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Minister: Malaysia, Pakistan to extend cooperation in palm oil trade

A worker shows palm oil fruits at a factory in Sepang November 20, 2014. — AFP pic
Credit to Malay Mail: A worker shows palm oil fruits at a factory in Sepang November 20, 2014. — AFP pic

KUALA LUMPUR, Jan 12 — Primary Industries Minister Teresa Kok’s visit to Pakistan has unearthed strong potential for Malaysia and the South Asian nation to cooperate further in palm oil trade as well as other commodities, her ministry said.

The Primary Industries Ministry said Kok and Pakistan’s Advisor for Commerce, Textile, Industry and Production and Investment Abdul Razak Dawood had a four-eye meeting over common interests for the two nations.

“The two leaders took the opportunity for bilateral dialogue to explore various issues of common interest to both countries. Both emphasised the excellent cordial bilateral relations and further explored areas for enhancing trade.

“Pakistan is a key importer of Malaysian palm oil and products. In 2018, Pakistan imported 1.16 million metric tonnes (MT) of palm oil from Malaysia valued at US$0.83 billion (RM2.97 billion). Avenues to further expand Malaysian palm oil share in this growing market was also discussed.

“For example, Pakistan is a net exporter of rice, fruit and other produce that are required by Malaysia and Abdul Razak Dawood encouraged Malaysia to consider instituting trading practices that could allow smoother passage of these products into Malaysia,” said the statement.

During her keynote address at the 5th Pakistan Edible Oil Conference (PEOC) in Karachi, Kok highlighted the importance of Pakistan as an end-user of Malaysian palm oil, facilitated by the joint venture refinery between Malaysia and Pakistan in Port Qasim.

She also described Pakistan as one of Malaysia’s most regular and dependable buyers of local palm oil and products.

She emphasised that palm oil has the potential for higher uptake in Pakistan given that its local production of oils and fats meets only around 20 per cent of its consumption needs.

It depends heavily on imports to meet growing domestic demand and consumption, which has been increasing at a rate of 4.5 per cent each year for the past seven years, due to increasing population, income and consumer spending.

Palm oil is widely used for the manufacture of vanaspati (ghee) and it is also the preferred raw material for the food industry in Pakistan, especially for frying and in confectionery items.

At the same time, during her discussion with Abdul Razak, Kok pointed out that Medium Density Fibreboard (MDF) exporters from Sri Lanka enjoyed lower duties whereas Malaysia’s higher quality MDF were subjected to higher import tariffs.

“Other product opportunities were also discussed and both leaders agreed to convey these matters to the concerned authorities in their respective countries so that solutions could be worked out to benefit better trade relations between Malaysia and Pakistan,” said the statement

Credit to: Malay Mail | Sunday, 12 Jan 2020 09:08 AM MYT | BY AZRIL ANNUAR

Palm Oil’s Changing Fortunes Signal Brighter Outlook in 2020

The tide appears to have turned for the world’s most-consumed edible oil.

Just five months ago, benchmark futures in Malaysia languished at four-year lows as investors fretted about stubbornly high stockpiles, waning demand from top buyers India and China and European restrictions that linked palm oil to environmental harm. Then in October, a trade spat between No. 2 producer Malaysia and India threatened to further hit sales and prices.

That all changed at an industry conference in Bali, where top analysts warned that dry weather and haze will hurt production, just as Indonesia focuses on implementing an ambitious, compulsory biofuel program, which is making the country the world’s biggest user of palm oil as well as the largest supplier.

That gave another leg-up to prices, extending the rally from the July low by 50% to more than 2,900 ringgit ($700) a ton and putting the market on track for a 35% gain this year, its best performance in almost a decade, reversing planter fortunes. By contrast, soybean oil is up 22% this year. So what’s next?

Palm oil prices have rallied to hover near a 3-year high

Most industry players see prices of the oil, used in everything from chocolate to shampoo and biofuel, staying at elevated levels in 2020. Benchmark futures may average 2,600 ringgit a ton, the highest in three years, according to the median of 25 estimates in a Bloomberg survey of analysts, traders and plantation executives, versus an average of 2,240 ringgit this year.

“Lower production at origins, increasing biodiesel mandates and robust food demand would be the key price drivers next year,” said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based broker and consultant.

