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Palm oil development and performance in Malaysia

Presentation to USITC Washington DC Feb. 3, 2010


Prepared by MPOB and APOC

Presentation Outline
Introduction palm oil in the global oils & fats market Background of the Malaysian palm oil industry Importance of palm oil industry to the Malaysian economy Sustainable development of oil palm production in Malaysia Palm based biodiesel development in Malaysia Conclusion

WorldOils&FatsProductionShare
(OilWorld 2008)

5% 15% 7%

11%

23%

S oybe a noil

P almoil
R a pe se e doil

27%
12%

S unflowe roil Anim a lF a ts L a uric s Othe rs

Palm Oil

TotalWorldOilsFatsProduction2008 (160milMT)
Othe rs L a uric s Anim a lF a ts S unflowe roil R a pe se e doil P a lm oil S oybe a noil 0 10 20 30 40 37.2 50 10.7 19.8 8.1 24.5 16.7

43.0

8 Major oils: Share in the world production


Jan Dec 2008: 127.8 Mn T 1991/1992: 58.8 Mn T

Sun Oil 8.4%

Palm Oil 33.6%


Sun oil 13.9% Rape oil 16.1%

Palm oil 20.1%

Rape oil 15.5% Soybean oil 28.8%

Soybean oil- 28.7%

Palm oil Sun oil PKO

Soybean oil Groundnut Coconut oil

Rape oil Cotton oil

Oil Palm the most productive oil crop

Source: Oil World Jan 30, 2009 and Oil World 2008.

Oil Crop Oil palm Soya bean Rapeseed Sunflower

Production (million t)

% of total production

Total area (million ha)

% of total Area

42.99 36.87 19.82 10.80

33.58 28.80 15.48 8.52

10.50 94.25 27.15 24.09

4.74 42.50 12.25 10.87

Major Vegetable oil production: 128 Mn T

Soaring global palm oil production


2008 Production = 42.9 Mil MT
40000

X 1000 metric tonnes of palm oil

35000 30000 25000 20000 15000 10000 5000 0 1966 1976 1986 1996

38 mt

2006

Source: Oil World, MOPB, MPOC

Global Palm Oil Production


Malaysia = 41.3 % of world production
Colombia 1.9% Nigeria 2.0% Cote d'lvoire 0.8% Others 4.9% Papua New Guinea 0.9% Thailand 2.7% 41.3%

Countries
Ecuador 0.9%

Indonesia 44.5%

Malaysia

Cote dlvoire Nigeria Colombia Ecuador Indonesia Malaysia Thailand Papua New Guinea Others Total

Volume (000 tones) 330 860 800 420 19100 17735 1160 400 2100 42904

% Share 0.8 2.0 1.9 0.9 44.5 41.3 2.7 0.9 4.9 100

(Oil World 2008)

Comparison between Malaysia & Other Palm Oil Producers in 2008


25

19.2
20

17.7

million tonn

15

10

3.3

0.9
0 Malaysia Indonesia Nigeria

0.8
Colombia

1.2

Thailand

Others

Export Trend of Major Oils


40,000 35,000 30,000
Soybean
Rapeseed

Palm Oil
Sunflower

'000 Tonnes

25,000 20,000 15,000 10,000 5,000 0

19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08

ProductionAverageGrowth
Annual global production growth during 2003-08 was 5.8% per annum. Palm oil had the highest growth at 11.1% per year during this period. Soybean and rapeseed growth rates were 4.5% and 8.3% respectively. In 2008, average growth of all oils estimated at 4.1%, with palm oil at 11.2%, rapeseed at 5.9% while soybean dropped by 0.5%.

Total Land Area in Malaysia


Population Avg. pop. growth rate (2007 est.) Total land area Forested land area (2007) Total cultivated land Oil palms Per capita consumption O&F 27 Million 1.8% 33 Million ha 56% - 18.5 mil ha 20% - 6.6 mil ha 13.6% - 4.5 mil ha (2008) 30kg

Status of Malaysian oil palm industry


No. in operation 434 40 52 18 31 Capacity (mil tonnes) 93.64 (FFB)* 5.46 19.19 2.60 1.16

Sector FFB Mills PK Crushers Refineries Oleochemical Plants Bulking Installations


* Based on 20% extraction rate

Total planted area of oil palm in Malaysia (Million hectare)


6

Million Hectares

5 4 3 2 1 0
1970 1980 1985 1990 1995 2000 2001 2003 1.02 0.26 1.98 1.48 2.54 3.38 3.5 3.79 3.88

