Archive for January 2009

China to go on buying more palm oil from Msia

MALAYSIA'S 23-year record of rising palm oil exports to China ended last year when shipments dipped by 1 per cent to 3.8 million tonnes.

However, there is no need to be alarmed, said Malaysian Palm Oil Council (MPOC) chief executive Tan Sri Yusof Basiron. "The slight 50,000 tonnes dip in palm oil purchase from Malaysia does not necessarily imply China is a saturated market," he told Business Times in an interview.

"There is still room for growth in China's demand for Malaysian palm oil. There are more than 1.3 billion people there and many have big appetite for tasty food," he said.

He explained that last year's dip was caused by extreme market volatility as prices fell for seven months from April. It hit a low of RM1,390 per tonne at the end of October and traded sideways for two months. Soon after Christmas, it began to climb to RM1,900 per tonne but of late, has settled to around RM1,800 per tonne.

The yoyo-like price movement had caused much uncertainty and disrupted vegetable traders' forward purchase decisions. Many orders to China were deferred, especially from August to October. "Also, Chinese vegetable oil trading houses, like other businesses there, were facing challenges in securing trade facilities from the banks," he said.

Yusof then stressed that the global palm oil market had recently taken a positive turn. Last month, there was a surge in palm oil shipments and stock levels reduced drastically. "In the past, the carry-on stock levels ranged between 500,000 and 600,000 tonnes. This year, the stock level reduced to between 200,000 and 300,000 tonnes," he said.

When asked to forecast palm oil exports to China, he replied, "we should be able to do four million tonnes this year. It is not a problem."

Yusof then explained the rise and fall of palm oil shipments to several other key markets.

Q: Palm oil exports to the Netherlands continued to shrink last year. Will the downtrend persist? Are there ways to halt the decline?

A: The declining palm oil imports into the Netherlands were mainly due to less palm oil usage in power generation.

The current palm oil purchase of around 1.3 million tonnes reflect the total consumption before the Dutch government's implementation of the renewable energy programme in 2005/06.

Then, the Dutch government encouraged production and use of renewable energy by giving tax credit to power producers. The decision boosted palm oil consumption since palm oil was cheaper then other oils.

But things took a turn lately, when environment activists mounted campaigns to stop the subsidy. The Dutch government, after consultations with the stakeholders, decided to revise the policy and restrict palm oil in green energy production. Rising palm oil prices in the first half of 2007 had also cut back palm oil use in power generation.

It is important to note that the Netherlands' declining palm oil orders in 2008 and 2007 do not reflect less demand for food.

Q: Did Malaysia file a complaint to the World Trade Organisation (WTO) on European Union's (EU) scaled down biofuel policy that seems to discriminate against palm oil?

A: We are studying this possibility and we consider the directive to be discriminatory and against the WTO rules. Several developing countries have joined hands to voice their concern on this matter. We will continue to actively engage EU legislators to address concerns on palm oil sustainability.

There is increasing awareness that this poorly thought-through legislation could turn out to be a trade barrier.

The European Commission (EC) is working to prepare guidelines to implement the biofuels sustainability scheme by July. It will include practical guidance on key issues like change in land use, food security of a nation, new default values for greenhouse gas emissions and tools to accredit certification schemes.

Besides sharing greenhouse gas savings data, Malaysia will submit other figures to support its views for a workable certification framework. By the end of this year, the EC is scheduled to report on the expansion of the sustainability criteria to all forms of biomass for energy uses.

It is crucial to provide relevant technical input to these initiatives to make sure palm oil is not discriminated.

Q: Malaysia's free trade agreement (FTA) with Pakistan expanded palm oil shipments. Will we see this positive trend continuing?

A: Malaysia's FTA with Pakistan, which was signed in November 2007, came into effect in January 2008. It took two months for the FTA modalities to finalise but after that there was a clear shift of imports from Malaysia.Pakistan is a stable market. We see 10 per cent more in exports to 1.3 million tonnes this year because the FTA with Pakistan facilitates a vegetable oils import tax structure that is favourable to Malaysia.

In 2008, Malaysia recaptured its lost market share by another 11 per cent and currently stands at a commanding 73 per cent share. 

