FROM policies and schemes to planting techniques, the Philippines government is trying very hard to restore the coconut industry, especially around East Visayas, where typhoon Yolanda or Haiyan hit the hardest. Under the Reconstruction Assistance of Yolanda (RAY), the government allocated US$416.5 million to revive the agriculture sector in the region, signifying the importance of restoring the livelihood of 3.5 million people who are directly or indirectly dependent on the coconut industry. It is also important for restoring the shortage of oils and fats supply and, which has pushed prices to levels that are burdening the local people.

Despite massive plans and support to restore the loss of around 33 million coconut trees on 295,000 hectares of land that were destroyed by the typhoon, it will not yield overnight success or in the near-to-immediate future. The gap left by the anticipated decrease of coconut oil production in the oils and fats sector needs to be filled to ensure that those who affected are not burdened by the hike in prices of oils and fats as a result of the pressure on coconut oil.

Since November 2013, coconut oil prices have shown strong upward trends despite weaknesses in the other vegetable oils. This is because of supply worries by coconut oil consumers as to the availability of the feedstock. This has caused a premium of around 60 percent as compared with palm and soybean oils.

The local coconut price has now reached around 90 pesos per kilogramme, as

compared to palm oil, which can be bought for 60 pesos/kg. The 30 pesos cushion is comfortable enough for palm olein to become the preferred cooking oil.

Filling in Gaps of the Growing Food SectorNo longer touted as the “Sick Man of Asia”, the Philippines is now showing strong GDP growth as a result of to increased economic activities in the services sector. This is reflected by the Philippines having outgrown India as the

biggest hub for the information technology support centre in the world. This has also increased purchasing power and also changes in lifestyle and eating habits. Increased female employment has also changed the eating

pattern of the Philippines’ population,especially in the urban areas,where most would prefer eating out as compared with cooking at home due to the convenience.

This has caused a healthy environment for the local restaurants and caterers, where growth of the food industry is clearly seen. Euromonitor reported that the market size for the bakery sector

reached 89.9 billion pesos in 2012, recording a CAGR of 11 percent from 2007. The same growth can also be seen in the hotel, restaurant and catering sectors, with the market size reaching 260 billion pesos in 2012, showing a healthy CAGR of 10 percent from 2007.

The tremendous growth in food sectors has seen local and international and local restaurant and hotel chains expanding rapidly in the Philippines. Dunkin’ Donuts, which currently has around 700 stores

MPOC FORTUNE

MALAYSIAN PALM OIL COUNCIL KKDN PP 14669/05/2013 (032704) VOL: 7 2014

®

DIRECTOR

Faudzy Asrafudeen Sayed Mohamed faudzy@mpoc.org.my

MANAGERS

Muhammad Kharibi Zainal Ariffin kharibi@mpoc.org.my

Mohd Izham Hassan izham@mpoc.org.my

MARKET ANALYSTS

Asia Pacific Lim Teck Chaii (China) lim@mpoc.org.my

Asia Pacific Mohd Hafezh Bin Abdul Rahman (Excl. China) mhafezh@mpoc.org.my

South Asia Fatimah Zaharah Md Nan fatimah@mpoc.org.my

Middle-East Mohamad Suhaili Hambali msuhaili@mpoc.org.my

Africa Nor Iskahar Nordin iskahar@mpoc.org.my

Europe Azriyah Azian azriyah@mpoc.org.my

Americas Mohd Izham Hassan izham@mpoc.org.my

MARKETING & MARKET DEVELOPMENT DIVISION

For more information, please contact Tel : 603 - 7806 4097 Fax: 603 - 7806 2272

Continued on page 6

Filling the Gapsof the GrowingFood Sector ofthe Philippines

700

800

900

1,000

1,100

1,200

1,300

1,400

$/M

T

Vegetable oil prices

Oct

- 1

2

Nov

- 1

2

Dec

- 1

2

Nov

- 1

3

Dec

- 1

3

Jan

- 13

Apr

- 1

3

Aug

- 1

3

Sep

- 1

3

May

- 1

3

Feb

- 1

3

Feb

- 1

4

Mar

- 1

3

Jul -

13

Jun

- 13

Oct

- 1

3

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- 14

Coconut Palm Soy

(’000 MT) 2010 2011 2012 2013E 2014F

Coconut Oil Production 1746.3 1136.7 1320.8 1450 1270

Export 1342.5 821.4 852.2 950 720

Domestic Consumption 424.7 314.2 403.6 504 504

Source: Oil World, MPOC

MPOC FORTUNE •  3

MARKETInsightsIns gNEPAL is a landlocked country bordered by the Tibet Autonomous Region of China in the north and India in the east, west and south. The country is roughly rectangular in shape with a total land area of 147,181 square kilometres. Topographically, the country can be divided into three distinct regions, the mountainous region, the hilly region and the flat plains, known as the Terai, which is an extension of the Gangetic plains of India and forms a low flat land along the southern border. It comprises most of the fertile land and forest area of the country and rich and big river basins. The mountainous region includes the Himalayas, the world’s highest mountain chain. The hilly region lies in the middle of the country. The capital of the country, Kathmandu, lies in the Kathmandu Valley in the hilly region.