4.05 4.17

4.3

4.48

2004 2005

2006 2007

2008

Year

Conversion of less productive crops to oil palm

Output of Malaysian palm oil


20 18 16 14 12 10 8 6 4 2 0

MillionTonnes

in iliz Ut
19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95

h hig g

in e ld yi

ma ng nti pla g

ia ter

ls

19 75

19 97

19 99

20 01

20 03

20 05

20 07

Forecast:

2009 17.8

2010 19.5

2013 20.5

2015 21.5

20 08

LandUse Change within the oil palm industry


Conversion of lower productivity crops to high yielding oil palm
Year Palm Oil (million ha) Rubber (million ha) Cocoa Coconut Total (million ha) (million ha) (million ha)

1990 2000 2002 2004 2005 2006 2007 2008

2.029 3.377 3.670 3.880 4.051 4.165 4.305 4.480

1.836 1.431 1.348 1.282 1.250 1.225 1.248 1.247

0.393 0.076 0.051 0.044 0.033 0.033 0.028 0.021

0.314 0.159 0.155 0.147 0.144 0.142 0.117 0.115

4.572 5.043 5.224 5.353 5.478 5.565 5.698 5.863

Million Tonn

10

12

14

16

18

0
1980

2 2.27 6.75 15.41

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

ExportGrowthofMalaysianPalmOil

MajorImportersofMalaysianPalmOil
(milliontones)
7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 C hina India EU P a kista n US A J a pa n Othe rs

1990 2008

Palm Oil export to the USA (000 tones)


1600 1400 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004
PKOil
2008: Total Volume: 1.52 mil tonnes Total Value: 1.42 billion USD 4th largest palm oil importer

2005

2006

2007
Oleo

2008

POil

Plantation ownership in Malaysia


Smallholder Farms: ~40% of Oil Palm hectarage
State Schemes 7% RISDA 2% FELCRA 4% Smallholders 11%

Private Estate 60%

FELDA 16%

Total Hectarage: 4.48 mil hectares (2008)


Private Estate FELDA FELCRA RISDA State Schemes Smallholders

Importance of palm oil


Malaysia is a global leader in oil palm plantations, production & export of palm products 43 listed plantation companies on KLSE 4.5 Mn ha of oil palms (2008) Highly focused on plantation operations ~ 60% Pvt. Sector. Resource rich Huge potential for smart partnerships for value creation in the downstream industries. Highly regulated industry No subsidy
Key Listed Plantation Cos in Bursa Malaysia* Market Capitalization Price Earnings Ratio ROE Total Assets Total Turnover Net Profits Total Debt Total Common / Share Equity Total Debt to Common Equity Total Cash RM 124.8b (US$ 35.4 b) 16.1 X 13.2 % RM 93.3 b (US$ 27.0 b) RM 71.2 b (US$ 20.6 b) RM 6.9 b (US$ 2.0 b) RM 18.0 b (US$ 5.2 b) RM 57.1 b (US$ 16.5 b) 0.32 X RM 8.0 b (US$ 2.3 bil)

Importance of oil palm to the Nation


Palm Oil contributes about 5-6 % of Malaysian GDP (2007) Provide employment to 1.4 million workers in the related industry

Country USA UK Belgium World Malaysia Indonesia

GNI per Capita $ 44,970 $ 40,180 $ 38,600 $ 7,439 $ 5,490 $ 1,420

Source: World Development Bank Indicator 2007. $: USD GNI: Gross National Income

Importance of oil palm to Malaysia


Palm oil export value (RM/USD billion) Export value of all commodities (RM/USD billion) % of palm contribution in the overall export

Year

1980 1990 2000 2007 2008

2.89 (0.80) 5.50 (1.53) 14.94 (4.20) 45.61 (12.7) 65.20 (18.1)

48.80 (13.56) 20.70 (5.75) 42.72 (11.87) 89.60 (24.89) 112.43 (31.23)

6.0 % 26.6 % 35.0 % 50.9 % 57.6 %


1 USD ~ 3.6 RM

Oil Palm Industry in Malaysia


Significant foreign exchange earner: contributed ~ RM 65.2 billion (USD 18 billion) Felda settlers income in 2008 RM3865 ~ USD 1074 National Poverty Line in 2008 RM 753 ~ USD 209

Re-distribution of wealth among the rural population had contributed to peace and stability in the country

Palm oil contribution to the Nations Economy (2008)

Article of apparel and clothing accessories: 2% Electrical & electronic Products: 39% Other manufactured goods: 13% Others: 15%