We have also managed to keep more than 50 per cent share in crude palm oil (CPO) exports to Pakistan, thanks to the joint venture between Felda, KLK and Westbury Group of Pakistan.

Q: Last year, Malaysia's palm oil exports to the US topped 1.05 million tonnes. What led to the 25 per cent export growth?

A: US increasing legislation against the deadly trans fatty acid has spurred more food giants to replace hydrogenated and partially hydrogenated oils with heart- healthy palm oil. More and more confectionery and snack food manufacturers are switching over to palm oil because in its natural form, it is trans fat free and remains stable in extreme deep-fry heat.

Q: Is the US buying more Malaysian palm oil for fuel? Will President Barack Obama's renewable fuel policy have an impact?

A: Last year, several biofuel producers in the US ordered about 10,000 tonnes of biodiesel from Malaysia to blend in with other variants of biodiesel.

Given Obama's commitment to reducing greenhouse gases and promoting renewable biofuels, Malaysian palm oil will be viewed favourably as we are committed to producing sustainable palm oil.

Obama had, in his campaigning days, stated that by 2022, six billion gallons of fuel produced in the US will be made up of sustainable and affordable biofuels.

Despite the current focus on improving the economy, his administration is likely to remain committed to developing alternative and sustainable sources of energy. We expect the new administration to invest federal resources, including tax incentives and government contracts, to develop second generation biofuels.

Q: India has started buying more from Malaysia after a 10-year decline. Will the strong purchase hold up this year?

A: Since April 2008, India abolished import duties on crude vegetable oils, including CPO. At the same time, duties on refined vegetable oils, including RBD olein, were brought down to 7.5 per cent. Following this, there was a surge of RBD olein imports from Malaysia. As to whether the strong purchase will hold up, it will depend on whether there is a change in the vegetable oil import duties.

Q: Despite Malaysia's promotional activities in South Africa, exports have fallen. Why?

A: Malaysian palm oil exports to South Africa fell last year because vegetable oil buyers bought more Indonesian palm oil at lower prices.

Q: Last year, palm oil exports to Ukraine almost tripled to 483,955 tonnes. Why the sudden surge?

A: The big orders going into Ukraine are largely due to the higher consumption by Delta-Wilmar CIS Ltd, a joint-venture between Wilmar International and a local Ukrainian company.

Delta-Wilmar operates a 300 tonne-a-day shortening plant there and is the largest importer of palm oil. With the completion of its 1,200 tonne-a-day palm oil refinery in the Black Sea Port of Yuzhniy, it is poised to import more palm oil from sister companies in Malaysia to make mayonnaise, margarine, confectionery and bakery products. Delta-Wilmar is also expanding its storage facility to 100,000 tonnes at Yuzhniy port.

Want youthful skin? Try tocotrienols.

Want youthful skin? Studies have shown natural vitamin E, extracted from palm oil, is very effective.

Vitamin E is a family of eight members, made up of four tocopherols and four tocotrienols. It is a natural anti-aging supplement because it protects body cells from harmful free radicals.

Instead of using vitamin E-fortified skin care made from soybean, canola and sunflower oils, which usually contain only tocopherols (the lame sisters in the Vitamin E family), you can try out palm oil extracts in soft gels. Palm oil vitamin E is better than the common soy-based because it has all eight tocopherols and tocotrienols. You can buy and the Tocovid brand of palm oil Vitamin E health supplement from any Caring Pharmacy outlet throughout Malaysia.

When you pop the Tocovid soft gel into your mouth, the active agent in palm oil extracts called tocotrienols enters your bloodstream. As these potent variants of anti-oxidants travel to the regenerating cells of your skin, they will disarms cell-killing free radicals.

Basically, the tocotrienols will help to slow down sun damage, age-spots and wrinkles on your skin. It can also help reduce inflammation and scarring after surgery.

Stinky fertiliser? Oil palms need nutrients, too

The fertiliser trail as published in the Business Times.

21 Jan 2009 -- Fertiliser importers set to drop prices further

FERTILISER importers are expected to drop prices by more than 15 per cent this quarter. This will benefit oil palm plantations as they use up some 3.5 million tonnes or 90 per cent of the country's chemical fertiliser imports.