PopulationThe population of the country is about 28.19 million (2014) with annual population growth of 1.35%. About 86% of the population lives in rural area and 14% in urban area. The average life expectancy is 67 years.

EconomyNepal is a developing country with an agricultural economy. It is among the poorest countries in Asia, with about one-quarter of its population living below the poverty line. Agriculture is the mainstay of the economy, providing livelihood for three-fourths of the population and accounting for a little over one-third of the GDP, followed by manufacturing, trade and tourism. The country’s efforts to expand into manufacturing Industries and other technological sectors have achieved some progress. Industrial activity mainly includes the processing of agricultural products, including pulses, jute, sugarcane, vegetable oil, tobacco and grain. The chief sources for foreign currency earnings include merchandise export, services and tourism.

Total GDP as forecast for 2014 is US$47 billion and per capita GDP is US$1,500 while GDP growth is 5.1%. Main crops locally produced are rice, maize, wheat, millet and barley. Besides food grains, cash crops such as sugarcane, oilseeds, tobacco, jute and tea are also cultivated. Manufacturing is still at the developing stage, representing 20% of the GDP. The edible oils and fats industry is one of the significant industries in the manufacturing sector.

Local Oils and Fats ProductionOilseeds production occupies a significant place in the national economy although oil seed production is insufficient to meet the country’s demand. Oilseed crops are mostly grown in marginal and sub-marginal lands by small farmers. Those are grown as rain-fed crops with limited inputs. Hence the productivity is low. However, oilseed crops occupy about 5% of cultivated land of Nepal. Rape/mustard seeds account for almost 94% of the total annual production of oilseed crops. Annual production of other oilseed crops such as sunflower, groundnut, sesame, linseed, aalus and niger comprise the remaining 6%. Besides, some quantities of soybean, to the tune of about 29,000 MT annually, are is also produced, but the entire producted is consumed as pulses and soya flour to enrich nutritional quality of foods and for animal feed production. Hence the production of soybean is not considered under the oilseeds crops. Accordingly, the annual production of oilseeds crop shown in Tables 2 and 3 comprise mainly mustard seed.

From the above tables, it is observed that in the years 2009-10 and 2010-11, there had been significant increase in both acreage and oilseed production as well, compared with previous years. In 2009-10, the acreage and oilseeds production increased respectively by 9.47% and 14.43% compared with 2008-09, while in 2010-11, the growths in acreage and oil seeds production were respectively 7.64% and 13.63% compared with 2009-10. But in 2011-12, the growths in acreage and oil seeds production were poor, registering 0.53%

and 1.68% respectively, compared with 2010-11. In 2012-13, the acreage increased by only 0.36%, while oilseeds production remained almost same as in 2011-12. Due to this stagnant situation of local oilseeds production, Nepal would have to depend more on import to meet its oils and fats demands, and to cope with increasing requirements in coming years in pace with the increase in consumption.

Consumption of Oils and Fats As per the data available from various sources, the total annual availability of oils and fats, both edible and inedible, in Nepal in 2013 was 349,000 MT, of which about 59,000 MT came from local production and the remaining 290,000 MT being imported. Out of 349,000 MT of oils and fats, about 312,000 MT were available for edible purposes and remaining 37,000 MT comprising of PFAD, tallow, coconut oil, went to inedible purposes. Nepal is mainly a liquid oil consuming country and about 82% of the present annual edible oil consumption is liquid oil and the rest 18% in the form of solid fats. Solid fats are consumed both in food industries and in domestic cooking.

Among the cooking oils, refined soybean oil occupies about 56% share followed by rape/mustard oil at 34%, sunflower seed oil accounts for 7% and remaining 3% is refined olein. Among these four cooking oils, soybean oil, sunflower seed oil and palm olein are imported, while only about 33% of the rapeseed and mustard oils are met through import. These oils are mainly imported in crude form and

Continued on page 7

Part 1 of 2

Table 1: Area under Oilseed Cultivation (Hectares)

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Quantity 180,328 181,361 198,540 213,706 214,835 215,600

Source: Statistical Year Book 2013, Central Bureau of Statistics, Nepal

Table 2: Oilseed Production (Metric Tonnes)

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Quantity 134,286 135,494 155,050 176,186 179,145 179,000

Source: Statistical Year Book 2013, Central Bureau of Statistics, Nepal

Table 3: Indigenous Production of Oils (Metric Tonnes)

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Quantity 44,314 44,713 51,167 58,141 59,118 59,070