Here’s what industry participants are watching:

1. Biofuel Boom

Indonesia’s B30 biofuel mandate is key to palm oil’s price direction. The policy “will help increase crude palm oil prices, improve plantations’ finances and help to channel biodiesel into the domestic market,” said Sathia Varqa, owner of Palm Oil Analytics in Singapore.

But biofuel mandates in Indonesia and Malaysia are facing scrutiny, especially as palm oil trades at a fat premium of almost $100 a ton to gas oil, compared with an average discount of $54 in the past year. That makes palm more expensive to blend into biofuel and requires increased financial incentives. The industry is watching whether Indonesia reimposes export levies to fund the mandate. That’s more likely now that No. 2 grower Malaysia is set to hike its own export duty from January. “Any failure to fulfil the mandate can have a negative impact on prices,” Varqa said.

Palm oil is the most expensive relative to gasoil since 2017

2. Weak Production

Analysts are trimming their outlook for production in Indonesia and Malaysia due to dry weather and lack of fertilizer application spilling into 2020. LMC International Chairman James Fry forecasts global palm stockpiles to shrink next year as slow output growth coincides with a boost to biodiesel mandates. What’s more, relentless pressure from NGOs to stop oil palm planting, as well as the slowdown in new planting due to low prices earlier, will inevitably keep production growth low in the next few years, Fry said in November. Industry watchers will be monitoring fresh fruit bunches to gauge production trends in the coming months, especially if there are signs of an uptick in yields.

Indonesia, Malaysia palm oil output growth in focus

3. Demand Buoyant

The rally has been so fierce it threatens the oil’s traditional role as cheap vegetable oil for food and fuel. Palm hit parity with soybean oil for the first time since 2011, reducing its appeal versus other oils and prompting buyers to turn to alternatives. While a politically fueled trade spat between Malaysia and India fizzled in November, traders will wait to see whether this key customer may look to hike import duties, which could curb palm purchases.

China, meanwhile, has upped its buying since July as African swine fever slashed hog herds and lowered domestic demand for soybean meal, meaning fewer beans are crushed and less oil produced. China National Grain and Oils Information Center expects palm oil imports to reach a record of 7 million tons in the year starting October, as the tropical oil fills the gap.

High prices may cut palm oil demand

4. Going Green, Weather Watch

Industry efforts to be more sustainable and avoid being dubbed a climate villain will become more important in 2020, especially since it could lead to more companies or countries restricting the use of palm. There are fears that the EU, which wants to phase out palm use in biofuel, may look to food next. Malaysia has warned that the bloc’s proposed limits on 3-MCPD esters may impact palm’s usage in food products and is looking into enforcing regulations to meet acceptable safety levels of the food processing contaminant. National sustainable certification schemes in Malaysia and Indonesia will become mandatory for growers next year, even as a producing-countries band together to fight what they call discriminatory measures against the palm.

Meanwhile, weather calamities that affect soybean crops in the U.S. and South America, or sunflower in the Black Sea countries could tighten supplies and lift edible oil prices including palm.

 Updated on 
Bloomberg
Credit Picture: Sanjit Das of Bloomberg

Good move to have body like OPEC for palm oil industry: MPOB

KUALA LUMPUR (Nov 20): The Malaysian Palm Oil Board is in favor of any move by Indonesia and Malaysia as the world’s largest producers of palm oil to form a body similar to the Organisation of Petroleum Exporting Countries (OPEC).

The move would enhance transparency and maintain crude palm oil (CPO) price at the same time, it said.

MPOB director-general Dr. Ahmad Parveez Ghulam Kadir said the world is currently depending on Malaysia for updates on the CPO price. In this regard, the board would make the announcement on the CPO price, stocks, production and export markets every tenth of the month.

“If Indonesia can also announce their stocks level and such, we can have a more controlled price,” he told Bernama on the sidelines of the three-day MPOB International Palm Oil Congress and Exhibition (PIPOC) 2019 here today.

Both Indonesia and Malaysia contribute 87 percent of the global supply, creating a duopoly market of the most versatile edible oil.

Ahmad Parveez noted that under the Council of Palm Oil Producing Countries (CPOPC) currently, both member countries Indonesia and Malaysia were only looking at issues pertaining to how they could work together, particularly in countering the European Union discrimination against palm oil.

