Growing Dependence on Palm Oil in World Trade and Consumption

13 Sept 2013

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Growing Dependence on Palm Oil in World Trade and Consumption

Plenary Lecture at the Malaysia – Russia Palm Oil Trade Fair & Seminar (POTS)

in Moscow on 16 Sept 2013

Thomas Mielke, Executive Director of ISTA Mielke, Oil World, Global Market Research on Oilseeds, Oils and Meals,

E-mail <[email protected]>

13 Sept 2013



§  ISTA Mielke GmbH – publisher of OIL WORLD - was founded in 1958 §  ISTA = International STatistical Agricultural Information §  Independent, not involved in trading §  Leading private authority for global research and market analyses for

oilseeds, oils & fats and oilmeals §  unbiased information on the past and current global supply, demand

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13 Sept 2013



§  Introductory statements on how palm oil is linked to all oilseeds and oils

§  The dynamics of world supply & demand of oils & fats (edible & ined.) §  Biodiesel production has fallen short of expectations §  Success Story: Russia has turned into a net exporter of vegetable oils

§  Outstanding growth in world palm oil and palmkernel oil production §  Consumers worldwide are getting more dependent on palm oil, owing to

insufficient supply growth of other oils & fats §  Price Outlook

The Outline of my Presentation

13 Sept 2013


88/89 91/92 94/95 97/98 00/01 04/05 07/08 10/11 13/14140

180

220

260

300

340

380

420

460

500Production (Mn T)Area (Mn ha)

10 Oilseeds: World Area and ProductionIn past 25 years world oilseed production more than doubled (strong oil and meal demand) On rising acreage and yields About half of the acreage increased came from grains. But this shift will slow down. Agricultural land has become a limiting factor worldwide, but big potential in Russia + Brazil Land values more than doubled in the past 6-8 years

13 Sept 2013


EUC.I.S.

CanUSA

ArgBra

AustraliaIndia

China

-2

-1

0

1

2

3

4

5

6Annual Change from 2012/13 ( in Mn T)

10 Oilseeds: Estimated Production Change in 2013/14Significant improvement in production in most countries expected in 2013/14 Biggest increases in Argentina, Brazil and the C.I.S. India: Much higher oilseed output in 2013/14; slowdown of veg. oil import requirements; prices declined in advance Major exception is China, boosting import requirements

13 Sept 2013


92/93 95/96 98/99 01/02 04/05 07/08 10/11 13/140

10

20

30

40

50

60

70CHINA: Imports of Oilseeds and Oils & Fats

Mn T

Oils & Fats

Oilseeds

CHINA: Rapidly rising import requirements Mainly of soybeans, but also of rapeseed and many other agricultural commodities Following a stagnation of oilseed imports (at the ex-pense of stocks in 12/13), big jump in imports by 8-9 Mn T is likely in 2013/14

13 Sept 2013


99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14123456789

10RUSSIA: Sunflowerseed Production & Area

Production (Mn T)

Harvested area (Mn ha)

In Russia production of sunflowerseed trebling in the past 15 years On account of : - higher acreage - improved yields

Sun oil exports seen at 1.4 Mn T in 2013/14

13 Sept 2013


99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/140

2

4

6

8

10

12

14RUSSIA: Production of Oilseeds (Mn T)Russian oilseed

production has increased from around 4 Mn T to 12 Mn T this year. - Sunflowerseed 9.0 Mn T - Soybeans 1.5 Mn - Rapeseed 1.4 Mn - Linseed 0.4 Mn Production potential seen at 15 Mn T within the next few years

13 Sept 2013


O c t o b e r / S e p t e m b e r 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

1

1,5

2

2,5

3

3,5

4

4,5

5

5,5Russia: 17 Oils & Fats Output & Consumption (Mn T)

Output

Consumption

In Russia domestic production of oils & fats is now exceeding consumption. Russia has turned from a net importer into a net exporter of oils and fats Still, palm oil imports has continued to increase and reached a record 730 Thd T in 2012/13. More growth potential ahead.