Source: Statistical Year Book 2013, Central Bureau of Statistics, Nepal

Note: Edible oil quantity is calculated @ 33% oil extraction rate on an average

Oils & Fats in Nepal - An Update

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- Fimachem Sdn Bhd

- Fima Liquid Bulking Sdn Bhd

- Fima Freight Forwarders Sdn Bhd

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- Fima Palmbulk Services Sdn Bhd

Jalan Parang, 2nd Extension, North Port, 42000 Port Klang, Selangor, MALAYSIATel: +603 - 3176 7211 Fax: +603 - 3176 5641 Email: enquiry@fimabulking.com

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Facilities available : • Carbonsteel• Coated & stainless tanks come

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Malaysia’s Largest Independent Common-user Multi-purpose Liquid

Bulk Terminal Operator

Egypt is one of the most populous countries in Africa and the Middle East, and the 16th-most populated in the world. With 86.9 million inhabitants, the country’s population is expanding rapidly at an annual growth rate of 1.84%, making Egypt one of the largest markets in the Middle East region.

Egypt is an important vegetable oil market in the Middle East region due to its geographic location and demographic profile. Due to their low domestic oil production, Egypt relies on imports to meet domestic consumption. Domestic production can only meet 18% - 20% of consumption requirement. Around 80% of the Egypt's needs for oils and fats are obtained from imports of semi-refined and crude oils.

The top two imported oils are palm oil and sunflower oil, followed by soybean oil, corn oil, coconut oil, palm kernel oil, and fat products such as butter, margarine, and hydrogenated fats. The country has favourable trade policies and sets zero tariffs on imported bulk crude and refined vegetable oils. It also has membership in several regional free trade agreements, making it an ideal hub for re-exports to Middle East & North African (MENA) countries and Europe.

Egypt consumes around 2.09 million MT of oils and fats per year. The country used to be a solid fat market in the 1980s and 1990s. This trend shifted gradually to liquid oil due to the expansion of the subsidized cooking oil scheme in the market. Currently, liquid oils make up about 60% of Egypt’s total oil consumption for food, while the balance is in the form of vegetable ghee. Edible oils and fats in Egypt are mainly used in two areas: food and industrial.

Oils & Fats Market Growth PotentialEgypt presents a large oils and fats market with a vast population and a severe deficiency in vegetable oil supply. The country’s oilseed production is unlikely to expand due to lack of arable land, nor is its vegetable oil production likely to expand significantly. What is certain is its population growth at a fast rate of 1.84% per year, which will lead to rising demand for oils and fats in the domestic market.

The high consumption of oils and fats in Egypt is supported by the government’s food subsidy program. To ensure food

security and social stability, the government of Egypt provides blended cooking oils at subsidized prices to an estimated 75% of the country’s population through ration card system. Such extensive government intervention determines the country’s oils and fats consumption pattern as well as import trend.

Taking into consideration the GDP growth rate, the population growth rate, the food subsidy system, the import-oriented nature of the market, and per capita oil consumption figure, the projected demand for edible oils and fats for the next five years is as follow:

The edible oil and fats market in Egypt is divided between public and private sectors. There are about 25 major vegetable oils and fats producers in the edible oil refining and processing sector. The top five processors of vegetable oils (excluding olive oil) in the private sector are Afia International Company – Egypt, ARMA Group, AJWA for Food Industries Co.-Egypt, IFFCO Egypt, and Integrated Oil Industries.

Palm Oil ImportsEgypt relies entirely on import to meet domestic requirement for palm oil. Palm oil is not a traditional type of cooking oil nor is it produced domestically. Import

fluctuates from year to year depending on domestic demand, economic conditions, and international prices. Annual import volume during 2011-2013 was around 1.16 million MT on average. Palm oil dominates Egypt’s total vegetable oil import with a 60% market share.

Import SuppliersEgypt’s sources of palm oil in the past three years have been consistently the world’s two largest suppliers, namely Indonesia and Malaysia, which account for over 99% of Egypt’s total palm oil imports during 2011-2013.

Palm Oil Usage in Industrial and Food Sectors

Palm oil is the major oil used in Egypt’s food industrial sector which comprises food processing and food service segments. Palm oil products are used in the manufacture of vegetable ghee, margarine and shortening, specialty fats, and for deep frying. Most of the fast food manufacturers and restaurants in Egypt use RBD palm olein as frying oil thanks to its high heat stability.

