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

World Oils & Fats Production Share
(Oil World ‐ 2008)

5% 15% 7%

11%

23%

S oybe a n oil

P alm oil
R a pe se e d oil

27%
12%

S unflowe r oil Anim a l F a ts L a uric s Othe rs

Palm Oil

Total World Oils  Fats Production 2008  (160 mil MT)
Othe rs L a uric s Anim a l F a ts S unflowe r oil R a pe se e d oil P a lm  oil S oybe a n oil 0 10 20 30 40 37.2 50 10.7 19.8 8.1 24.5 16.7

43.0

8 Mn T 1991/1992: 58.8 Major oils: Share in the world production Jan – Dec 2008: 127.7% Palm oil Sun oil PKO Soybean oil Groundnut Coconut oil Rape oil Cotton oil .6% Sun oil 13.1% Palm oil 20.8% Soybean oil.5% Soybean oil 28.1% Rape oil 15.8 Mn T Sun Oil – 8.9% Rape oil 16.28.4% Palm Oil 33.

87 Major Vegetable oil production: 128 Mn T .80 15.87 19.52 10.82 10.25 10. Oil Crop Oil palm Soya bean Rapeseed Sunflower Production (million t) % of total production Total area (million ha) % of total Area 42.74 42.58 28.15 24.50 94.99 36.80 33.09 4.48 8.Oil Palm – the most productive oil crop Source: Oil World Jan 30. 2009 and Oil World 2008.50 12.25 27.

MOPB.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. MPOC .

9 4.3 2.9% Thailand 2.7 0.9% Papua New Guinea 0.9% Nigeria 2.9 0.5% Malaysia Cote d’lvoire 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 0.9 100 (Oil World 2008) .Global Palm Oil Production Malaysia = 41.0% Cote d'lvoire 0.5 41.9 44.7% 41.3% Countries Ecuador 0.9% Indonesia 44.8% Others 4.0 1.8 2.3 % of world production Colombia 1.

9 0 Malaysia Indonesia Nigeria 0.8 Colombia 1.Comparison between Malaysia & Other Palm Oil Producers in 2008 25 19.2 Thailand Others .2 20 17.7 million tonn 15 10 5 3.3 0.

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 .000 35.000 15.000 10.Export Trend of Major Oils 40.000 30.000 Soybean Rapeseed Palm Oil Sunflower '000 Tonnes 25.000 20.

3% respectively.9% while soybean dropped by 0.1%.2%. rapeseed at 5.8% per annum.5% and 8. . Soybean and rapeseed growth rates were 4. average growth of all oils estimated at 4.Production Average Growth • Annual global production growth during 2003-08 was 5. • Palm oil had the highest growth at 11.1% per year during this period. • In 2008.5%. with palm oil at 11.

Total Land Area in Malaysia Population Avg.8% 33 Million ha 56% . pop.6.6 mil ha 13. growth rate (2007 est.6% .18.5 mil ha (2008) 30kg .) Total land area Forested land area (2007) Total cultivated land Oil palms Per capita consumption O&F 27 Million 1.4.5 mil ha 20% .

in operation 434 40 52 18 31 Capacity (mil tonnes) 93.Status of Malaysian oil palm industry No.46 19.60 1.19 2.64 (FFB)* 5.16 Sector FFB Mills PK Crushers Refineries Oleochemical Plants Bulking Installations * Based on 20% extraction rate .

38 3.17 4.05 4.48 2004 2005 2006 2007 2008 Year Conversion of less productive crops to oil palm .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 0.88 4.79 3.98 1.54 3.48 2.3 4.5 3.26 1.

5 2013 20.8 2010 19.5 2015 21.Output of Malaysian palm oil 20 18 16 14 12 10 8 6 4 2 0 Million Tonnes 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 17.5 20 08 .

165 4.305 4.117 0.250 1.247 0.314 0.863 .348 1.224 5.051 0.670 3.043 5.Land–Use 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 2.142 0.353 5.028 0.051 4.377 3.393 0.021 0.698 5.159 0.029 3.144 0.044 0.431 1.880 4.155 0.478 5.115 4.033 0.565 5.147 0.225 1.033 0.282 1.076 0.836 1.480 1.248 1.572 5.

75 15.27 6.Million Tonn 10 12 14 16 18 0 1980 2 2.41 4 6 8 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Export Growth of Malaysian Palm Oil .

00 5.00 3.Major Importers of Malaysian Palm Oil (million tones)  7.00 4.00 C hina India EU P a kista n US A J a pa n Othe rs 1990 2008 .00 1.00 6.00 0.00 2.

52 mil tonnes Total Value: 1.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: 1.42 billion USD 4th largest palm oil importer 2005 2006 2007 Oleo 2008 POil .