Plantation Industries and Commodities Minister Datuk Peter Chin said fertiliser prices in the world market, except for potash, have fallen significantly and it is only logical to see these savings passed on to the plantations.

"In the last quarter, they've dropped prices by 15 per cent. They are now calculating the quantum of price drop for this quarter. It's likely to be more," Chin told Business Times after meeting with Agriculture and Agro-based Minister Datuk Mustapa Mohamed and Fertiliser Industry Association of Malaysia (FIAM) in Putrajaya yesterday.

FIAM chairman Zainal Matassan said: "Although barter trade is an option that would involve extra steps and procedure, we'll strive to find ways to implement fertiliser purchase via the POCPA. We'll revert to the government soon, before the end of this month."
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19 Jan 2009 -- Plan to barter palm oil for fertiliser with North Korea, Russia

MALAYSIA, in efforts to reduce its fertiliser import bill, will barter US$70 million (RM250.6 million) worth of palm oil for fertiliser with North Korea and Russia.

Last year, without much leverage from barter arrangement, oil palm planters paid more than RM6 billion to fertiliser importers for an estimated 3.5 million tonnes at market pricing.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said his ministry and Bank Negara had, last month, approved US$20 million (RM71.6 million) credit with North Korea for palm oil orders until end-2010.

"In the last nine years, we've bartered US$60 million (RM215 million) worth of palm oil for fertiliser with North Korea. We've approved a further US$20 million for another two years," he told reporters after meeting with the Malaysian Estate Owners' Association (MEOA) in Putrajaya over the weekend.

"Russia is a bigger fertiliser producer. We're bartering US$50 million (RM179 million) of palm oil for potash this year," he said. Bartering of palm oil for fertiliser could facilitate more competitive pricing in fertiliser components from smaller suppliers. Giant crop nutrients suppliers of the world are in Canada, Norway and Chile, Chin said.

Apart from North Korea and Russia, Chin said, Malaysia wants to do more barter trade with other fertiliser producing countries like Morocco, Jordan, Syria and Iran. Since 1992, Malaysia has been bartering palm oil for other commodities via the Palm Oil Credit and Payment Arrangement (POCPA) with Bank Negara as credit guarantor.
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30 Dec 2008 -- Govt seeks views on fertiliser bulk-buying, ceiling pricing

THE government plans to meet with the Fertiliser Industry Association of Malaysia (FIAM) to explore the option of bulk buying and selling fertiliser to oil palm and rubber planters at lower prices.

"Before we bring this up to the Cabinet, we need to meet with FIAM to gather their views on bulk-buying and ceiling pricing," said Plantation Industries and Commodities Minister Datuk Peter Chin. "We already have this kind of arrangement with sugar distributors," he told Business Times in a recent interview in Putrajaya. "If fertiliser importers are agreeable, we can work together to find ways to implement this in a practical manner like in the sugar trade," he added.

According to the Statistics Department, in the first eight months of this year, Malaysia imported 2.57 million tonnes of fertiliser worth RM4.64 billion. So far, industrial crops consume RM4.4 billion, which make up 95 per cent of the country's fertiliser import bill.

Oil palm plantations consume 90 per cent of Malaysia's fertiliser imports while rubber and cocoa estates take up another five per cent. Padi fields, vegetable farms and orchards use the remaining five per cent.

Fertiliser make up 60 per cent of oil palm planters' production cost. Many planters, especially those with young trees just starting to bear fruits, are crying foul over expensive fertiliser. "Last year, our oil palm planters spent RM2.6 billion on 3.4 million tonnes of fertiliser. This year, the import bill may swell to more than RM6 billion since fertiliser prices have more than doubled," the minister said.

Chin's plan is in line with that of Agriculture and Agro-based Minister Datuk Mustapa Mohamed who suggested subjecting fertiliser to ceiling pricing so as to ease farmers' and planters' burden.

In a separate interview, the Malaysian Estate Owners Association (MEOA) said it welcomes the ceiling price proposal if fertiliser importers continue to sell it at high prices.

"We propose that the ceiling price for fertilisers, other than urea, should be at least 50 per cent less than the current prices," said MEOA president Boon Weng Siew. "The ceiling for urea, a petroleum derivative, should be fixed at, say, 65 per cent less than the price as at 31st July 2008," he added.

Boon said the government should probe into the two-tier pricing of Muriate of Potash (MOP) in the global market if it were to facilitate fertiliser bulk buy from global suppliers.

Citing industry journal "Potash Corp", Boon said current MOP prices showed contract price for shipment to China and India was US$550 (RM1,914) whereas that for Malaysia, Indonesia and Brazil was between US$1,000 (RM3,480) and US$1,100 (RM3,828) per tonne.
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26 Dec 2008 -- TH Plantations may have to use less fertiliser

TH PLANTATIONS Bhd, the plantation arm of Lembaga Tabung Haji, will reduce its fertiliser usage if palm oil prices do not improve and continues to be expensive.

"So far, we have not cut down the amount of fertiliser usage this year. Earlier, we had budgeted for 38,000 tonnes," its managing director Datuk Rashidi Che Omar told reporters after the company's extraordinary general meeting in Kuala Lumpur yesterday.

"If, however, palm oil prices do not improve, we may have to reduce by as much as 30 per cent. Fertiliser is so expensive. If this drags on, we will have no choice but to cut back," he said.

Rashidi's comment comes on the back of major oil palm planters' recent stand to reduce fertiliser purchases in the next six months if fertiliser continue to be sold at high prices.

Fertiliser makes up 60 per cent of oil palm planters' total production cost. "Cutting back on fertiliser usage is not an easy decision because we don't want to have drastic impact on yields in the later years," Rashidi said. TH Plantation's landbank now totals 28,730ha. Its shareholders, yesterday, approved of the almost RM200 million purchase of Bukit Belian estate and one-half of Sabaco estate from parent Lembaga Tabung Haji.
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19 Dec 2008 -- Ceiling price on fertiliser?

THE GOVERNMENT may make imported chemical fertiliser a controlled item, placing a ceiling on its price so as to ease oil palm planters' burden.

"The government is aware that fertiliser prices have yet to come down despite importers pledging to drop prices by 15 per cent. Fertiliser prices have risen significantly, about three times higher than in 2006.

"While crude oil prices have dropped significantly, fertiliser is still sold at high prices," Agriculture and Agro-based Industry Minister Mustapa Mohamed told reporters after officiating the launch of the Fisheries Department's business prospectus on aquaculture in Kuantan yesterday.

"The government is already subsidising fertiliser for padi and vegetable farmers, but the biggest users are oil palm planters. It would be disastrous if planters cut back on fertiliser usage as this would affect Malaysia's palm oil output next year," Mustapa said.

Asked how soon there would be a ceiling price on fertiliser, he said: "The proposal is still preliminary. We have yet to bring it up to the Cabinet."
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25 Nov 2008 -- Oil palm growers to buy less fertiliser

MALAYSIA'S 200,000-odd oil palm planters, initially forecast to spend more than RM6 billion on 3.5 million tonnes of imported fertiliser this year, have collectively agreed to reduce purchases in the next six months.

Oil palm plantations consume 90 per cent of the nation's fertiliser imports. Last year, Malaysia's oil palm planters spent RM2.6 billion on 3.4 million tonnes of imported fertilisers. This year, they are expected to use 3.5 million tonnes worth more than RM6 billion.

Oil palm planters do not usually want to skim on fertiliser usage unless they have no choice. This is because the more fertiliser is applied to the oil palm tree, the more fruit it bears. Therefore, productive estates are better at curbing production cost. For example, estate churning out 25 tonnes of fresh fruit bunches (FFB) per hectare per year incur production cost of about RM1,300 per tonne while those producing 20 tonnes of FFB per hectare per year will have to cope with RM1,500.

"We're considering not applying fertiliser for the next six months to cut cost if fertiliser prices do not come down. Fertiliser is still two times more costly than at the beginning of the year," said Malaysian Palm Oil Association (MPOA) chairman Datuk Azhar Abdul Hamid, who is also Sime Darby Bhd executive vice-president of the plantation and agribusiness division.

He was speaking to reporters after a meeting with Malaysian Estate Owners Association (MEOA) president Boon Weng Siew and the Malaysian Palm Oil Board (MPOB) chairman Datuk Sabri Ahmad.