Palm oil is also used as cooking oil in the household market. Palm olein is often blended with soft oils such as soybean oil, sunflower oil, and corn oil to lower the

MPOC FORTUNE •  5

MARKETInsightsIns gOils & Fats Market Development in Egypt:Consumer Preference for Palm Oil

Egypt: Oils and Fats Consumption Forecast (1000 Tonnes)

2011 2012 2013c 2014f 2015f 2016f 2017f 2018f

2,320 2,053 2,114 2,146 2,189 2,255 2,322 2,392

Source: Entelliprise.com

0

200

400

600

800

Egypt: Imports of Palm Oil (1000 Tonnes)

710 720772.6

690.7

800

2009 2010 2011 2012 2013

Source: Oilworld

Continued on page 11

6 •  MPOC FORTUNE

Filling the Gaps of the GrowingFood Sector of the Philippines

Bakery Horeca Expenditure on Food

0

50,000

100,000

150,000

200,000

250,000

300,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

‘000

PH

P

‘000

PH

PGrowth in Food Sector

2007 2008 2009 2010 2011 2012

Source: Euromonitor International

throughout the Philippines, is opening many more stores. Even local food chains such as Julie’s Bakeshop and Max’s Chicken are also looking for opportunities to expand to capitalise on the current positive market response.

Forecast and TrendsThe question is where are these food businesses going to get their supply of oils and fats? It is clear that the local coconut industry cannot fill the thirst for oils and fats from the rapidly grown

industries. To continue using coconut oil would mean that they have to import from Indonesia – the next biggest supplier of coconut oil which will not make business sense due to its price and extra costs.

Plus, coconut production is unlikely to recover in the next few years. The USDepartment of Agriculture has forecast that world coconut production will likely fall this season due to the situation in the Philippines. Export and consumption is also expected to be

stagnant and with supplies very much limited, this will be reflected by continued high prices over the years.

Palm oil has always been the viable substitute to coconut oil, especially in the Philippines. The price spread for local availability of palm and coconut oils can be seen from the above. In Q4 of 2009 and Q1 of 2010, the spread was negative due to cheaper coconut oil prices in the Philippines as record strong production was expected in 2010. Palm oil prices acted as the floor and coconut oil prices rebounded and reached the peak at US$600 difference in 2011. This was because production of copra was expected to be affected due to tree stress from previous years’ record production and prolonged drought.

As production of coconut stablised in 2012, coupled with weakness in palm oil prices, the spread began to drop and only recovered by Q3, 2013. However, as the typhoon hit Philippines in November 2013, the spread began to climb, reaching US$440. Most companies anticipated this price spread the moment the destruction of major coconut planting region in East Visayas hit the news.

Looking at the previous price trend, the spread is expected to hit another peak, but this time it will not be as high as the previous spread peak due to weaknesses in palm oil and other vegetable oils. Though aggressive measures were taken by the authorities to speed up the recovery of agriculture, including coconut replanting in the affected region, it will not be until the next four to five years before it will start to fully recover. Therefore, prices of coconut oil are expected to remain high and at a premium as compared with palm oil until the coconut industry is fully recovered.

Other factors underpinning coconut oil priceHealthy growth shown in the food sector will likely increase the demand for coconut oil, but policies and healthy growth from other sectors will also demand that there will be pressure on coconut oil supply. Global oleochemical market growth will always affect coconut oil prices as its lauric property

2010/11 2011/12 2012/13 2013/14 Jun Jul

2014/15 2014/15

Production 3.71 3.41 3.66 3.45 3.43 3.43

Exports 1.71 1.88 1.91 1.73 1.73 1.73

Consumption 3.67 3.53 3.77 3.47 3.41 3.41

Source: FAS USDA, 2014

MARKETInsightsIns gContinued from page 1

Continued on page 9

MPOC FORTUNE •  7

Oils & Fats in Nepal - An Update

marketed after refining locally. Some quantities of soybean are also imported, which are crushed locally to obtain soybean meal and oil.

Soybean meal is used by the local poultry feed producing industries and the oil obtained from the extraction of seeds is marketed locally after refining. Rape/mustard oils, which are the traditional oils consumed in virgin form, are mainly obtained from locally grown seeds. Besides, some quantity of mustard and canola seeds are also imported and crushed locally to obtain oil, which is also marketed in virgin form. At present, almost all the imported palm oil is used for the production of vanaspati to cater to local demand, except a small quantity of about 8,000 MT, which is marketed as refined olein.

Besides the major four edible oils, some 30,000 MT of PFAD is also imported to meet the demand from local soap industries. Small quantities of tallow, vegetable fat, butter, margarine and coconut oil are also imported regularly, but in insignificant import volumes. Besides the domestic consumption, Nepal’s biscuit and noodles industries are the major two food industries that are major consumers of edible oils and fats.

ImportsAs is evident from the data, the local production of oils is quite insufficient to meet country’s demand and hence Nepal requires to import oils and fats, both edible and inedible, which will grow in pace with the population and economic growth. From the import trend during 2010-13, it appears that annual import of oils and fats in 2013 calendar year

increased by about 12.18% compared to 2012 due to increase of local consumption. In 2013, import of soybean oil registered a significant increase, by about 43.91%, while that of palm oil also increased substantially by about 30.18% compared with 2012.

