POINTERS 2014 MPOC
Palm Oil Internet Seminar
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Section 2: Opportunities for Palm Oil in Asian Market:
Growth of Palm Oil Demand in the ASEAN Region for 2022 and Beyond
By: Dr Julian Conway McGill

Dr Julian Conway McGill is the Head of South East Asia at LMC International. He is in charge of LMC’s research across the region. He and his team are based in Kuala Lumpur. Their work aims to help clients better understand the economics of crops, agricultural commodities and their value chain. Most of their time is spent on the oil palm and it’s downstream derivatives. Dr McGill holds an M.A. (Honours) in Economics from the University of Edinburgh and completed his PhD (DPhil) at the University of Oxford
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The focus for palm oil exports is mostly on the major import markets, notably China, India and the EU. The ASEAN region, however, is home to over 660 million people – almost one and half times the population of the EU. In addition, the population is younger and poised to urbanize and develop more rapidly. So how can we understand how this market will evolve?

In this presentation we will discuss:

• How are consumption habits in South East Asia changing with greater income and urbanisation? What will this mean for vegetable oil demand?

• What are the cropping patterns in South East Asia? How will they evolve? What will this mean for import requirements?


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Questions & Answers (3) :
Qua Kiat Seng
1 month ago
Dear Julian, A very interesting presentation as always. This time you focus on calorie disappearance. I would like to ask you what your findings are on sugar as there is a general trend that its consumption increases with income and the health issues that accompany it. Kind regards, Qua
Julian McGill:
Dear Mr Qua, Nice to hear from you! Thank you for listening to the presentation and your astute question. We have a very large team at LMC working on sugar so this is an area of particular interest for us. As I mentioned in my reply to Mr Teh (below), there is very strong evidence that vegetable oil consumption increases with higher incomes in every country in the world, regardless of their traditional dietary preferences and local cuisine. Unfortunately for our sugar team, in terms of sugar consumption the pattern is much more localized. Certainly in many countries there has been a tendency for sugar consumption to increase with higher incomes in the US as well as many European, Latin American and Middle Eastern economies. In Malaysia sugar intake has certainly increased as well. (I still struggle to obtain drinks tanpa gula!). Increase sugar intake, however, is certainly not a universal trend. Crucially both Japan and China have not seen any growth in sugar intake with income. Of course in both of these East Asian cuisines traditionally only a relatively small share of calorie intake came from sugar and, along with other carbohydrates, that has not increased. There is some evidence in western countries that the “war on sugar” has resulted in stable to declining consumption. Consumers increasingly view sugar as empty calories and are reducing their intake, particularly of soft drinks. In addition producers have been reformulating to use less sugar both voluntarily and under duress. Nonetheless as the Middle East, Africa and South Asia are still increasing their consumption, sugar demand is still likely to grow - so our sugar team needn't worry! Very Warmest Wishes, Julian
1 month ago
JENNY FOO
1 month ago
Dear Dr McGill, 1) You mentioned that close proximity will dominate consumption of palm oil. Why should this be so? I think price and ready availability are more important. What are your views? 2) You showed that although palm oil consumption keeps on going up in Myanmar, Philippines and Vietnam, the share from Malaysian palm oil keeps on decreasing. What are the some of the reasons please? 3) I would think that price is more important than sustainability concerns in your study region for oils and fats currently. When do you think sustainability concerns will over ride price concerns ?
Julian McGill:
Dear Mrs Foo, Thank you for your questions. 1. Price and availability are certainty the most important factors. However both, I would argue, are driven by proximity which reduces prices with lower shipping costs as well as improving availability thanks to shorter shipping times. Another minor factor is that the relatively high and consistent temperatures in South East Asia mean palm oil is more easily acceptable as a table top oil. (In colder climates the fact that the bottle clouds up as the oil solidifies – which of course has no real bearing on its use as an oil – makes it difficult to sell). 2. The Malaysian share of ASEAN markets is declining, in part as Malaysian output continues to stagnate and as Indonesian export taxes have made their refined palm oil exports more competitive. In addition, Indonesian companies have made large investments in many of these markets, aware that their export volumes are growing and keen to find outlets. 3. I would entirely agree with you. Sustainability concerns are not a major issue in these markets, apart from where a product is being exported to the US/Europe or produced by a multinational with global sustainability commitments. I think its worth noting that even in Europe for the vast majority of end-use price remains the single most important purchasing factor. Only in very limited niche markets (cosmetics, baked goods, surfactants) could sustainability be seen as an over-riding factor in purchasing decisions and only in PKO have we seen high sustainability premia. I suspect sustainability will never be more important than price. However, that is not to suggest that sustainability is not a valid commercial consideration. Companies demonstrating clear and credible sustainability commitments have managed to increase their market share and obtain new clients – in part by reassuring their buyers that they pose less of a reputational risk. Very Warmest Wishes, Julian  
1 month ago
George Teh
1 month ago
Dear Dr McGill If you were to juxtapose the consumption habits of China (Southern China in particular, as Northern Chinese cuisine and consumption habits are quite dissimilar to those of SEA countries) and India (again, Southern India as South vs North divergences similar to that of China apply in the case of India), do you speculate that it would yield mere corroborative evidence or even better, further insights? Or you are already in possession of such data? Look forward to such a study/presentation in the next edition of POINTERS. Thank you.
Julian McGill:
Dear Mr Teh, Thank you very much for your suggestion. Sadly, there is no comprehensive and consistent data available comparing regional diets. We have, however, done a large amount of work comparing consumption patterns in different countries across the world. The single most interesting piece of evidence comes from looking at Japanese consumption patterns. That is both because of the extremely high quality of Japanese statistics and their unique and relatively inflexible diet. The data from Japan clearly demonstrates that Japanese consumers have not “Westernized” their diet. Rather than moving to a diet high on meat and dairy, they continue to consume more fish, vegetables and fruit. Nonetheless, in terms of vegetable oil consumption, Japan has exhibited an identical increase in calorie disappearance per capita as incomes have risen. As we have not found any difference in vegetable oil consumption patterns between countries - despite their different culinary habits - I suspect we would also find limited variation within countries. It is important, however, to note that the amount and type of meat consumed does differ depending on cuisine and culture and this has major implications for the future of agriculture. (How much more Chicken will India’s 1.4 billion people consume as they become wealthier given their traditionally high level of vegetarianism?) Interestingly, outside of income the single biggest determinant of vegetable oil consumption we have found is the existence of government subsidies for food. Of course, this is also the case in Malaysia of course where the government subsidizes cooking oil. Very Warmest Wishes, Julian
1 month ago
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