OIL PALM

100 YEARS OF ECONOMIC

OIL PALM SAGA GROWTH AND
Dr Ahmad Kushairi Din, MPOB
SUSTAINABILITY
Dato’ Carl-Bek Nielsen, UPB

ECONOMIC AND
AND MARKET PALM OIL
OUTLOOK AND HEALTH
Dr James Fry, LMC
Dr Azman Ismail, Clinician
3,000 BC FROM AFRICA 100 YEARS AGO TO MALAYSIA
MALAYSIA

EGYPT

INDONESIA
Bogor Palms

AFRICA

ONE LONG JOURNEY FROM WEST AFRICA,

ONE AMBITIOUS DREAM OF A FRENCHMAN,
ONE ASPIRATION FOR A DEVELOPING
NATION.
BIG PICTURE ON OIL PALM & GLOBAL LAND-USE

Global
Agriculture Land
5 Billion Ha = 37% Pasture
3.45 Billion Ha
>2/3 = 69%

~1/3 <1/3
Arable Land for Crops 1.2%
1.55 billion ha
( ie 1,550 million ha )
= 31%
100%
Global Land Area
13.4 Billion Ha
GLOBAL OIL PALM : 19 million ha
0.1% 0.4% of global agricultural land
10% 30%of global edible oils production
20% 55%of global edible oils exports
TRADING OF GLOBAL EDIBLE OILS AND FATS
 CONSUMPTION DEMAND OF “CHINA + INDIA” COMBINED
JUST THINK ABOUT IT : CHINDIA’s POPULATION
2 Tablespoons of Olive Oil A Day
Keep the Doctors Away

2.7 BILLION
2 tablespoon (~24 g) of palm oil / day / person in CHINDIA
will require additional >23 million tonnes of palm oil per year
i.e. > total Malaysian annual palm oil production

Removing palm oil will only pass the problem to other crops - with more detrimental effects
 PALM OIL – BALANCED RATIO OF FATTY ACIDS
40% monounsaturated oleic acid, 10% polyunsaturated linoleic acid, 44% saturated palmitic acid and 5% saturated stearic acid

A E
 100 YEARS OF
OIL PALM SAGA
Dr Ahmad Kushairi Din, MPOB
100 Years of Oil Palm Saga

A. Kushairi
Director General, MPOB

Evening Forum
PIPOC 2017
MPOB International Palm Oil Congress
Treasuring the Past, Charting the Future

Kuala Lumpur Convention Centre,

Kuala Lumpur, Malaysia
14 – 16 November 2017
 1 A Long Time Ago
Origin Africa 3 Epic Journey
1848 Bogor Botanical Garden, ID 1961 FELDA Taib Andak,
Cornerstone to further expansion
1870s Deli, Sumatra, ID; decorative
1970s Refining sector
1911- Rantau Panjang, Selangor, MY;
1912 decorative purposes 1970s KPU/MPIC, PORLA, PORIM,
Onwards MPOB, MPOA, MPOC
1981 Eladobius kamerunicus
2 Humble Beginning
1980s Oleochemical sector
1917 First commercial plantation,
Followed by first Mill Since “Anti-palm oil” on nutrition,
1980s sustainability by third parties
1922 DOA formal oil palm research
2005 National Biofuel Policy
1920- Expansion by plantation
1950 companies 2015 MSPO Certification
2017 Celebrating 100 years
Abbreviations
ID = Indonesia KPU = Ministry of Primary Industries MPOB = Malaysian Palm Oil Board
MY = Malaysia MPIC = Ministry of Plantation Industries and Commodities MPOA = Malaysian Palm Oil Association
DOA = Department of Agriculture, P. Malaysia PORLA = Palm Oil Registration and Licensing Authority MPOC = Malaysian Palm Oil Council
FELDA = Federal Land Development Authority PORIM = Palm Oil Research Institute of Malaysia MSPO = Malaysian Sustainable Palm Oil
 Managing the Industry
Local and Global
• 100 years of colourful Labour vs Mechanization
success stories, but not
without challenges Expertise Collaboration

• Despite had undergone Communication Funding

yield-enhancing shifts in the
25.00
past
o including introduction of improved 20.00
high yielding varieties, planting 15.00
density, mechanisation, High yields
Low yield Low yield

FFB Yield (t/ha/yr)

1985, 1986 2016
agricultural chemicals, best 10.00 1998
22.15 t/ha/yr 15.91 t/ha/yr
15.98 t/ha/yr
practices,
5.00
• Yield is stagnant, and below El Nino
(1997/98)
El Nino
(2016)
-
potential 1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Malaysia national average FFB yield, 1975-2016
• Growth in yield needs new
technologies, innovations
 The Way Forward

If agriculture is to continue to feed the world, it needs to become

more like manufacturing, says Geoffrey Carr. www.economist.com

Smart Farming New Technologies

Examples
• GPS, sensors, cloud computing, weather,
fertigation, VRT, pest & disease controls,
site yield potential
• Leading to cost-effective measures,
optimise yield, maximise profit
• Thus, farms becoming factories-like with
tightly controlled operations.
Examples
• genome editing, DNA sequencing
enable breeding for desired traits
more precise
• Microbe, including bacteria and
fungi helps improve soil health,
fertility and crop yield

http://www.economist.com/technology-quarterly/2016-06-09/factory-fresh
 Transformative Technologies
DIGITAL:
BIOTECHNOLOGY:
 High Performance Computing Sustainability  Genomics
 Cloud Computing
Pillars  Bioinformatics
 Data Analytics
 Sensors  Synthetic Biology
 Internet of Things People Planet  Biocatalysis
 Artificial Intelligence  Health monitoring
 Drones technology
 Robotics  Biochips and sensors
 Mobile wireless  Bioimaging

ENERGY & ENVIRONMENT:

 Biofuels
Carbon capture & Storage ADVANCED MATERIALS:
 Profit
 Precision Agriculture  Nanomaterials
 Energy harvesting  Functional Materials
 Smart grids  Additive Manufacturing
 Connected & Autonomous vehicles
List is non-exhaustive

Oil Palm Industrial Revolution

 Thank You

Books launched at PIPOC 2017

Introductory price of 20% discount during PIPOC week, 13-17 Nov 2017

8 hours ago
 OIL PALM
ECONOMIC
GROWTH AND
SUSTAINABILITY
Dato’ Carl-Bek Nielsen, UPB
 Increasing production through
EU Rape Oil Higher Yields……vs……. Deforestation Malaysian
USA Soya Oil Palm Oil

2.5 5

Mal Palm : 3.6 to 3.75MT/Ha  5 % yield increase

2 4

1.5 3

1 2

EU Rape : 1 to 1.45MT/Ha  45% yield increase

0.5 1

US Soy : 0.4 to 0.6MT/Ha  50% yield increase

0 0
1990 1995 2000 2005 2010 2015

EU Rape Oil USA Soya Oil Malaysian Palm Oil

Source: Oil World 2017; MPOB 2017

Ha of land required to produce Land area to produce 150mill MT
1 MT of vegetable oil X-tra veg oil by 2050

SOY 2.22 Ha 330mill Ha of Soy

SUN 1.85 Ha
278mill Ha of Sun
RAPE 1.52 Ha

OIL PALM 0.26 Ha 228mill Ha of Rape

39mill Ha of Palm
“Best in
0.17 Ha
class” 25.5 mill Ha of Palm

….palm oil will eventually gain the consumers affection…..

…..if sustainability is “built in” & not just “bolted on”…
……..An emerging threat ?.........

• We must remain alert,

vigilant and fix our eyes on
our radar screen and our
ears to the ground

• …..disruptive change may

be lurking just around the
corner

• …opportunity or Threat….
ECONOMIC AND
AND MARKET
OUTLOOK
Dr James Fry, LMC
 Treasuring the past; charting the future:
Economic and Market Outlook for the Palm Industry
Presentation to the PIPOC Evening Panel
by Dr. James Fry, Chair, LMC International, Oxford, UK
KLCC, November 2017

© 2017 LMC International. All rights reserved. www.Lmc.co.uk

 The recovery in output after El Niño has been erratic
There has been a stop-start revival in production after the severe shock in 2016

2
Yr on yr change in output, million tonnes

-1

Current period of slower output growth

-2

-3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
Indonesia Malaysia

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 Rolling 12 month year-on-year output growth is now high
Slow output growth in the second half of this year is reflected in the temporary
decrease in year-on-year growth before a return to a rise of 6 million tonnes.
8
Annual change in output, million tonnes

-2

-4

-6

-8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
Indonesia Malaysia

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 The outlook for palm oil prices

Forecasting palm oil prices and stocks

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output 24
 2007 heralded the creation of a price band in which EU
vegetable oil prices trade at a premium to Brent crude oil
You can see that whenever, since 2007, EU CPO prices fell and touched Brent
crude oil prices, they bounced back. Brent is now an effective floor to CPO
2,100 prices

1,800
EU prtices (US$ per tonne)

1,500

1,200

900

600

300

0
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Soy Oil CPO Rapeseed Oil Sun Oil Brent

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 There is a link between stocks and the CPO-Brent spread
When Malaysian stocks are high, downward pressure on prices cuts the EU CPO
premium over Brent. When stocks are low, the premium rises to ration demand.
600 3,050
EU premium over Brent, US$ per tonne

500 2,800

MPOB Palm Oil Stocks, '000 tonnes

400 2,550

300 2,300

200 2,050

100 1,800

0 1,550

-100 1,300
Jan-08Jan-09Jan-10Jan-11Jan-12Jan-13Jan-14Jan-15Jan-16Jan-17
EU CPO Premium over Brent Average CPO Premium MPOB Stocks

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 Rising stocks are putting pressure on the CPO-Brent spread
Daily local CPO premia in Indonesia and Malaysia over Brent have shrunk to a
2017 low, but have been overlooked because of the recent rise in the Brent price.
350
Premium over Brent crude, US$ per tonne

330

310

290

270

250

230

210

190

170

150
Jan
Indonesia FOB minus export levy Malaysia local delivered CPO

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 MPOB stocks will rise, fall and then rebound quickly.
Stocks should peak this month; fall back as output drops on a seasonal basis; but
recover rapidly in Q2. The CPO-Brent spread should move in the opposite direction.
800 3,000
EU premium over Brent , US$ per tonne

700 2,800

MPOB Palm Oil Stocks, '000 tonnes

600 2,600

500 2,400

400 2,200

300 2,000

200 1,800

100 1,600

0 1,400

-100 1,200
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
EU CPO Premium over Brent Average Premium MPOB Stocks

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 MPOB PKO stocks are at last showing signs of recovery
The inverse relationship between PKO stocks and the PKO premium over Brent
is a striking one. With output and stocks reviving, the premium should fall back.
1,500 550
EU PKO premium over Brent, US $/tonne

PKO + oil in PK stocks, '000 tonnes

1,200 500

900 450

600 400

300 350

0 300

-300 250
Jan-07 Nov-08 Sep-10 Jul-12 May-14 Mar-16
EU PKO premium over Brent Stocks

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 Implications for EU CPO prices at different Brent prices
I illustrate EU CPO price forecasts until July at different Brent crude oil prices
alongside MPOB stocks. The price today is in the region of $63-$64 per barrel
800 2,400
EU price, US$ per tonne

750 2,200

MPOB stocks, '000 tonnes

700 2,000

650 1,800

600 1,600
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
$65/bbl Brent $60/bbl Brent $55/bbl Brent Stocks

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 Implications for BMD futures at different Brent prices
This expresses price forecasts in Ringgits. Recently BMD has been near RM2,800.

3,000 2,400
BMD CPO, Ringgits per tonne

2,800 2,200

MPOB stocks, '000 tonnes

2,600 2,000

2,400 1,800

2,200 1,600
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
$65/bbl Brent $60/bbl Brent $55/bbl Brent Stocks

© 2017 LMC International. All rights reserved. Long term prospects for palm oil output
 Treasuring the past; charting the future

Thank you for your attention

© 2017 LMC International. All rights reserved. Treasuring the past; charting the future 32
 Oxford New York Kuala Lumpur

4th Floor, Clarendon House 1841 Broadway SO-30-8

52 Cornmarket Street New York, NY 10023 Menara 1
Oxford USA No3 Jalan Bangsar
OX1 3HJ KL Eco City
UK 59200 Kuala Lumpur
Malaysia
T +44 1865 791737 T +1 (212) 586-2427 T +603 5611 9337
F +44 1865 791739 F +1 (212) 397-4756
info@lmc.co.uk info@lmc-ny.com info@lmc-kl.com

www.Lmc.co.uk

© LMC International, 2017

All rights reserved

This presentation and its contents are to be held confidential by the client, and are not to be disclosed, in whole or in part, in
any manner, to a third party without the prior written consent of LMC International.

While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation,
any decisions based on them (including those involving investment and planning) are at the client’s own risk.
LMC International can accept no liability regarding information analysis and forecasts contained in this presentation.

© 2017 LMC International. All rights reserved. Treasuring the past; charting the future
 PALM OIL
AND HEALTH
Dr Azman Ismail, Clinician
Dr Ralph Holman
1917 2012
ENUGU IN NIGERIA
 OIL PALM
100 YEARS OF ECONOMIC
OIL PALM SAGA GROWTH AND
Dr Ahmad Kushairi Din, MPOB
SUSTAINABILITY
Dato’ Carl-Bek Nielsen, UPB

ECONOMIC AND
AND MARKET PALM OIL
OUTLOOK AND HEALTH
Dr James Fry, LMC
Dr Azman Ismail, Clinician
 SUSTAINABILITY - SUSTAINABLE DEVELOPMENT
“Common But Differentiated Responsibility”
17 UN Sustainable Development Goals (SDGs)
… include addressing poverty, hunger, good health & well-being, quality education, decent growth
& economic growth, responsible production, climate action, partnerships for the goals ….

SUSTAINABILITY

PROFIT

PLANET PEOPLE
 SUSTAINABILITY ASSURANCE
CERTIFIED SUSTAINABLE PALM OIL (CSPO)

?
 EG. WHAT DOES ‘ZERO’ DEFORESTATION MEAN TO YOU?

1. ZERO-NET DEFORESTATION
2. NO NET LOSS DEFORESTATION
3. NET POSITIVE DEFORESTATION
4. ‘ZERO’ DEFORESTATION

# Forest conservation vs Development & Poverty Eradication

# Carbon-Neutral conversion
# Richer Developed ( already cleared forests long ago)
vs Poorer developing countries ( many with forests )
# Environmental (climate-change) advocacies
vs complex moral dilemma of poverty and sustainable development
# Hard compromises and trade-offs
 REBRANDING TROPICAL AGRICULTURE :
MANAGING PERCEPTION ON “PLANTATION” ?

EXAMPLES FOR
OIL PALM PLANTATION
 Plantation -> Agribusiness
 Planters -> Green-collared
 Creche Ayahs -> Daycare centres
 Mandores -> Supervisors
 Manuring -> Fertilisation
 Crude Palm Oil (CPO) -> VIRGIN?
 Perception : Tapping palm oil ??

IT IS ALSO A WAKE UP CALL ….

 OIL PALM : A ‘SHARED DESTINY’ FOR MALAYSIANS

MALAYSAN 90% EXPORTED &

GLOBAL PLAYERS NOURISH 160 COUNTRIES

Upholding the sovereignty Redeemer during Asian Financial Crisis

of our country (1997/8) & Sub-Prime Collapse (2008/9) ?
Positive foreign exchange earnings

4,000,000 involved in the supply-chain INVESTMENTS

“Symbiotic and intertwined” Dividends

Eradicate poverty & Security crop,

rural development 650,000 smallholders
Socio-political stability

Multiplying effects Spin-off economies Personal Lives Touched

2016 : Malaysian oil palm growers contributed over RM7 billion ie 31% of profitability as
income taxes, cess, windfall levy and state sales taxes ( MEOA Annual Report ).
 HISTORY : COLLAPSE OF A DEVELOPING NATION
COCOA INDUSTRY IN AFRICA (1950s-1970s)
Example : Kwame Nkrumah Administration in Ghana
“If you want to send your
children to school, it is cocoa
If you want to build a house, it is cocoa
If you want to marry, it is cocoa
If you want to buy cloth, it is cocoa
If you want to buy a lorry, it is cocoa
Whatever you want to do in this world
It is with cocoa money that you do it…..”
Ghanaian 1950s high-life tune
LET US END WITH A PUZZLE
 Apparently, a survey was conducted by the U.N. worldwide.
The only question asked was :
"Would you please give your honest opinion about solutions to the
food shortage in the rest of the world”
The survey was a failure….. WHY ?
1. In Africa, many did not know what "food" meant.
2. In Western Europe, many did not know what "shortage" meant.
3. In Eastern Europe, many did not know what “opinion" meant.
4. In the Middle East, many did not know what "solutions" meant.
5. In South America, many did not know what "please" meant.
6. In Asia, many did not know what "honest" meant.
7. And in the USA, many did not know what "the rest of the world" meant.

…… WE LIVE IN A WORLD OF NON-LEVEL PLAYING FIELD

THERE IS A TRADE-RELATED DIMENSION IN THE EQUATION.
ie sustainability VS competitiveness and safeguarding sovereignty
 CHOICES ON GLOBAL SUSTAINABILITY
UN Report : By 2030, we will need 30% more water,
45% more energy & 50% more food than today

NEW
GLOBAL NEXUS
Food-Water-Energy 45%

Year 2030

50% 30%
OIL PALM-per-se IS VITAL VIS-À-VIS
OTHER EDIBLE OIL CROPS IN THE GLOBAL NEXUS

Removing palm oil from the equation will have disastrous consequences

‘We must learn to live together as brothers or perish together as fools’ (MLK)
TOWARDS A PURPOSE-DRIVEN LIFE AND THE INDUSTRY
IN THE NEXT 100 YEARS