On the other hand, the import of rape/mustard oils and sunflower seed oil declined respectively by 9.59% and 54.46% in 2013 compared with 2012.

It may be mentioned here that Nepal is a landlocked country and its main imports are made through Indian seaports. Budge Budge port of West Bengal is generally used for the import of oils and fats, which are then transported to Nepal by road. Fakhrul, MPOC Bangladesh

(Watch out for Part 2 in our next issue)

Table 4: Imports of Oils and Fats in Nepal: 2010-2013 (In Metric Tonnes)

Commodities 2010 2011 2012 2013

Crude Soybean Oil 100,610 101,351 95,077 139,624

Refined Soybean oil 440 660 664 314

Soybean oil¹ obtained from Imported Soybean 6,841 12,140 7,656 8,790 (40,240) (71,411) (45,038) (51,708)

Crude Palm Oil 56,529 46,616 36,245 46,674

Refined Palm Oil/Olein 13,807 2,633 3,773 5,403

Crude Sunflower oil 15,376 7,377 37,451 16,445

Refined Sunflower oil 1,076 1,566 1,686 1,378

Sunflower oil² obtained from imported seed 19 160 Nil 100 (68) (571) (358)

Rape/Mustard Oil 97 118 205 164

Rape/Mustard Oil³ obtained from Imported Seed 21,604 30,366 31,330 28,347 (57,611) (80,976) (83,549) (75,593)

Sesame oil + Oil obtained from imported Sesame seed 230 302 306 268

Animal Oils & Fats 7,745 6,649 6,672 5,221

Crude/Refined Coconut oil 702 480 733 551

Hy. Fat/Margarine/Butter 870 1,003 3,070 4,975

Other Oils and Fats 3,387 3,579 3,735 332

PFAD/Acid Oil 35,139 29,986 29,774 31,238

Total 264,472 244,986 258,377 289,824

Source: Export Import Data Bank, Trade and Export Promotion Centre, Ministry of Commerce and Supplies, Government of Nepal.

Note: 1. Figures are oil equivalent of imported soybean @17% oil extraction while bracketed figures are import quantities of soybean. 2. Figures are oil equivalent of imported sunflower seed @28% oil extraction while bracketed figures are import quantities of sunflower seed. 3. Figures are oil equivalent of rape/mustard seed @37.5% oil extraction while bracketed figures are import quantities of rape/mustard seed.

MARKETInsightsIns gContinued from page 3

Veteran of the agro-commodity industry with over 50 years professional experience in the executive management of business operations within the plantation tree crop commodity sector. Having served for 35 years, he retired as Director and Head of Plantations of Franco-Belgian multi-national, SOCFIN Company Ltd in 1996.

He was the start-up Chief Executive of the Malaysian Palm Oil Association(MPOA) and served this umbrella entity tasked with the function of balancing the needs and interests of the various sectors for synergy and development of the Malaysian plantation industry, from 1999 to 2005.

He was involved in the formation of Roundtable on Sustainable Palm Oil (RSPO) in 2003 with the objective of promoting the growth and use of sustainable palm products through credible global standards & engagement of stakeholders. Appointed as the Chairman of the first RSPO meeting in 2003, elected as a Vice-President during 2004/2005 term and currently the Advisor to RSPO.

Over the years he has held responsible positions in the agro- commodity sector and continues to serve the industry as company director/commissioner, and also in an advisory and consultancy capacity to various business ventures and trade associations, at both regional and international level.

He is a University of Adelaide graduate in Agricultural Economics (B.Sc Tech)) and has been honoured with the Fellowship awards of the

Incorporated Society of Planters (FISP), the Malaysian Oil Scientists' & Technologists’ Association (FMOSTA), the British Institute of

Management (FBIM), The Malaysian Institute of Management (FMIM) and Honorary Membership of RSPO.

Palm Oil: Navigating through Global Challenges

2.00 pm - 6.00 pmGrand Dorsett SubangSubang Jaya, Selangor, Malaysia

2014October

31st

FRIDAY

Mr. M. R. Chandran, Platinum Nanochem Sdn. Bhd

Analysis of Malaysian Palm Oilin 2015 – Production, Stock & Prices

En. Ramli Abdullah,MPOB

Managing Palm Oil Price Risk

Mr. Ryan Long, FCStone Asia Pte. Ltd.

En. Ramli Abdullah was formerly a Statistical Officer at the Department of Statistics Malaysia and Kuala Lumpur City Hall. He was a Researcher at PORIM / MPOB and a Principal Research Officer at MPOB, heading the Techno-Economic Research Unit of MPOB. He is currently the Director of the Economic and Industry Development Division of MPOB. He had written a number of papers and made presentations at local conferences, such as Kuala Lumpur Commodities Exchange (KLCE) Workshops, Palm Oil Congress (POC), PORIM International Palm Oil Congress or PIPOC Conferences and MPOB Economic Review and Outlook Seminar. At the international level, his presentations included those at the International Oils and Oilseeds Conference (IOOC), China and technical seminars in Karachi, Pakistan, and in Dhaka, Bangladesh.