Natural Rubber: 1% Petroleum Products: 17% Palm oil & palm based Products: 10%

Timber & timber products: 3%

Total export Value for commodities: RM112.43 billion (USD 31.23 billion) Palm oil contribution: RM 65.2 billion (USD 18.0 billion)

The oil palm industry : a major source of employment


Eradicated poverty and narrowed income gap between town and rural folk Created rural townships where workers reside and enjoy good quality of life Contributed to social security and peace Reduced migration of labor force from rural areas to urban areas
People Employed (person)

Year 1980 1990 2000 2007 2008

Area (ha) 1,203,306 2,029,464 3,376,664 4,304,913 4,480,000

92,352 115,285 251,039 420,000 570,000

Strengths of Plantation
At a time when the flow of people from the countryside into the cities is creating major problems in Third World, the Plantation Industry provides contra-cyclical jobs in the heart of the countryside; not only jobs for agricultural workers but also for skilled mechanics, fitters, laboratory workers, factory operators, drivers, office staff, secretaries and Managers. The oil palm plantation industry is one of the few examples of an agricultural development in the Third World which, without any Government subsidies, can successfully compete with the highly protected farmers in the G7 countries.

World Demand for Oils & Fats (excluding bio-energy) Year Population Avg. per capita Production (billion) intake (kg) (mil mt) 2005 6.54 21.4 149 2010 7.00 25.0 175 2015 7.40 27.0 200 2020 7.80 30.0 234 2050 9.00 ? ? Increment (%) 18 15 17 ?

Several Drivers: Population growth Prosperity increasing wealth in developing world Abolishment/reduction of import quota& tariffs China & India Stagnant oilseed domestic production in major consuming countries.

World Net Exporting Countries

Very few countries are in a position of nett excess to supply oils &fats to the world market

Importance of Palm Oil


Feeding the world: palm oil consumed in over 150 countries. Provides crucial source of food & energy supplies to developing world. Scientifically proven nutritional & health benefits and durability Provides bio-energy: environmentally-friendly alternative fuel source to supplement decreasing high carbon fossil fuels. Highly productive: significantly more palm oil produced per hectare compared to other oil seed crops. Palm oil is used in more than half of packaged supermarket products today

Leading Role of the Palm Oil Industry on Sustainability Practices

Sustainable Practices Adopted by the Industry


Good Agricultural Practices Estates & Smallholders:
Zero burning policy Good water management Maintain riparian reserves Avoid soil compaction Use correct fertilizers Maintain soil fertility (using cover crops) Waste Management (converting POME into compost) Management of pruned fronds and empty fruit bunches

Integrated Pest Management


- decreased reliance on harmful chemical pesticides - Increasing use of Biological Control microbial pathogen - Barn owl to control rats and using beneficial plants

The Regulatory Framework


HIGHLY REGULATED INDUSTRY
Land Matters: National Land Code 1965 Land Acquisition Act 1960 Environmental Matters: Environmental Land Conservation Act 1960 revised in 1989 Quality Act 1974 (Environmental Quality) (Prescribed Premises) (Crude Palm Oil) Regulation 1977 Environmental Quality (Clean Air) Regulation 1978 Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 1987 Labour and Employees Matters: Labor Law Workers Minimum Standard of Housing & Amenities Act 1990 Occupational Safety & Health Act 1977 Factories & Machinery (Noise Exposure) Regulations 1989 Pesticide Use: Pesticides Act 1974 (Pesticides Registration) Rules 1988 Pesticides (Licensing for sale & storage) Rules 1988 Pesticides (Labeling) Regulations 1984 Wildlife Matters: Protection of Wildlife Act 1972

Taking a BIG LEAP on Sustainability Efforts

Methane Capture
Biogas Plant converting POME waste into biogas

United Plantations, Keck Seng, Kim Long, Sime Darby etc

Mitigating CH4 emissions by ~ 68 %

Using new variety of palm oil High Yielding Materials


CPO Yield tonnes/hectare/year) Biological Potential of Oil Palm National Average for Malaysia Best Managed Oil Palm Plantation New Varieties of Oil Palm

18 4 8 10

Industries Initiative to address sustainability issues

United Plantation

First company to be awarded RSPO Certification (2008) Second company to be awarded RSPO Certification Contribute 6% of the global output for palm oil

RSPO Certified PO (million tonnes/year) Targeted: 1.5 Achieved to date: 0.3

4 Other Malaysian companies being certified and two from Indonesia (PT Musim Mas & PT PP London Sumatra Tbk) & one from PNG

Our industries commitments toward continuous improvement

Governments Initiatives to enhance palm oils competitiveness


Codes of Practices & Sustainability Manual
Launched in August 2007 by Minister Plantation Industries and Commodities Five Codes of Practices (CoPs): Good Agricultural Practice for Oil Palm Estates & Smallholdings Good Milling Practice for Palm Oil Mills Good Crushing Practice for Palm Kernel Crushers Good Refining Practice for Palm Oil Refineries Good Practice for the Handling, Transport and Storage of Products from the Oil Palm Preparation of the Sustainability Manual for the oil palm industry

New initiatives within the industry


LCA Study throughout the oil palm supply chain with approved 3rd party lab Establishment of Tropical Peat Institute. 3 areas of research are: Inventory of peatland cultivation in Malaysia Review on working program of GHG flux studies Best management practice (BMP) of oil palm on peatland Collaboration with the Ministry of Housing, Environment and Spatial Planning and University of Wageningen in the Netherlands on the tropical peatland project Collaborative projects on biodiversity with the Netherlands Collaborative projects on carbon emission studies

Palm-based Biodiesel Development in Malaysia

Feedstock for biodiesel in Malaysia

Fresh Fruit Bunch

Crude palm oil, RBD Palm oil, palm olein and palm stearin

Used Frying Oil

Spent Bleaching Earth (SBE)

Summary of field trial using palm biodiesel


No modification of conventional diesel engine required. Performance of engine : good. Easy starting, no knocking, smooth running. Exhaust gas emission : much cleaner (reduction of hydrocarbon, CO, CO2, More environmentally SO2 content.) friendly. Engine oil: still usable after recommended mileage. Cetane number / Diesel Improver (62.4 c.f 37.7 for petroleum diesel from Europe)

Status of Approved Biodiesel Projects (October 2008) Status Approved Production Not in Operation Construction Completed Construction Pre-construction Planning No. 91 6 6 4 6 9 58 Capacity, TPA 10.2 mil 873,000 599,000 190,000 605,000 1,306,500 6,620,130

Current freeze on new licenses

Location and Capacity of Biodiesel Plants

In operation State Sabah Johor Selangor Pahang Perak N. Sembilan Total


No. Capacity (tonnes/yr)

Completed Construction
No. Capacity (tonnes/yr)

2 5 2 1 2 12

250,000 780,000 190,000 99,000 153,000 1,472,000

2 1 1 4

72,000 100,000 18,000 190,000

Take home messages


The future direction of the Malaysian palm oil industry is The future direction of the Malaysian palm oil industry is very much dependence on the trade relation s it shares very much dependence on the trade relation s it shares with buyers around the world. with buyers around the world. Malaysia relies on market expansion as most of its Malaysia relies on market expansion as most of its production are for the export markets where countries production are for the export markets where countries like the USA with its sound political and economic like the USA with its sound political and economic situation makes a good trading partner with Malaysia. situation makes a good trading partner with Malaysia. This shared future entails that Malaysia and the USA should continue to work on common ground based on win-win formula that allows for more usage of palm oil in formulation as it compliments the use of palm oil in food and non-food applications.

Malaysian Positions
Sustainable agriculture is not just environmentally sound land management practices, but an integration of the three main goals of social responsibility, environmental health & economic profitability. In pursuing the objectives of sustainability, Malaysia welcomes a fair and balanced view on issues related to sustainability of palm oil. Malaysia is on track towards fulfilling the sustainable business triple bottom line of PEOPLE, PLANET & PROFITS

Enhance US-Malaysia trade relations


Issues and concerns to be addressed; 1. Renewable energy policies (imposing discriminatory regulatory policies against palm at the state level removal of negative inferences on palm and to recognize the importance of palm oil as renewable feedstock for biodiesel); 2. Removing the non-trade barrier (e.g. ILUC) and redress environmental policies facing the developing countries for agriculture development related to deforestration issues; 3. Removing the tariff on modified palm products;

Enhance US-Malaysia trade relations


Issues and concerns to be addressed; 4. Recognizing the dietary role of saturated fats. 5. Pursuing trait enhancement & biotechnology programs and joint ventures with US-based institutions to produce high yielding clones (increase productivity). 6. Encourage joint ventures on biodiesel productions and other renewable energy programs using palm oil.

Contact details
www.mpob.gov.my or www.mpoc.org.my

rosidah@mpob.gov.my or mpobtas@aol.com and kassim@americampalmoil.com

Thank You