MEOA's Boon said fertiliser importers' recent pledge to cut prices by 15 per cent is not justified. "Fertiliser suppliers should drop prices by 50 per cent, considering that international crude oil have come down by more than 65 per cent from its high of US$147.47 (about RM535) per barrel in July," he said.

Also present at the press conference were Felda Holdings Bhd group managing director Datuk Mohd Bakke Salleh, IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng and Kuala Lumpur Kepong Bhd (KLK) chairman Datuk Seri Lee Oi Hian.

MPOB has so far collected RM500 million in cess from oil palm planters. Some RM200 million has been set aside to replant 200,000ha of land and stabilise biodiesel prices when the government implements the B5 mandate effective February 2009.

Oil palm planters are also proposing to the government that national power firm Tenaga Nasional Bhd uses palm oil feedstock for its diesel-fuelled power plants in Sabah.

Although yesterday's sudden gathering of the oil palm associations that included captains of the six biggest oil palm companies seemed to reflect the seriousness of low palm oil prices, KLK's Lee said oil palm planters and exporters are not in dire straits.

"Please do not misread this as a distress situation. At RM1,500 per tonne, we're still profitable," he said, adding that oil palm planters can manage production cost by lowering inputs.

He said KLK's oil palm planted area of some 170,000ha in Malaysia and Indonesia have begun to reduce fertiliser inputs by 20 per cent. "By using less fertiliser, we've cut back on our production cost by about RM100 per tonne," he said.

Yesterday, the third month benchmark crude palm oil on Bursa Malaysia Derivatives Exchange traded RM28 higher to close at RM1,488 per tonne.
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5 Nov 2008 -- Palm oil sector could gain from lifting of fertiliser duty

MALAYSIA'S palm oil industry could get a respite from low margins thanks to a government move to scrap import duty on fertilisers.

Deputy Prime Minister Datuk Seri Najib Razak, who is also Finance Minister scrapped the 5 per cent duty on seven imported fertilisers yesterday.

"On fertilisers, usage cost is approximately RM1,600 per hectare," Affin Investment Bank said in a research, "hence, scrapping the import duty is estimated to boost net profits by 0.5 per cent to 2, equivalent to the impact of a RM20/tonne increase in crude palm oil price."

A level of RM1,500 a tonne — 15 per cent below current levels — represents the break-even point for plantations, which face a margin squeeze as fertiliser and other farm costs stay strong. Yesterday, the third month benchmark crude palm oil futures on the Bursa Malaysia Derivatives rose as much as RM122 to close at RM1,700 per tonne.

Malaysia’s import bill for fertiliser, used mostly by the palm oil industry, is likely to more than double to RM6 billion this year, as global prices flare on strong demand.

Maggi Mee....slurrrp!

Do you know that 12% of a packet of Maggi mee is palm oil?

Palm oil is the preferred cooking oil in the 100 billion servings of instant noodles in a year consumed in China, Indonesia, Japan, South Korea, Thailand, Vietnam, Taiwan, the Philippines, Singapore and Malaysia.

Why? because palm oil is cheap and good ;-)

China is the world biggest instant noodles consumer, gobbling up 50 billion packets of instant noodles every year. Indonesia comes in second, slurping up 15 billion packets and Japan is in third placing with about seven billion packs.

On a per capita basis, however, South Koreans eat the most instant noodles ... 70 packets per year. That means, an average Korean eats a packet of instant noodles every five days.

In Malaysia, instant noodles is not only popular with students and low income earners, it is also an economic indicator. In times of economic slowdown, many middle class people will go for cheap instant noodles like mee goreng at mamak stalls just to fill up the stomach.

Don't be surprise if sales of Maggi mee go up this year.

burgerlicious!

Hotdogs, burgers, nuggets and french fries sold at Malaysia's fastfood restaurants are mostly cooked in palm oil.

Fastfood restaurants choose palm oil because it can withstand extreme deepfry heat better than other soft oils like olive oil, soya oil, sunflower oil which oxidise easily in high heat.

Incidentally, palm oil is also nutritious, packed with Vitamins A and E. So, the next time you walk into McDonalds, Burger King, A&W, Wendy's or even buy hotdogs from the 1901 carts at shopping malls here... take heart, it is cooked in palm oil that is naturally packed with anti-oxidants.