Palm oil exports may hit RM60 billion

MALAYSIA'S palm oil exports may expand by 20 per cent to touch RM60 billion this year, thanks to higher average palm oil prices and improving global demand.

Palm oil futures prices are now averaging at RM2,500 per tonne, higher than last year's RM2,250 per tonne.

The latest data from the Malaysia Palm Oil Board shows that palm oil exporters have shipped out almost 11 million tonnes for consumption in the global food industry. This is 6 per cent growth from a year ago.

In an interview with Business Times, Malaysian Palm Oil Council (MPOC) chief executive officer Tan Sri Yusof Basiron said apart from Asia, Russia and the Middle East, more palm oil shipments are going to Western nations. Below is an excerpt of the interview:

QUESTION: Do you think Malaysia's global palm oil exports could surpass last year's RM49.59 billion? If so, by how much?

ANSWER: This year, Malaysia's crude palm oil output is not likely to change much from last year. Dry weather caused by El Nino and tree stress in the early part of the year has slowed down crude palm oil output.

In the first eight months of this year, output only grew by a mere 1.7 per cent to 11.1 million tonnes. This has limited palm oil available for exports. The current limited supply trend is expected to continue for the rest of 2010 as the Indonesian government has imposed higher export duties on its palm oil shipments.

As more rapeseed, soya and corn oil are burnt as renewable energy in Europe, the US and Latin America, more palm oil is being imported to make margarine, mayonnaise, cheese spread and chocolate.

Asia's strong economic growth, including our Asean neighbours, and recovering economies in the Middle East, will spur our palm oil exports by between 10 and 20 per cent.

Q: Is Russia an emerging market for Malaysia's palm oil?

A: From January to August 2010, we shipped 104,971 tonnes to Russia, 5 per cent more than in the same period last year. Russia is a major consumer of oils and fats, but it is not able to grow enough oil crops to feed its 145 million population.

     Last year, Russia imported some 446,000 tonnes of palm oil from Malaysia and Indonesia. This is almost 60 per cent of its total oils and fats imports. Palm oil is becoming popular in Russia because it is the most suitable and economical raw material to make soap and detergent.

Q: In the last five years, Malaysia had exported more palm oil to Ukraine. But in the first eight months of this year, volume plunged 62 per cent to 158,678 tonnes. Why?

A: The drastic decline in our exports to Ukraine is caused by two factors. Ukraine's monthly vegetable oil production are at record high levels in the 2009/2010 marketing year. The Eurozone debt crises and Ukrainian currency devaluation may also have an influence on the demand for palm oil.

     Despite the dismal numbers this year, it must be highlighted that palm oil remains the bulk of Ukraine's vegetable oils imports. According to Oil World, from January to June 2010, palm oil imports from Malaysia and Indonesia accounted for 96 per cent compared with 93 per cent in the same period a year ago. Just like in Russia, people in Ukraine use palm oil to make margarine, mayonnaise and other variants of bakery fats.

Q: Palm oil exports to the Netherlands - the gateway into Europe - fell in 2007, 2008 and 2009. Will 2010 see a further decline?

A: Malaysia's palm oil exports to the Netherlands went up 15 per cent to 697,503 tonnes in January-August 2010, compared with 608,808 tonnes in the same period last year. Similarly, exports to the European Union (EU) also recorded a 16 per cent increase to 1.32 million tonnes in January-August 2010 compared with 1.14 million tonnes in the same period last year.

   Going forward, we expect EU-27 nations (including the Netherlands) to remain dependent on palm oil imports to make up for the shortage of vegetable oils in the food sector as a result of higher usage of domestic rapeseed oil and sunflower oil in its biodiesel sector.

Q: Last year, Malaysia's palm oil exports to the US fell 18 per cent to 0.86 million tonnes. What led the decline? Will this year's exports to the US able to top the one million-tonne mark?

A: Since 2005, Malaysian palm oil shipment to the US soared as a result of the US Food and Drug Administration compulsory ruling on trans fat labeling in 2006. The US baking industry turned to palm oil to rid its products of trans fat, which is common in partially-hydrogenated vegetable oils. Malaysia's palm oil exports peaked at more than a million tonnes in 2008.

       Last year, however, the local vegetable oil industry in the US, namely the American Soybean Association, came up with other trans fat-free alternatives and raised the competition for palm oil.

    Despite such challenges, we still see good prospects. Until August, more than 700,000 tonnes of palm oil reached the US shores. For the full year, it should touch a million tonnes. Malaysia has, for more than 30 years, been the major supplier of palm oil to America.

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