48 mil hectares (2008) Private Estate FELDA FELCRA RISDA State Schemes Smallholders .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.

1 X 13. Sector.32 X RM 8.0 b) RM 18. production & export of palm products • 43 listed plantation companies on KLSE • 4. • 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 124.4 b) 16.3 b (US$ 27.2 % RM 93.5 Mn ha of oil palms (2008) • Highly focused on plantation operations ~ 60% Pvt.0 b (US$ 5.6 b) RM 6.0 b) RM 71.3 bil) .2 b (US$ 20.Importance of palm oil Malaysia is a global leader in oil palm plantations.9 b (US$ 2.2 b) RM 57.5 b) 0.8b (US$ 35.1 b (US$ 16.0 b (US$ 2.

490 $ 1.420 Source: World Development Bank Indicator 2007.600 $ 7.180 $ 38.439 $ 5. $: USD GNI: Gross National Income .4 million workers in the related industry Country USA UK Belgium World Malaysia Indonesia GNI per Capita $ 44.970 $ 40.Importance of oil palm to the Nation • Palm Oil contributes about 5-6 % of Malaysian GDP (2007) • Provide employment to 1.

56) 20.94 (4.0 % 26.60 (24.80) 5.20 (18.7) 65.89 (0.6 % 1 USD ~ 3.0 % 50.1) 48.23) 6.9 % 57.50 (1.72 (11.70 (5.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 2.6 % 35.6 RM .80 (13.20) 45.53) 14.75) 42.87) 89.61 (12.89) 112.43 (31.

2 billion (USD 18 billion) Felda settler’s 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 .Oil Palm Industry in Malaysia Significant foreign exchange earner: contributed ~ RM 65.

23 billion) Palm oil contribution: RM 65.0 billion) .43 billion (USD 31.Palm oil contribution to the Nation’s 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: RM112.2 billion (USD 18.

029.039 420.000 570.664 4.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) 1.285 251.000 .203.304.352 115.376.480.913 4.464 3.000 92.306 2.

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

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 Demand for Oils & Fats (excluding bio-energy) Year Population Avg.40 27.0 200 2020 7.00 25.54 21.0 175 2015 7.80 30. per capita Production (billion) intake (kg) (mil mt) 2005 6. .0 234 2050 9.4 149 2010 7.

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. 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 • • . Scientifically proven nutritional & health benefits and durability Provides bio-energy: environmentally-friendly alternative fuel source to supplement decreasing high carbon fossil fuels. Provides crucial source of food & energy supplies to developing world.

Leading Role of the Palm Oil Industry on Sustainability Practices .

decreased reliance on harmful chemical pesticides .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 .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 .

Sime Darby etc Mitigating CH4 emissions by ~ 68 % . Kim Long. Keck Seng.Methane Capture Biogas Plant – converting POME waste into biogas United Plantations.

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 .

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 .5 Achieved to date: 0.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.

Government’s Initiatives to enhance palm oil’s 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 .

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 • • • . 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.New initiatives within the industry • • LCA Study throughout the oil palm supply chain with approved 3rd party lab Establishment of Tropical Peat Institute.

Palm-based Biodiesel Development in Malaysia .

palm olein and palm stearin Used Frying Oil Spent Bleaching Earth (SBE) . RBD Palm oil.Feedstock for biodiesel in Malaysia Fresh Fruit Bunch Crude palm oil.

• Performance of engine : good. • Exhaust gas emission : much cleaner (reduction of hydrocarbon. • Cetane number / Diesel Improver (62. Easy starting. • Engine oil: still usable after recommended mileage.Summary of field trial using palm biodiesel • No modification of conventional diesel engine required. CO2. More environmentally SO2 content. no knocking. smooth running.4 c.7 for petroleum diesel from Europe) .f 37.) friendly. CO.

TPA 10.000 599.000 1.130 Current freeze on new licenses .306.620.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.2 mil 873.000 605.500 6.000 190.

000 190.000 99.000 153. Capacity (tonnes/yr) 2 5 2 1 2 12 250. Capacity (tonnes/yr) Completed Construction No.000 .Location and Capacity of Biodiesel Plants In operation State Sabah Johor Selangor Pahang Perak N.000 18.000 2 1 1 4 72.000 1.000 780. Sembilan Total No.000 190.000 100.472.

• 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.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.

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

. Removing the non-trade barrier (e. ILUC) and redress environmental policies facing the developing countries for agriculture development related to deforestration issues.Enhance US-Malaysia trade relations Issues and concerns to be addressed. Removing the tariff on modified palm products. 3. 1.g. 2. 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).

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

my or www.gov.mpob.com Thank You .mpoc.com and kassim@americampalmoil.Contact details www.gov.my or mpobtas@aol.my rosidah@mpob.org.

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