13 Sept 2013


91/92 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/1405

1015202530354045505560

17 Oils & Fats: World Production (Mn T)

Sun oil

Rape oil

Soya oil

Palm oil

9 Other oils4 Animal Fats

Palm oil has become the most important veg. oil worldwide Palm oil production was boosted by more than 4 times in the past 20 years from 14 Mn T in 1993/94 and is estimated to reach 59 Mn T in 2013/14, Thereof: Malaysia 20 Mn and Indonesia 30 Mn T

13 Sept 2013


Rising Dependence on Palm Oil

97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/140369

12151821242730333639424548

Soy, Rape, Sun Oils4 Animal FatsPalm Oil 9 Other

World Exports in Mn T17 Oils & Fats

1997/98 - 2012/13: §  Palm oil exports (blue line)

almost quadrupled §  Exports of all 16 other Oils/

Fats + 48% In Oct/Sept 2013/14: §  Palm oil exports (blue line)

likely to rise to 45 Mn T §  Combined exports of soya,

sun & rapeseed oils (red) to recover to 21 Mn T

13 Sept 2013



91/92 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/140

5

10

15

20

2517 Oils & Fats: Exports of Major Countries (Mn T)

Indonesia

Argentina

U.S.A.Canada Ukraine

Malaysia

Indonesia & Malaysia have exported 43.4 Mn T of oils & fats in 2012/13,

. . thus accounting for 58% of total world exports all oils & fats in 2012/13.

13 Sept 2013



The Success Story of the past 30 Years §  Substantial growth in world production of palm oil §  In 1980: 4.6 Mn T or 8% of 17 oils & fats §  In 1990: 11.0 Mn T or 14% §  In 2000: 21.9 Mn T or 19% §  In 2010: 46.1 Mn T or 27% (only 6% of area)

§  In 2011: 50.8 Mn T or 28% (57% of exports) §  In 2012: 53.7 Mn T (plus 5.9 Mn T of Palmkern oil) §  In 2020 at least 78 Mn T of palm oil required by

consumers worldwide

13 Sept 2013


World consumption of all oils & fats more than doubled in the latest 20 years to 188 Mn T in 12/13 Palm oil and Pkernel oil: annual growth rates were more than double of those of other oils & fats. Today both oils account worldwide for : - - 33% of consumption - - 63% of exports

98/99 01/02 04/05 07/08 10/11 13/140

50

100

150

200palm oil + palmkernel oil15 other oils & fats

World Consumption of 17 Oils & Fats

Mn T

Growing Dominance of Palm Oil & Palmkernel Oil Worldwide

13 Sept 2013


Food use Other (animal feed, etc.)Chemicals Energy (biofuels)

Jan/Dec 2012 total: 183.9 Mn T17 Oils & Fats: World Consumption, by Category

8.8 Mn (4.8%)

133.7 Mn (72.7%)

17.1 Mn (9.3%)

24.3 Mn (13.2%)

World consumption of 17 oils & fats reached 183.9 Mn T in Jan/Dec 2012 Of which: •  Food use 133.7 Mn T •  Biofuels – 24.3 Mn T •  Chemicals – 17.1 Mn T •  Other use – 8.8 Mn T

13 Sept 2013


Usage Breakdown of Individual Oils/Fats in 2012 biofuels food oleochemicals other

§  Soya oil : 17% 77% 4% 2% §  Palm oil : 12% 76% 8% 4% §  Rape oil : 27% 67% 3% 3% §  Sun oil : 1% 97% 1% 1% §  Tallow: 18% 15% 55% 12% §  Coconut: 5% 50% 45% §  Palmk.oil : 1% 47% 50% 2% §  Other oils : 1% or less for biofuels

13 Sept 2013


2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

5

10

15

20

25World Production of Biodiesel (Mn T)

Rising needs of feed-stock for biodiesel production require additional agricultural land But the growth in biodiesel consumption has recently slowed

13 Sept 2013


Supply, Demand and Price Outlook 2013/14

13 Sept 2013



Prices from 3 Sept 2012 until 12 Sept 2013Sep Oct Nov Dec Ja13 Feb Mar Apr May Jun Jly Aug Sep

700

750

800

850

900

950

1000

1050Crude palm oil, cif Rott.Brent crude oil, Brent/ICE

Daily Prices of Crude Palm Oil & Brent Oil (US-$/T)Energy Market Impacts: Palm oil prices (red line) traded largely sideways in the past 7 months Palm oil was supported by the appreciating crude mineral oil prices (blue line) and huge demand In Europe palm oil usage for energy increased by 0.8 Mn T in 2012/13

13 Sept 2013


Arg. soya oil prices have come under considerable pressure and fell to the lowest level in 32 months in August 2013 reducing the premium over palm oil to US $ 100 For vegetable oils most the bearishness already discounted But much greater downward potential for oilmeal prices