He holds a Diploma in Statistics, Bachelor of Science degree in Business Administration majoring in Computer Information System from Drake University, Iowa, United States of America and a Masters of Arts degree in Computer Science from Springfield State University, Illinois, United States of America.

Mr. Ryan Long has 15 years of hands-on work experience in the palm oil industry. He graduated with an honors degree in International Business from Northumbria University, U.K. He started his career in the industry as a physical broker with an established brokerage firm in Kuala Lumpur. His curiosity and interest in financial aspect of the palm oil market led him to become a licensed futures broker’s representative

with a regional investment bank head-quartered in Kuala Lumpur. He was last attached to the palm oil corporate dealing team of RHB Investment Bank before his move to Singapore to set up a new palm oil desk for FCStone Asia Pte Ltd. INTL FCStone Inc. is a NASDAQ listed Fortune 500 financial services firm specializing in commodity risk management.

Programme2.00 pm Registration / Networking Refreshment

2.30 pm Welcome Remarks by En. Wan Mohd Zain Wan Ismail, PORAM Chairman

SESSION I

2.45 pm Presentation 1 “Palm Oil: Navigating Through Global Challanges” by Mr. MR Chandran, Platinum Nanochem Sdn. Bhd

3.30 pm Presentation 2 “Analysis of Malaysian Palm Oil in 2015 -

Production, Stock & Prices” by En. Ramli Abdullah, MPOB

4.15 pm Questions & Answers

4.30 pm Networking Refreshment

SESSION II

4.50 pm Presentation 3 “Managing Palm Oil Price Risk” by Mr. Ryan Long, FCStone Asia Pte. Ltd.

5.30 pm Presentation 4 “Exim Bank - Expanding Frontiers” by Mr. Chairil Mohd Tamil, Exim Bank

6.10 pm Questions & Answers

6.30 pm Closing Remarks / Networking Refreshment

En. Chairil Mohd Tamil,Exim Bank

• Deputy President / Chief Business Officer

• Graduated from the University of Bristol (UK).

• 22 years experience in investment banking and consultancy works.

• Started banking career with several investment banks namely, AmInvestment, Affin Investment and CIMB Investment.

• Former Director of Investment Banking, a local Islamic Bank and an independent advisory company.

• Joined EXIM Bank in 2011 as the Head of Strategic Project Finance and was later promoted to be the Head of Banking in early 2013. Effective from 6 Feb 2014, appointed as Chief Business Officer of EXIM Bank.

• Extensive experience in fund raising with completed bond/sukuk issuances and loan syndications exceeding RM50 billion.

Exim Bank: Expanding Frontiers

MPOC FORTUNE •  9

CPO Prices CNO Prices Diff

Palm Oil vs Coconut Oil Spread (Local prices)

0

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4

Filling the Gaps of the GrowingFood Sector of the Philippines

MARKETInsightsIns gContinued from page 6

is highly sought in the industry. The oleochemical industry is expected to reach 15 million MT by 2018, growing at a CAGR of around 6% from 2013 to 2018. Asia-Pacific is the fastest growing market for oleochemicals, growing at a CAGR of 8.2% from 2013 to 2018.

In an effort by the Philippines government to secure affordable, environmental-friendly renewable energy and boost the prices of the local coconut industry, the Department of Energy has come up with a National Biodiesel Plan (NBP 2013- 30) that targets up to 30% biodiesel blend by 2030. With CME being the only mandated feedstock, the extra 392.6 million litres of biodiesel required will add more pressure on supply and prices of coconut oil.

The health industry also affects the production of copra as coconut water is the new sensation in the United Kingdom, United States and Australia. Major

beverage companies such as Coca-Cola, Pepsi and Vita Coco have started to source for coconut water and are turning to Philippines because the South American coconut supply is not sufficient for the increasing demand. With Philippines’ farmers leveraging on this opportunity, the coconut oil production

might be affected due to decreased copra production.

Virgin coconut oil is also gaining popularity and has increased demand as it can help significantly increase the level of HDL and improve cholesterol ratio that will make an individual less susceptible to stroke and heart attacks.

ConclusionThe booming food industry in the Philippines, boosted by increased in GDP and purchasing power, will make relevant stakeholders in the food industry in Philippines resort to cheaper alternatives to cut costs and maintain profitability. Other factors such as growth in the global oleochemical industry, biodiesel mandates and demands for other coconut products will definitely put pressure on supply and prices.