“So far in terms of trade and marketing each country does so on their own,” he added.

Former Malaysian ambassador Dr. Azhari Karim wrote to NST yesterday, calling the Government to consider following the footsteps of the OPEC by establishing a similar organization to comprise mainly palm oil producers, millers, and consumers.

“The issue of pricing continues to plague the industry, as we depend largely on countries which have large populations such as China and India, the two largest buyers of our palm oil.

“Anything that can lead to lower demand from these two countries, whether due to internal or other political and economic factors, will certainly affect palm oil prices,” he said, adding that the demand for palm oil would also be dependant on the performance of other vegetable oils in the world.

Credit: November 20, 2019 21:03 pm +08, Bernama News

 

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What are the main reasons haze occurs every year in Indonesia?

The recent haze encountered by Indonesia, Malaysia, Singapore and it’s neighbouring, countries have badly affected the nations, the young and the old. The haze was an after effect of the vast open burning done in the rural plantation areas within Indonesia at large.

Credit: Petronas Twin Towers are shrouded by haze in Kuala Lumpur, Malaysia, September 9, 2019. Picture was taken on September 9, 2019. (Reuters/Lim Huey Teng)

Open burning or also known as slash & burn is exercised by the farmers/Big Corporation mainly due to a number of reasons such as:

  1. The easiest way for farmers to clear their land & get rid of any potential disease for their crops.
  2. Farmers chose the cheaper option of slash & burn method to their advantage.
  3. One hectare land was to be cleared legally by chopping down the tree, which produces almost 500 ton of bio-mass.
  4. It takes almost three years for that bio-mass to decompose and the land to become usable for plantations.
  5. Using slash & burn makes the process faster and cost-effective, at least in the short run.

Credit: BBC News

However, there are disadvantages to slash & burn activities, which are mainly:

  1. The dry season between July & October during the slash & burn activity makes the situation worse.
  2. The burnt land will turn drier, which makes it more likely to catch fire during the slash & burn clearings.

Credit: FILE – Haze from forest fires blankets villages along Kahayan river in Palangkaraya, Central Kalimantan, Indonesia, Sept. 20, 2019. Haze blown by monsoon winds from fires in Indonesia has begun affecting some areas of the Philippines.

Slash & burn activity could not be controlled by Indonesia, mainly due to corruption and weak governance and the movement of the fire itself within the soil once the burning starts. Some of the gaps in controlling the open burning activity include:

  1. Slash & burn is illegitimate in the country but has been allowed to happen for many years.
  2. Some companies appeared “to operate outside the law for years with little sanction”.
  3. The lack of government transparency makes it difficult for independent monitoring: concession maps are incomplete, data is lacking with very weak enforcement of laws
  4. Indonesia is experiencing difficulty enforcing the rules and regulations via the authority body in handling vast rural burning Sumatra and Kalimantan.
  5. The Association ASEAN approved ASEAN agreement on trans-boundary haze pollution in 2002.
  6. The Indonesia President, Mr Joko Widodo told the news agency that his country needed at least three years to solve issue haze in Sep 2015, however, four years later, the forests are still burning.
  7. Peatland burning is also one of the hardest to be controlled.
  8. Firefighter and army faced difficulty to put out the fires, many of which have burned at flammable and dry peat-rich areas.
  9. A peat fire is difficult to extinguish and it can burn underground for months, and requires a lot of water to put out. Fires can spread underground and spring up in other places later.
  10. Indonesia has laws in place to protect Peat land but is rarely seen enforced.

Indonesia’s attitude towards the haze is on a questioning matter when they continue to blame Malaysia & Singapore Investor on the matter.

  1. Indonesia has named several firms, including Singapore and Malaysia-based palm oil companies, which is said equally responsible for the fire.
  2. Many of those companies have denied any involvement and have accused the local farmers of starting the fires to clear the land.
  3. APRIL (A Singapore’s company) says all fires it had detected originally started outside of its concession areas and had spread into its concessions.
  4. Sime Darby (A Malaysia’s Company) says they followed “a zero burning policy throughout its operations”. Fires were reported in a concession area of one of its subsidiaries in Riau, it said, but it could not “exert control over activities beyond its operating areas and where it is occupied by others”.

