POINTERS: Global Oils & Fats Outlook

By: Tan Sri Datuk Dr. Yusof Basiron

TAN SRI DATUK DR. YUSOF BIN BASIRON aged 66, a Malaysian. He is presently holding several important positions which include: i. Chief Executive Officer of Malaysian Palm Oil Council (MPOC) ii. Director of Sime Darby Berhad iii. Chairman and Director of CBIP Berhad Apart from holding distinguished corporate positions, he is also involved in other organizations which are: (i) Senior Fellow and Past President of Academy Sciences Malaysia (ASM) (ii) Fellow member of Malaysia Scientific Association (MSA) (iii) Fellow member of Malaysian Oil Scientists' and Technologists' Association (MOSTA) (iv) Fellow member of the Incorporated Society of Planters His notable academic achievements are as follows: i. In 1972, he obtained his Bachelor in Chemical Engineering Degree from the University of Canterbury, New Zealand; ii. In 1974, he obtained his Post-Graduate Degree in Rubber Technology (ANCRT) in the United Kingdom; and iii. In 1976, he obtained his Masters Degree in Engineering specializing in Industrial Management (M.E.) and also in Business Administration (MBA) from the Catholic University of Leuven in Belgium. Before he joined Palm Oil Research Institute of Malaysia (PORIM) in 1979, he held the position of Rubber Technologist/Techno-Economist with the Rubber Research Institute (RRI)/Malaysian Rubber Research Development Board (MRRDB). In 1986, he completed his doctorate with a PhD in Applied Economics and Management Science from the University of Stirling, Scotland. He was later appointed as the Director-General of PORIM in 1992. He held the position for 8 years until April 2000 before assuming the role of the Director-General of Malaysia Palm Oil Board (MPOB), an organization which existed as a result of a PORIM and Palm Oil Registration and Licensing Authority (PORLA) merger, from 1 May 2000 until 18 January 2006.

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The global oils & fats production in 2013 is forecast to be at 189 million MT compared to the 186 million MT produced in 2012. This would mark an increase of 1.6% in oils and fats production. Global palm oil production for 2013 is forecast at 56 million MT, compared to 53.7 million MT in 2012 reflecting an increase of 4.3%. Malaysia and Indonesia will remain as the top two producers of palm oil, contributing to 84% of the total global palm oil production. The palm oil production from both these countries is crucial as they contribute to almost 30% of the total global oils & fats production.

Price of crude palm oil in the beginning of 2013 was RM2,500/MT and fluctuated between RM2,250 to RM2,500 per MT in the first half of 2013 and reached a peak of RM2,600. Since then, price of crude palm oil has been on the downtrend and settled in the region of RM2,300/MT. Among the reasons for the downward trend was the concern over the high stock levels of palm oil especially in the first quarter of 2013 but the levels have since tapered off and stabilised. Demand and export have been seen strengthening in the latter part of May and June as countries such as India, Middle East, Pakistan and Bangladesh stock up their requirements in anticipation of the festive season.

This paper will analyse issues that will affect palm oil price in 2013 especially in the second half of the year. The regional analysis on the demand and supply scenarios will be aggregated at the global level to forecast the demand and supply balance in the second half of 2013.

We use the Stock Usage Ratio (SUR) as our basis to determine the demand and price forecasts. The SUR is also a useful indicator to measure the amount of surplus in stock that can be carried forward to the next year, thus indicating the supply situation carried forward for the following year.

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Questions & Answers (8) :

Yusof Basiron

11 years ago

Kurt, most Malaysian oil palm plantation companies operating in Indonesia are members of RSPO, and they practise zero burning when clearing land. There is absolutely no reason for our plantation companies to use fire in an oil palm plantation. The bad publicity was created by wild allegations by opponents of the palm oil industry like Greenpeace. MPOC monitors the efforts made by Malaysian plantation companies in helping to put out fires in neighbouring small farmers' area which forms part of their CSR programme.

Kurt Faudel

11 years ago

We still see customers in the USA who are reluctant to use palm oils, due the "sustainability issue". So it is important that producers/organizations support the RSPO. The fires and smoke in Sumatra has cast a bad image on palm oil again. Is the MPOC working with Indonesia to stop the burning.

Yusof Basiron

11 years ago

Sarala, I think the question is whether importers will reduce palm oil imports because of allegations negatively linking oil palm plantations with the haze.So far, oil palm plantations are not implicated with the fires that caused the haze. There is no reason to reduce import of palm oil.

Sarala Aikanathan

11 years ago

Dear Tan Sri Datuk Dr. Yusof Basiron.: With the current haze problem, there maybe a risk for pressure to increase to limit Malaysia’s palm oil import. What do you think are the major hurdles that needs to be addressed to overcome to this issue and do you see that this problem can be resolved?

Yusof Basiron

11 years ago

Dr Girgis, the high stock usage ratio projected for the next six months for world oils and fats market means prices of all oils and fats will still be low compared to 2012, but projected growth in production is not excessive for 2013/2014, so prices of palm oil, sunflower oil and canola will generally rise in the coming months in anticipation of normalized market demand and supply. The low prices of palm oil will not continue for too long, Palm oil price trend will influence the price trends of other vegetable oils.

Yusof Basiron

11 years ago

Peter, Malaysian biodiesel initiative is now implemented for central and south region of the Peninsular, and will potentially consume any excess supply of CPO as biodiesel to fulfill local B5 mandate. By October, the whole of Peninsular will use B5 and by July 2014, Sabah and Sarawak will be implementing B5, with total consumption nationally of up to 500,000 MT of palm oil. This will help Malaysia achieve its low carbon green fuel objective and allow palm oil market to correlate more with other vegetable oil prices.

Peter Lavina

11 years ago

Sir, I notice that CPO prices went up after petroleum oil hit $100 per barrel. The reason is quite obvious. Biodiesel becomes a viable alternative. My question is whether there is any mechanism to break this relationship between CPO and petroleum price. Can we not push for more biodiesel use and not be pegged by the ups and downs of the volatile petroleum market. Thank you! - Peter Tiu Lavina, Davao City, Philippines

POINTERS SECRETARIAT

11 years ago

Dear Tan Sri Datuk Dr. Yusof Basiron. Thank you for your article series about GLOBAL OILS & FATS OUTLOOK. In the previous POINTERS, you say the reason for low palm oil price is due to high stocks. Do you expect the same to happen to the prices of sunflower oil, soy and canola for the second half of 2013. (This question was e-mailed by Dr. Adel Youssef Girgis of the Food Technology and Research Institute of Egypt to the POINTERS Secretariat)