Palm oil will be sought highly and the Malaysian palm oil export trends of 2011 can be seen through this year’s import figure. Malaysian palm oil imporst from Jan-May 2014 have already reached 177,000 MT as compared to last year’s level at 75,754 MT. The same level was seen during Jan-May 2011, where Malaysian palm oil imports reached 209,000 MT and palm olein was the most sought-after palm product.

As the coconut crisis in the Philippines is highly correlated with palm oil importsby the country, the Malaysian palm oil industry should aggressively seek opportunities available by forging long-term relations with partners in the Philippines to secure a strong and stable

growth in the Philippines, even when the coconut industry recovers. If these gaps are not filled by Malaysian palm oil companies right now, palm oil will be sought from other neighbouring countries, which will take this golden opportunity to stamp their presence in the Philippines. Hafezh, MPOC HQ

Biodiesel Supply-Demand Outlook (in Million Liters) 2013-2030

Year Diesel Biodiesel Blends Supply Fuel Demand (Targets) Requirements Displacement

2013 7095.18 5% 392.60 354.76

2014 7214.23 5% 392.60 360.71

2015 7382.23 5% 392.60 369.11

2020 7968.81 10% 840.88 796.88

2025 8746.34 20% 1770.00 1749.27

2030 9087.52 20% 1858.00 1817.50

Source: National Biofuels Plan 2013 - 2030 and Post’s estimates(2013 & 2014 fuel displacement)

2011 2012E Price per litre Growth (%)

Water Production (‘000 L) 15,804 18,355 0.90 19

Export Value (‘000 $US) 14,287 19,150 1.08 159

MPOC FORTUNE •  11

cost of production. Palm olein is popular as frying oil in household cooking due to its stability at high temperature and its high resistance against oxidative degradation.

Overall, roughly 80% of Egypt’s palm oil imports for human consumption go to the industrial sector, including food processing and food services, according to USDA 2013 GAIN Report. Within this sector, around 36% of palm oil imports are used in the production of vegetable fats such as margarine, vegetable ghee,

and shortening. About 44% of palm oil imports are consumed as frying oil in the HRI sector (hotel, restaurant, institutional). For the remaining 20%, food preparation absorbs around 3% of palm oil imports. At least 5% of palm oil imports are blended with other edible oils for the retail market.

Palm Oil Usage in Cooking Oil Blends and TrendsBlended cooking oil is very prevalent in the Egyptian market, as it appeals to a wide consumer base with its affordability

and versatility. Palm olein is either blended with one single refined oil, such as sunflower oil, soybean oil, or corn oil, or mixed with multiple oils. Large cooking oil manufacturers and suppliers, including the top players such as Afia International - Egypt, AJWA Group, offer blended palm olein cooking oils. Typically they produce several brands of blended palm olein cooking oil. Their products are available in major supermarkets in Egypt. These products are also being sold in small retail outlets across the country.

Blended cooking oil dominates total edible oil sales due to its attractive prices relative to monotype cooking oil such as

pure sunflower oil and soybean oil. Most vegetable oil manufacturers offer blended oil in order to reach a large consumer segment that is price-sensitive. Industry sources indicate that blended oils account for an estimated 70% of Egyptian’s total oils consumption. Blending palm olein with soft oils will continue to grow as palm olein’s excellent frying quality and competitive price relative to other edible oils will provide strong incentive for

36% Vegetable ghee, margarine, and shortening

5% Retail market

3% Food production

12% Others

44% Frying oil

Egypt: Palm Oil Use in Edible Applications

Source: compiled by Entelliprise.com based on USDA GAIN Report 2013

13% Bulgaria

3% Tunisia

3% Sudan

5% Libya

5% Saudi Arabia

4% Jordan

5% Eritrea

9% Ethiopia

9% Morocco

13% Others

31% Syria

Egypt: Major Palm Oil Markets, 2011 - 13

Source: Source: Entelliprise.com based on data from Comtrade

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Oils & Fats Market Development in Egypt:Consumer Preference for Palm Oil

MARKETInsightsIns gContinued from page 5

MPOCOffices

WorldwideMalaysian Palm Oil Council (MPOC)2nd Floor Wisma Sawit Lot 6, SS 6, Jalan Perbandaran47301 Kelana Jaya, SelangorTel: 603-7806 4097Fax: 603-7806 2272www.mpoc.org.my

American Palm Oil Council 1010 Wisconsin Av, Suite 307Washington DC 20007Tel: +1 (202) 333 0661Fax: +1 (202) 333 0331www.americanpalmoil.comE-mail: haznita@mpoc.org.myContact: Haznita Hussin

MPOC Africa Regional Office5 Nollsworth Crescent, Nollsworth ParkLa Lucia Ridge Office Estate,La Lucia 4051, KwaZulu-Natal, South AfricaTel: +27 (31) 5666 171Fax: +27 (31) 5666 170E-mail: kazmi@mpoc.org.zaPostal Address:P.O.Box 1591M.E.C.C. 4301, South AfricaContact: Kamal Azmi