Daily prices from 1 Jan 2010 until 12 Sep 2013Ja10 Jun Sep Ja11 JunSep Ja12 JunSep Ja13 Jun Sep

0

200

400

600

800

1000

1200

1400

1600

-150

0

150

300

450

600

750

900

1050Daily Prices of Soya Oil & RBD Palm Olein (US-$/T)

Soya oil, Arg.fob

RBD palm olein, Mal.fob

Soya oil Premiums/discounts

13 Sept 2013


99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/148

10

12

14

16

18

20

22Palm Oil Sun OilSoya Oil 17 Oils/Fats

Annual Stocks / Usage Ratios (%)17 OILS & FATS World stocks of palm oil reached

a record 11.7 Mn T as of end-Dec 2012, thereof: Malaysia 2.6 + Indonesia 4.0 Mn T With consumption picking up sharply, stocks in August had declined by 2.5 Mn T in Malaysia & Indonesia combined But palm oil stocks are now starting to rise seasonally and may recover by 2.2 Mn T from Sept until end-Dec 2013

13 Sept 2013



05/06 07/08 09/10 11/12 13/140

1

2

3

4

5

6Supply Change Usage Change

Annual Growth in Mn TPALM OIL: World Supplies & Usage

Mn T

The annual growth in world palm oil supplies and usage were at or near record highs in 2012/13 But will be slowing down in 2013/14

13 Sept 2013



§  Record or near-record crops of sunflowerseed in the European Union (8.6 Mn T) and C.I.S. (19.7 Mn) this year

§  Heavy selling pressure creating price discounts

§  In early Sept sunseed prices below soya & rapeseed

§  Black Sea sun oil now offered at US $ 850

§  World sun oil output +1.6 Mn

Pressure in Sunseed and Oil

January 1997 until 12 September 2013'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

150

300

450

600

750

900

1050Soybeans, US, cif R'dmSunseed, EU, cif Lower RhineRapeseed, EU, cif Hamburg

Monthly Prices of 3 Oilseeds (in US-$/T)

13 Sept 2013


Daily futures from 4 Sept 2012 until 12 Sept 2013Sep Oct Nov Dec Jan13 Feb Mar Apr May Jun Jly Aug Sep

1100

1150

1200

1250

1300

1350

1400

1450

Nov 2013

CBOT: Daily Soybean Futures (c/bu)

Daily futures from 4 Sept 2012 until 12 Sept 2013SepOct Nov Dec Jan13 Feb Mar Apr May Jun Jly Aug Sep

310

330

350

370

390

410

430

450

470

Dec 2013

CBOT: Daily Soya Meal Futures (US$/ST)

Soybean and Meal Prices Overvalued in Chicago

13 Sept 2013


77/7880/81

83/8486/87

89/9092/93

95/9698/99

01/02 04/05

07/0810/11

13/14

0

20

40

60

80

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120

140

Soybean Crop TrendMn T

U.S.A.

In the past 6 weeks drought damaged the US soybean crop by about 2.9 Mn T US supplies will again be tight in 2013/14 (in 3rd consecutive year)

13 Sept 2013


77/7880/81

83/8486/87

89/9092/93

95/9698/99

01/02 04/05

07/0810/11

13/14

0

20

40

60

80

100

120

140

Soybean Crop TrendMn T

U.S.A.

Argentina, Brazil & Paraguay

Growing dependence on South America - - but supply risks owing to weather, strikes, infrastructure shortages + political issues (Argentina !) Assuming normal weather, higher plantings should boost S. Amer. soybean output to a new high in early 2014 (by 8 – 10 Mn T) Drought in most of Argentina and in central Brazil reduced soil moisture supplies in August and the first 15 days of Sept If required rains do not arrive - - > sharply higher prices

13 Sept 2013


Ample oilseed supplies ahead in 2013/14. Biggest increases in soybeans, sunflowerseed, rapeseed and palmkernels These 4 oilseeds were also the growth leaders in the past 15 years In 2013/14 world production seen rising by 21 Mn T and opening stocks up 7 Mn T, boosting world supplies by 28 Mn T - - > BEARISH !

