts of dairy to increase capacity (30 times) and faster (1,000
products or their alternatives; grain food or mostly times) charging required by modern applications.
whole-meal; lean meats, fish, eggs, tofu, nuts, seeds and This makes it potentially possible to reduce (30 times)
beans). Recommendations are targeted at promoting progressively all consumer electronics, medical
health, reducing obesity and protecting against major devices, sensors, etc.
chronic diseases (cardiovascular, type-2 diabetes and
cancer). There are hardly any controversial materials: The Deaf Can Hear. Medical technology has advanced
eat plenty of vegetables and fruit, choose mostly sufficiently to provide implants to children born deaf.
unprocessed grains and cereals, cut back on salt, fat It is not just the elderly that benefits from hearing
and sugars and get more active. Will these be just aids, infants once diagnosed with total hearing
aspirational or reflect reality in available food choices? disability can be provided with implants since 2000.
Ideology and business interests are put ahead of the
science that could meet individuals. Impacts will have RSPO Alert. Khor Yu Ling reported on the risks to
to come to and from industry food manufacturers, PO growers on the carbon tax from the RSPO HCV
production of cloven-hoof animals, agriculture and compensation scheme. The vague rules have financial
sustainable environment. With two-thirds of the implications with cost indications of about US$3,000
population overweight or obese, guidelines seem 13,000/ha of new plantings. There are many legalistic
to be viewed through political prisms in relation to details for policy makers to address so as to ensure
consumer tastes for sugars, salt, fats and oils (and their that Malaysia (a globally miniscule GHG emitter and
types), kinds of protein and dairy foods. a major stakeholder) does not get the wrong end of
the stick.
Drug Discovery: Polyunsaturated fatty-acid derivative
helps zap killer flu in mice Now, biological informatics Palm Oil as Currency. Non-traditional Chinese
and experimental therapeutics professor Yumiko traders have been innovatively importing CPO (and
Imai of Akita University, in Japan, and coworkers then selling it with a discount to market price for
report that that the protectin D1 isomer 10S,17S- instant cash) in order to obtain bank credit for loan to
dihydroxydocosahexaenoic acid blocks replication SMEs who are unable to get funding due to a period
of the flu virus by inhibiting export of viral genomic of time when government policies are for slowing
material from host-cell nuclei [Cell, DOI: 10.1016/j. any credit bubble formation.
cell.2013.02.027]. They found the compound by
screening a lipid library
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 worlds resources of
gas, oil, and coal combined, and claims it can have
commercial operations up and running by 2019.
viii Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

O N A L I G H T E R N OT E
Someone commented that the FED had creatively The Germans are no doubt rather annoyed about a new
added so much to the vocabulary: quantitative easing study showing theyre amongst the poorer nations of
(QE), austerity measures, debt ceilings, Fiscal cliffs, Europe. Spain, Italy and Cyprus topped the wealthy end
sovereign debt defaults, green shoots, dark pools and of the list. The reason for the surprising numbers lies in
black swans, tapering, etc these were not part of our house prices.
vocabulary five years ago. In the enthusiasm for QE,
Operation Twist, ZIRP, and other monetary innovations There are four types of countries in this world,
to stimulate the economy, the FED forgot the basics. according to the old Argentine lament. There are first
Maybe if the FED stuck to the essentials, the strong world and third world countries, rich and poor. Then
banks and corporations would survive and the weak theres Japan, where nobody can work out how they
ones should be allowed to disappear, by now the world did so very much with so very little. And lastly, theres
economy would be recovering well and more people Argentina, where nobody can figure out how so little
would have jobs. was done with so very much. Joel Bowman
We, as individuals, can live beyond our means by G20 Summit, Regional Economic Cooperation, Free Trade
borrowing, but only for a limited period of time. Agreements, Etc Gabfests provide the usual double
Why then should we think that collectively, as a nation, speak, buzzwords, fostering cooperation, free trade, open
we are not bound by that same limitation? Ronald economies, etc. But then competition, protectionisms,
Reagan non-tariff barriers, anti-dumping regulations, currency
manipulation, QE (stimulus, money-printing, etc), etc
No very deep knowledge of economics is usually seem more and more apparent.
needed for grasping the immediate effects of a measure;
but the task of economics is to foretell the remoter One must change ones tactics every ten years if one
effects, and so to allow us to avoid such acts as attempt
wishes to maintain ones superiority. Napoleon
to remedy a present ill by sowing the seeds of a much
greater ill for the future. Ludwig von Mises Bonaparte
Confucius wisely said, Study the past if you would The Universe only rewards action. -- Robert Redfern.
divine the future
Like Socrates, smart investors only advantage is
Men and nations behave wisely once they have knowing they dont know anything.
exhausted all other resources Abba Dban
Nothing in this world is more dangerous than sincere
Give me control of a nations money and I care not who ignorance and conscientious stupidity Martin Luther
makes its laws. Mayer Amschel Rothschilda King
Australia is the happiest country on earth, according In the end we will remember not the words of our
to an OECD index. Only theres a small kink in that enemies but the silence of our friends Martin Luther
claim. You need money to buy that happiness. A lot of King
money Nick Hubble of DR
Advice of a CEO to a Pretty Girl looking for a Mate
People have the wrong idea of socialism. It is not a well- earning $500k per year: A guy earning $500k and above
functioning welfare state. Any system based on giving will assess the investment value of the Pretty Girl as
people something for nothing, and sticking hard- a depreciating investment unlike good wine. So he
working, productive citizens with the bill, is doomed is unlikely to take up the offer as such investment will
to fail. Sweden is no exception Nick Hubble of DR depreciate exponentially with age. It is probably best
to learn with a little luck to be the $500k+ per annum
Nothing sedates rationality like large doses of person yourself instead of the futile pursuit to find one.
effortless money Warren Buffett
I once had a rose named after me and I was very
How beautiful it is to do nothing and the to rest flattered. But I was not pleased to read the description
afterward Spanish proverb in the catalogue: no good in a bed, but fine up against a
wall. Eleanor Roosevelt
The bitterness of poor quality remains long after the
sweetness of low price is forgotten Benjamin Franklin Be nice to people on your way up because you meet
them on your way down Jimmy Durante
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 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,1,4,8,9,13-19,21,33,36,37- Wong CK 43
39,41 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
Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 xi

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Malaysian Oil Science and Technology (MOST)

INTERNATIONAL ADVISORY COMMITTEE: COVER STORY

Cheng Sit Foon 603-7967 7172

Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 i

EDITORIAL POLICY INFORMATION

C-3A-10, 4th Floor, Block C (Lift No. 5)

ii Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

14 TESTING THE FLOOR OF THE PRICE BAND

9 14 GLOBAL PALM OIL BUSINESS PROSPECTS AND CHALLENGES

15 21 INFLUENCE OF BIO-DIESEL ON PALM OIL PRICING: IS THE GAME NOW CHANGING?

35 37 INDONESIAN PALM OIL MARKET AND ITS IMPACT ON PRICE IN 2013

43 47 GENETIC IMPROVEMENT AND CHOICE OF OIL PALM PLANTING MATERIALS

Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 iii

iv Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 v

[Presented at the POC2013 Conference, Mar 2013, Kuala Lumpur]

EU premium over diesel, US$ per tonne

NW Europe prices, US$ per tonne

PKO + oil in PK stocks, '000 tonnes

we must focus on the premium for oils over Brent in 400

order to understand the behaviour of prices (Fig. 1). 300

RSO and SO premia over Brent crude is seen to be 400 CPORSO

crude, shown as horizontal lines. Note: All three major -100 0

follows that our analysis should concentrate upon the vegetable

Malaysian Oil Science and Technology

TESTING THE FLOOR TO THE PRICE BAND

The Impact of Stocks on Prices

We all know and believe that there is a relationship

Premium over Brent, US$ per tonne

between stock levels and prices in the usual supply- 150

demand relationship. If you are sceptical about the 100

price band, see how closely the CPO premium is tied to 50

to come down we can expect increasing premium or -200

higher prices. -250

400 2,250 premium of CPO prices over Brent crude

200 1,750 The Attractions of CPO as a Fuel in S.E. Asia

Figure 5. Comparative prices of methyl esters

2 Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

EU PKO premium over Brent US$ per tonne

TESTING THE FLOOR TO THE PRICE BAND 250

EU double counting of biofuels from waste oils has

PKO + oil in PK stocks, '000 tonnes

EU PKO premium over Brent US$ per tonne

tax) has been far below EU gasoil prices. (Fig. 6)

PME supply price discount on EU gasoil

150 Figure 7. PKO stocks and price premium over Brent

Another big unknown is the way Malaysian export

Is the link between stocks and the CPO premium over

Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 3

Fry J (2012) The world of oils and fats: Is smart

4 Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

[Presented at the POC2013 Conference, Mar 2013, Kuala Lumpur]

Introduction crop. This is in an environment of the big export push

Background India: Production, Consumption and Per Capita

Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 5

Indian Import Duties

6 Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

Table 3. Incremental supply growth of vegetable

Soybeans The complex of vegetable oil market is anticipatory.

Malaysian Oil Science and Technology 2013 Vol. 22 No. 1 7

Abbreviations. BMD = Bursa Malaysia Derivatives;

8 Malaysian Oil Science and Technology 2013 Vol. 22 No. 1

[Lecture presented to MOSTA on 22nd June 2013, Kuala Lumpur]