Credit: A view of the city skyline shrouded by haze in Kuala Lumpur on Sept 11.PHOTO: REUTERS

Internally within Indonesia itself, the government can practice some of the listed solutions to curb the slash & burn exercise or illegal open burning.

  1. Make forest moratorium permanent.
  2. Ban on new permits affecting primary forests and Peatlands, known simply as the forest moratorium to become permanent.
  3. The moratorium slated has already expired in July 2019 but has been extended to expire in 2021. It was first implemented in 2011 under President Susilo Bambang Yudhoyono. The moratorium aims to protect 64 million hectares of forests and is part of Indonesia’s effort to slash greenhouse gas emissions.
  4. Banning the use of forests and Peatland, areas for new plantations can reduce fires because planters often burn cleared land to prepare it for planting.
  5. Improve transparency and public access to forest land information
  6. Have an open palm oil plantation data accessible as it is vital to point out who’s accountable for the burned areas as well as to enforce the law.
  7. The government should improve its One Map Initiative to integrate maps across the nation and to make data on who owns or manages palm oil plantations available to the public.
  8. The government to show the political will to provide open and transparent geospatial data.
  9. The government should not be reluctant in providing all the information as it hinders the process of clarifying the status of 3.47 million hectares of oil palm plantations that overlap with forest areas.
  10. This will also prevent the illegal development of oil palm plantations that are often connected to man-made forest and Peatland fires.

Credit: by Environment Division on August 11, 2016, in Media Release via HAZE ACTION ONLINE

Externally, the neighbouring countries such as Malaysia and other ASEAN countries, they could also jointly do some of the listed to curb the matter.

  1. Malaysia Anti-haze law must extend beyond borders. The Malaysia government can provide for extraterritorial powers in the proposed law on Transboundary haze, using a US anti-corruption law and a Singapore transboundary, haze law as models.
  2. Attorney-General’s Chambers can take legal action against any Malaysian companies if they or their subsidiaries abroad were found to be involved in causing transboundary haze pollution.
  3. Foreign Corrupt Practices Act (FCPA) 1977 (USA) – Company and person can be held criminally and civilly responsible for corruption offences committed abroad.
  4. Several types of punishments, such as higher fine, imprisonment or whipping, while in terms of administration, it would be more on payments for cleaning works, firefighting operations and land rehabilitation, apart from civil punishment such as compensatory and punitive damages.
  5. A most effective method was for Malaysia and Indonesia to sit down and discuss the suitable punishments for the offences, with Malaysia to give full cooperation when needed.
  6. Alternatively, ASEAN countries should also work together. Malaysia and Indonesia can work together and overcome the annual haze problem instead of playing the blame game include other ASEAN Country.
  7. A single body, answerable directly to the prime minister and president of both nations respectively, must be formed to look into the root cause of the issue, with detailed weekly reports and updates on hand.
  8. The body should work closely with the private sector and adopt the latest technology in assessing the situation, including drones and satellite imaging.
  9. Leaders of both nations need to come up with severe penalties, including economic punishments, to be imposed against those found responsible.

Reference:

https://www.bbc.com/news/world-asia-34265922

https://www.bbc.com/news/business-23026219

https://www.freemalaysiatoday.com/category/nation/2019/09/21/anti-haze-law-must-extend-beyond-borders-says-expert/

https://www.channelnewsasia.com/news/asia/malaysia-companies-haze-penalised-lim-guan-eng-transboundary-act-11938200

https://theconversation.com/three-things-jokowi-could-do-better-to-stop-forest-fires-and-haze-in-indonesia-120497

https://www.nst.com.my/news/nation/2019/10/527199/together-asean-can-make-haze-thing-past

 

 

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More goodies in store for sustainable palm oil

The Government is ready to dish out additional incentives to encourage oil palm planters to embrace Malaysian Sustainable Palm Oil (MSPO) certification, which is aimed at boosting the crop’s profile in the global market.

“It is good news, especially to the smallholders,” Malaysian Palm Oil Certification Council (MPOCC) CEO Chew Jit Seng said in an interview recently.

As at end-April, only about 32 % of the 5.85 million hectares of oil palm plantations and 39 % of the 451 palm oil mills in the country had achieved MSPO certification, he said.

As announced previously, the MSPO standard will be made mandatory for the entire industry by the end of this year.