10 OILSEEDS: World Production (Mn T)

13/14F 12/13 11/12 10/11

Avg.Change15 Yearsto 12/13

Soybeans . . . . 280.88* 266.39* 240.64 264.91 +3.5%Cottonseed . . . 43.00* 45.01* 47.17 43.55 +1.8%Grdnuts,shelled 28.02* 27.55* 27.18 27.70 +2.0%Sunflowerseed 40.20* 35.46* 39.56 33.60 +2.9%Rapeseed . . . . 65.02* 62.83* 60.63 61.04 +4.3%Sesameseed . . 3.93* 3.74* 3.83 3.83 +2.3%Palmkernels . . 14.64* 13.97* 13.29 12.54 +7.4%Copra . . . . . . . 5.46* 5.46* 5.26 4.80 +0.4%Linseed. . . . . . 2.21* 2.01* 2.12 1.82 -0.8%Castorseed . . . 1.51* 1.41* 2.03 1.56 +1.3%Total. . . . . . . . 484.88* 463.82* 441.71 455.35 +3.3%

13 Sept 2013



17 OILS & FATS: Consumption Change (in Mn T)O c t o b e r / S e p t e m b e r

13/14F 12/13 11/12 10/11 09/10EU-27 . . . +0.05 +0.17 -0.33 -0.87 +0.93U.S.A. . . . +0.35 +0.39 +1.19 +0.90 -0.13Argentina. +0.38 -0.96 +0.53 +0.55 +0.79Brazil . . . . +0.40 +0.11 +0.14 +0.60 +0.89

China, PR +1.10 +1.15 +1.03 +1.09 +1.40India. . . . . +0.78 +0.93 +0.74 +0.49 +0.73Indonesia. +0.84 +0.88 +0.91 +1.01 +0.60Malaysia . +0.04 +0.23 -0.11 +0.09 -0.10

Others . . . +2.08 +1.79 +2.53 +2.34 +2.14World . . . +6.03 +4.67 +6.64 +6.19 +7.25

17 OILS & FATS: Consumption Change (in Mn T)O c t o b e r / S e p t e m b e r

13/14F 12/13 11/12 10/11 09/10EU-27 . . . +0.05 +0.17 -0.33 -0.87 +0.93U.S.A. . . . +0.35 +0.39 +1.19 +0.90 -0.13Argentina. +0.38 -0.96 +0.53 +0.55 +0.79Brazil . . . . +0.40 +0.11 +0.14 +0.60 +0.89

China, PR +1.10 +1.15 +1.03 +1.09 +1.40India. . . . . +0.78 +0.93 +0.74 +0.49 +0.73Indonesia. +0.84 +0.88 +0.91 +1.01 +0.60Malaysia . +0.04 +0.23 -0.11 +0.09 -0.10

Others . . . +2.08 +1.79 +2.53 +2.34 +2.14World . . . +6.03 +4.67 +6.64 +6.19 +7.25

We at Oil World forecast an increase in global consumption of 17 oils & fats by 6.0 Mn T in 2013/14

13 Sept 2013



O c t o b e r / S e p t e m b e r 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14

-2

0

2

4

6

8

10Production Ending stocks

Change From Year Ago in Mn T17 OILS & FATS: Production & End'g StocksWorld production of oils

& fats is likely to rise faster than consumption in coming months, mainly on account of sun oil and palm oil. In Oct/Dec 2013 the excess of production over demand could lead to a recovery in world stocks of all oils & fats by 2.2 – 2.4 Mn T. Price pressure likely, lead by sun oil and palm oil.

13 Sept 2013


Monthly prices from Jan 1972 until 12 Sept 201372 77 82 87 92 97 02 07 '13

0

200

400

600

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1200

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1600

Palm oil, crude cif Rott.Soya oil, Dutch fob ex-mill

Soya Oil & Palm Oil: Monthly Prices (US-$/MT)

In Europe palm oil established a low of US $ 776 in Dec 2012, ending its price cycle after 48 months The latest low was much above those of preceding cycles. But veg.oil prices moved to a higher plateau since 2007.

13 Sept 2013



§  The global dependence on palm oil will continue to rise in the years ahead owing to insufficient production of other oils & fats

§  Palm oil has competitive advantages over other oils and fats, e.g. much higher yields and lower production costs

§  Higher investments are necessary to raise oil palm plantings and yields to get ready for rising palm oil demand in the future

§  But this has to done in a sustainable way, in line with the regulations of the Round Table of Sustainable Palm Oil (RSPO)

Concluding Statements

13 Sept 2013


Thank You for Your Kind Attention !

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If I can be of assistance to you in the future, you are invited to contact me any time.

More details and background information are given in the Oil World Weekly & Monthly Reports, which can all be obtained from the

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Growing Dependence on Palm Oil in World Trade and Consumption

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