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POINTERS 2014 MPOC
Palm Oil Internet Seminar
10

Anticipating 2014 Palm Oil Price Direction:
China Oils and Fats Demand Analysis 2014 - Demand Outlook for Palm Oil
By: Mr. Cao Zhi

Mr. Cao Zhi is the Head of Market Intelligence Department of National Grain and Oil Information Center and a Senior Economist who has been conducting research on oils and fats, oilseeds and cereals market for many years. He is in charge of many research reports in National Grain and Oil Information Center and gave more than 100 papers in past several years. His researches won many awards from National Development and Reform Commission and State Administration of Grain. He was invited to be the expert in the expert group of Ministry of Agriculture. Mr. Cao Zhi has presented many lectures and talks on China's grain and oil market in conferences and workshops all over the world.
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In past several years, three factors were identified to have an impact on the oils and oilseeds consumption in China. These factors are population and income growth, urbanization, and changing structure of livestock industry. Along the years, with the limited arable land and competition among grains and oilseeds for planting area expansion, oilseeds have been less preferred and led to stagnating production volume. This subsequently led to increase reliance on imported oilseeds, and causes the influence of annual growth of domestically produced oilseeds on vegetable oils prices to slowly weaken. On the other hand, the influence of oilseeds production will be more reflected on the price difference between different oils, and between different regions. China’s vegetable oil production is predicted to rise slightly by 2.3% to 23.2 million MT in 2013/14, and import volume will reduce sharply by 16.7% to 8.03 million MT. In terms of demand, total demand volume for vegetable oil, including ones to be exported, is predicted to increase by 2.4% to 28.98 million MT. As meat consumption growth will remain steady until 2021, the China is forecasted to bring in more soybeans to satisfy the growing requirements for protein meal. This will result in growing domestic supply of soybean oil and reduce the need for additional vegetable oil import in coming years.


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Questions & Answers (5) :
Cao Zhi
4 years ago
With regards to palm oil of having the characteristic of credit financing commodity, my understanding is that between 2000 and 2007, palm oil was a major source of imported vegetable oil in China, and imports of palm oil was under normal form of international trade. But after 2008, with the Chinese government tightening the lending to real estate and other high-profit margin sectors, some private enterprises from real estate and mining sectors began to use international trade as a form of financing. As a major agriculture commodity and also its short transportation / delivery time from Southeast Asia to China, palm oil became a target for trade financing. As of now, if the Chinese government does not change its lending policies, trade financing activities using palm oil will still continue. In addition, China's vegetable oil supply gap still exists; this part of the gap can be met by direct import of vegetable oil or through crushing soybean. With future rigid demand growth of China's vegetable oil slowly decreasing, soybean oil derived from crushing imported soybean may be able to meet the incremental annual growth of vegetable oil, and do not need to import more palm oil to meet domestic demand. Thus, we can foresee that the palm oil import demand will remain at 6 million tons, and will not see the significant growth trend recorded in the past 10 years.
Cao Zhi
4 years ago
Dear Mr Chaii, Thanks for your question. With growing population and increase in disposable income, demand for food has been increasing steadily in China. However, the Chinese government was unable to keep the growth pace of food crops output against the demand in the country due to limited arable land. Hence, in order to make sure that the country is self-sufficient in staple foods, grains were given preference to oilcrops, and as such the support was and will still more skewed towards grains production.
Mohammad Jaaffar Ahmad
4 years ago
I am intrigue with your analysis that "palm oil has the characteristics of being the credit financing commodity". I assumed that the attractiveness of palm oil is largely linked to a stable China's financing policy. Am I correct then to conclude that the demand for palm oil is not driven by its superiority in quality or nutritional value compared to soyabean oil and rapeseed oil ?. Honestly, what is the perception of Chinese consumers towards palm oil? Regards
Mohammad Jaaffar Ahmad
4 years ago
I am intrigue with your analysis that "palm oil has the characteristics of being the credit financing commodity". I assumed that the attractiveness of palm oil is largely linked to a stable China's financing policy. Am I correct then to conclude that the demand for palm oil is not driven by its superiority in quality or nutritional value compared to soyabean oil and rapeseed oil ?. Honestly, what is the perception of Chinese consumers towards palm oil? Regards
LIM TECK CHAII
4 years ago
China's land use change (LUC) as reported in your paper is skewed towards a higher preference for grain cultivation. The question is why is China's government giving more support to the cultivation of grain than oilseed. Appreciate if you can elaborate. TQ
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