There are separate deadlines for plantation companies and smallholders.

Plantation industries were given until Dec 31 last year to obtain MSPO certification if they already have Roundtable Sustainable Palm Oil (RSPO) certification, and until June 30 if they have no RSPO or International Sustainability Carbon Certification (ISCC) certification.

The government has given smallholders the longest grace period for getting MSPO certification, up to Dec 31, 2019.

Since the announcement of the mandatory timeline for compliance, MPOCC has anticipated that smallholders will face challenges in terms of resources and capacity to comply with the MSPO standards, but the Primary Industries Ministry and its agencies can assist them, Chew said.

“We noticed some of them are thinking of scaling down their oil palm plantation areas and even venturing into alternative cash crops, but we would still advise the smallholders to be MSPO-certified to make their product sellable in the long run.

“Our main concern is on the smallholders (growers who own below 100 acres) and small and medium-scale growers who have 100 acres, or 40.46ha, to 1,000ha.

“These growers need more guidance, especially those in the rural areas, as they sometimes lack awareness of the certification process,” he said.

The large companies, on the other hand, can readily embrace the MSPO as many of them have already been certified with international standards such as RSPO or ISCC.

The existing incentives, which are provided to boost the take-up rate for MSPO certification, fully cover the audit cost and the cost of preparation for the certification for smallholders.

“The new incentive scheme will also cover the full audit cost of the small and medium-scale growers and defray their cost of becoming sustainable in the long term,” he said.

Currently, the government is giving the independent smallholders RM135 per hectare as an MSPO incentive.

“However, for the organised smallholders under the various land schemes like Felda, Felcra and Risda, they only get about RM10 per hectare. So there is a big disparity.

“Therefore, the government will rationalise the incentive scheme to make sure that everybody would be incentivised, with priority given to smallholders and small and medium-scale growers,” he explained.

According to him, MSPO certification system is managed by third-party audit companies (certification bodies) accredited by the Standards Department.

There are 14 accredited certification bodies at present, and the department is in the process of accrediting another four bodies in the country. The accredited bodies are listed on the MPOCC website.

“For oil palm plantations and the supply chain players seeking to get MSPO and Supply Chain Certification System (SCCS) certified, they can contact any of these 18 certification bodies to get quotations for comparison.

“For independent smallholders, the audits will be arranged by the Malaysian Palm Oil Board (MPOB),” he said.

The MPOB will visit the smallholders’ plantations to check if their plantations have met all MSPO requirements before scheduling them for an actual audit, he explained.

“The MPOB has organised the independent smallholders into 162 Sustainable Palm Oil Clusters or SPOCs, and 114 SPOCs have been certified to date according to the board,” Chew said.

Despite the short timeline, MPOCC is confident of the full implementation of MSPO, he said.

“It is an uphill task (due to the various procedures and funding that is needed) but with the government’s undivided support, we will strive to achieve the 100 % target by end of 2019,” Chew said.

MSPO is crucial as it is the platform for Malaysia’s palm oil industry to move towards sustainability and tackle current and future challenges, he said.

Hence, the federal government and various agencies are providing technical support and financial aid.

However, there are areas where the federal government will seek the cooperation of state governments, especially on land use and title, as it falls under their jurisdiction, he explained.

Chew also said that since almost 90 % of Malaysian palm oil and palm oil products are exported, meeting the sustainable requirement of importing countries is crucial.

He noted that China, one of the top buyers of Malaysian palm oil, is also going into “green food” and sustainability.

“MPOCC has recently signed a memorandum of understanding with the China Green Food Development Centre for mutual recognition of the ‘Green Food’ and MSPO certifications.

Chew said the government and its agencies will also promote MSPO-certified palm oil to India in the latter part of this year.

In 2020, the plan is to participate in the Dubai International Expo to target the Middle East market.

“It is noted that our main competitor, Indonesia, has also implemented the Indonesian Sustainable Palm Oil (ISPO) certification system.

“However, Indonesia does not invest much in promoting the ISPO-certified palm oil but instead is focusing on selling its commodity at a cheaper price due to its higher CPO production.

“So, I think, this is where our palm oil may have an advantage in the market as MSPO-certified sustainable palm oil,” he added.

** Credit: Nurul Hanis Izmir, Bernama  |  Published:   |  Modified: