POINTERS: Global Oils and Fats Outlook

By: Mr. Mohd Izham Hassan

Mohd Izham Bin Hassan graduated from the Southern New Hampshire University, USA with a Bachelor of Science Degree Majoring in Economics & Finance in May 1990. Having started his career in the banking sector with Maybank, he moved on to join one of the biggest plantation companies in Malaysia heading the insurance unit. Among his responsibilities were the procurement of the group insurance requirement and to ensure adequacy of cover for company’s risk exposure. Due to his knowledge in this field, he was assigned to the committee to set up the Enterprise Wide Risk Management (EWRM) programme for the company. He was also assigned to conduct research on production, compile data on estate land bank and liaise with regulatory bodies on submission of monthly statistics. He has more than 15 years of experience in the plantation industry and prior to joining Malaysian Palm Oil Council, he was the Head of the Statistics Department of a major insurance company in Malaysia. He has presented papers at MPOC organised seminars in Philippines, Myanmar, Vietnam and Singapore. He is currently the Manager, Marketing & Market Development Division at Malaysian Palm Oil Council (MPOC) responsible for market movement of global oils and fats.

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It is estimated that the total global oils and fats production in 2011 was about 184 million MT. The contribution of palm oil by producers in Malaysia and Indonesia to the total production of vegetable oils in the world has increased considerably in the past several years from 14% in 1990 to 28% in 2011. The contributions of other vegetable oils products around the world are also equally important as they also feed the need for oils and fats.

To forecast consumption we utilise our model based on: Beginning stocks + Production + Net import = Ending Stocks + Consumption, which will give the Stock Usage Ratio (SUR). This will be the basis to determine the demand and price forecast. 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 determining the number of days or months the surplus will be able to support the population based on current demand.

We forecast that demand from most regions may actually increase due to stronger demand from Europe and from other traditionally strong consumption regions, especially in Asia Pacific and Middle East. New markets in the African continent will also spur the demand for 2012. Production is also forecasted to increase due to higher yields projected due to better weather conditions.

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Questions & Answers (2) :

Mohammad Jaaffar Ahmad

12 years ago

Dear Sir, In your slide 5, you mentioned that China, Middle East and India to remain major export market for Malaysian palm oil (MPO). There was no mentioned about Pakistan. In 2011, Pakistan is the third largest importer of MPO (1.82 million tonnes). It was reported that Pakistan is set to increase its purchase from Indonesia after it agreed to reduce an import tax duty (from 10% to zero percent) under a free-trade agreement (FTA) effective 1st January 2012. This will help Pakistan to lower its dependence on Malaysia for its RBD palm olein and palm oil. Effectively, there is now a level playing field between Malaysia and Indonesia in terms of import tax duty. Currently, Pakistan meets about 80% of its import from Malaysia. The Indonesian Palm Oil Producers Association (GAPKI) predicted that the Indonesian palm oil export to Pakistan may reach 800,000 tonnes this year (2012) from 220,000 tonnes in 2011. This would literally means that Malaysia will be deprived of about 580,000 tonnes of its market volume to Indonesia (unless Pakistan can increase its palm oil import by another similar amount). Such situation may arise because of Indonesian export duty advantage. How serious this situation and what is your view about Malaysian palm oil price compeiveness vis-a-vis Indonesian?. In Slide 49, you had confirmed that major export market to Indonesia are India, Pakistan, China and Europe. How can you justify that Malaysian export forecast to increase by 112,000 tonnes to 18.1 million tonnes in 2012? TQ

Mohammad Jaaffar Ahmad

12 years ago

Dear Sir, It is interesting that you have concluded that higher demand for Malaysian palm oil (MPO) in 2012 will come from Turkey, Philippines, Nigeria, South Korea and Vietnam. Of particular interest will be Nigeria which recorded more than 1,200% increase to 384,000 tonnes in 2011. In the past three years (2008-2010), the average import of MPO is around 27,000 tonnes a year. Similarly, the Philippines imported 512,000 tonnes of MPO in 2011 or 150% jump from 2010. In order to realise your higher import from these countries, the import from these two countries must be further increase. How much more can they further import and the justifications. TQ