MPOC Bangladesh62-63 Motijheel Commercial Area,7th Floor, Amin Court Building,Dhaka, BangladeshTel: +88 (02) 9571 216Fax: +88 (02) 9551 836E-mail: fakhrul@mpoc.org.bdContact: Fakhrul Alam

MPOC ShanghaiShanghai Westgate Mall Co. Ltd.Room 1610B, 1038 Nanjing Rd. (w)Shanghai 200041, P. R. ChinaTel: +86 (21) 6218 2085 / 6218 2513Fax: +86 (21) 6218 1125E-mail: desmond@mpoc.org.myContact: Desmond Ng

MPOC Pakistan11 – 3rd Floor, Leeds CentreMain Boulevard Gulberg, 111 Lahore, PakistanTel: +92 (42) 3571 6600 / 3571 6601Fax: +92 (42) 3571 6602E-mail: faisal@mpoc.org.pkContact: Faisal Iqbal

MPOC India S-4, New Mahavir Building, Cumballa Hill Road Kemps Corner, Mumbai 400 036Tel: +91 (22) 6655 0755 / 6655 0756Fax: +91 (22) 6655 0757E-mail: bhavna@mpoc.org.inContact: Bhavna Shah

MPOC Europe Regional Office31 Avenue Emile Vendervelde1200 Brussels BelgiumTel: +32 (2) 7748 860Fax: +32 (2) 7794 371E-mail: kumar@mpoc.euContact: Uthaya Kumar

MPOC MoscowMoscow, 4th Dobrininskiy side-street,8 BC 'Dobrinya', 1st floor, Office R00-126Tel: +790 963 520 40Email: udovenko@mpoc.org.myContact: Aleksey Udovenko

MPOC Cairo3 Gamal E1-Din Afify Street, Nasir CityZone No.6, 11371 Cairo, EgyptTel: +20 (2) 2273 8108Fax +20 (2) 2273 8106E-mail: zainuddin@mpocegypt.comContact: Zainuddin Hassan

MPOC IstanbulGuzel Konutlar SitesiDilek Apartment Daire 3Balmumcu, Besiktas - Istanbul, TurkeyTel: +90 (212) 2668234Fax +90 (212) 2668236E-mail: msuhaili@mpoc.org.myContact: Muhamad Suhaili HambaliPublisher: Malaysian Palm Oil Council (MPOC)

2nd Floor Wisma Sawit, Lot 6, SS 6, Jalan Perbandaran, 47301 Kelana Jaya, Selangor

Printed by: Aktiara Corporation Sdn Bhd 1 & 3, Jalan TPP 1/3, Taman Industri Puchong Batu 12, 47160 Puchong, Selangor

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MARKETInsightsIns gContinued from page 11

manufacturers to use palm oil in order to reduce input cost and increase profit.

Palm Oil ExportsEgypt exports a small portion of palm oil, usually as packaged final products, to neighbouring Middle East and African countries. The average annual export volume of palm oil from 2011 to 2013 was 15,667 MT. On average, export of palm oil accounts for around 10% of Egypt’s total exports of oils and fats between 2011-2013, according to data provided by CAPMAS via UN Comtrade. Shipments to these countries vary from year to year. Ethiopia and Saudi Arabia, for example, received sizable volume from Egypt in 2011, but zero shipments in 2012 and 2013. However, two consistent top export destinations during 2011-13 were Syria and Bulgaria, according to CAPMAS data provided via UN Comtrade.

Palm Oil Market Growth Potential and Trends Palm and palm kernel oils and their products are the leading imported vegetable oils in Egypt. Palm oil will continue to maintain its competitive edge in Egypt thanks to its relatively competitive price compared to other vegetable oils.

Palm oil’s primary consumers are the food manufacturing sector and food services sector. These two sectors are expanding as demand for high-value processed foods are rising due to increasing urbanization, busy lifestyles, growing popularity of large food retail formats, and presence of large food companies. The expansion in these two sectors will drive consumption of palm oil.

One huge potential market for palm oil lies in the government’s subsidy system. The decision of the government to allow blended palm olein cooking oil to be distributed under this system will prop up the demand for palm oil, considering that large quantity of subsidized cooking oil is currently being distributed each year to around 67 million ration card holders in the country.

Palm oil, or palm olein, is already blended with seed oils in the free/open market. Several large cooking oil producers in Egypt have started manufacturing and selling blended palm olein cooking oil, reflecting on consumers’ growing acceptance of this oil. The trend for consumer acceptance of blended palm olein cooking oil will continue in Egypt, which will drive demand further for palm oil in the open market in the years to come. Zainuddin Hassan, MPOC Cairo

Oils & Fats Market Development in Egypt:Consumer Preference for Palm Oil