POTS: Malaysia Myanmar Palm Oil Trade Seminar 2013

Transcription

1 POTS: Malaysia Myanmar Palm Oil Trade Seminar 213 Palm, the leader of vegetable oil complex Pawan Kumar Director Food & Agribusiness Research and Advisory Rabobank International

2 Table of contents Sections 1 Rising vegetable oil demand-palm leading the way 2 A closer look on palm oil 3 Palm oil trade and consumption growth 4 Key drivers propelling the growth 5 Myanmar: Palm serving the vegetable oil demand 6 Conclusion 2

3 1 Rising vegetable oil demandpalm leading the way

4 Millions Growing population equals to more mouths to feed World population has almost doubled from 195 to 212 and it is forecast to grow further World population grew at a CAGR of 1.7% between 195 and 212. World population, E The world s two most populous countries, China and India, grew at a CAGR of 1.5% and 2.% respectively during the same period Rest of World China India Source: UN Population Division, 213 4

5 Million tonnes As a result, consumption for vegetable oil is also increasing over the years Growing population and urbanization have led to increase in consumption of vegetable oil Total global consumption of vegetable oils has increased at a CAGR of 5.% between 1992/93 and 212/13. As of 212/13, palm oil is the most consumed vegetable oil, occupying 33% of total market share. It is expected to increase to 38% by 219/2. Palm oil has shown the most resilient growth of 7.7% per annum over the same period. Global consumption of key vegetable oils 2 18 CAGR = 5% Olive Oil Coconut Oil Cottonseed Oil Peanut Oil Sunflower Oil Rapeseed Oil Soybean Oil Palm Oil 1992/ /23 212/ /2 Source: USDA, 213 5

6 Million tonnes So how exactly is vegetable oil being consumed? Food production and usage accounts for up to 76% of total vegetable oil consumed in 212/13 Vegetable oils are predominantly used for food production and cooking, and food use has grown at a CAGR of 4.2% between 1992/93 and 212/13. Breakdown of vegetable oil use, 212/ Industrial registered the greatest growth, with a CAGR of 1% during the same period CAGR = 1 % Feed Use Industrial Use 6 Food Use 4 CAGR = 4.2 % /93 22/3 212/13 Source: USDA, 213 6

7 Million tonnes Can the world produce enough vegetable oil to satisfy demand? Global vegetable production is matching consumption closely on a yearly basis World production of vegetable oils has grown at a CAGR of 5% between 1992/93 and 212/13. Global vegetable oil demand and supply curves, 212/ CAGR (Supply) = 5% /93 22/3 212/13 Consumption Supply Source: USDA, 213 7

8 (Index: 1992/93 = 1) Palm oil leads the pack in global vegetable oil production Supply of palm oil has grown at an average of 7.7% per annum over the past two decades Besides palm oil, production of soybean oil and rapeseed oil has grown at an annual rate of 4.7% and 5.5% respectively during the same period. Global production of key vegetable oils (indexed), 212/ Others Sunflower Oil Rapeseed Oil Soybean Oil Palm Oil /93 22/3 212/13 Source: USDA, 213 8

9 and palm oil has overtaken soybean oil to become the top producing vegetable oil Palm oil s production market share has increased significantly from 22% to 35% over the past two decades Total volume of palm oil produced grew from 13 million tonnes in 1992/93 to about 55 million tonnes in 212/13. Production market share breakdown, 1992/93 Production market share breakdown, 212/13 Peanut Oil 6% Cottonseed Oil 6% Palm Kernel Oil 3% Coconut Oil 5% Olive Oil 3% Palm Oil 22% Cottonseed Oil 3% Palm Kernel Oil 4% Sunflower Oil 9% Peanut Oil 3% Coconut Oil 2% Olive Oil 2% Palm Oil 35% Sunflower Oil 12% Rapeseed Oil 14% Soybean Oil 29% Rapeseed Oil 15% Soybean Oil 27% Source: USDA, 213 9

10 On demand side, palm oil is widely used in food Palm oil accounts for 32% of food use in 212/13 Palm oil used in food has increased at a CAGR of 7.3% over the two decades. Market share breakdown, 1992/93 Market share breakdown, 212/13 Cottonseed Oil 6% Peanut Oil 7% Olive Oil 3% Coconut Oil 3% Palm Kernel Oil 1% Palm Oil 18% Cottonseed Oil 4% Olive Oil 2% Peanut Oil 4% Sunflower Oil 11% Coconut Oil 2% Palm Kernel Oil 1% Palm Oil 32% Sunflower Oil 14% Soybean Oil 32% Rapeseed Oil 14% Rapeseed Oil 15% Soybean Oil 29% Source: USDA, 213 1

11 and industrial production as well Palm oil accounts for 38% of industrial use in 212/13 Palm oil market share has decreased, while soybean took over the lead position for industrial production. Market share breakdown, 1992/93 Market share breakdown, 212/13 Cottonseed Oil Sunflower 2% Oil 4% Coconut Oil 16% Olive Oil 1% PEanut Oil <1% Palm Oil 4% Sunflower Oil 2% Coconut Oil 5% Palm Kernel 13% Cottonseed Oil 1% Olive Oil <1% Peanut Oil <1% Palm Oil 38% Palm Kernel Oil 18% Rapeseed Oil 2% Rapeseed Oil 9% Soybean Oil 1% Soybean Oil 22% Source: USDA,

12 2 A closer look on palm oil

13 First, let s see where palm oil is produced West Africa and Latin America contribute only 1% Indonesia and Malaysia account for 87% of total palm oil produced Source: USDA,

14 Million tonnes Indonesia is the leading producer of palm oil with a market share of 52% in 212/13 Indonesia overtook Malaysia as the top palm oil producer from 25/6 onwards Indonesia has displayed strong performance with an annual growth rate of 11.5% between 1992/93 and 212/13, while Malaysia lagged behind with 5%. World palm oil production, 212/13 6 Rest of World Malaysia Indonesia 5 4 CAGR (Global) = 7.7% 3 CAGR (Indonesia) = 11.5% 2 1 CAGR (Malaysia) = 5% 1992/93 22/3 212/13 Source: USDA,

15 Million ha Oil palm planted area in Indonesia and Malaysia has grown tremendously over the years Governmental push and increasing global palm oil consumption led to the growth of oil palm plantation Total planted area in Indonesia increased by about 24, hectares per year between 1975 and 212, while that in Malaysia grew by 12, hectares per annum during the same period. Indonesia and Malaysia oil palm plantation, Planted area (LHS) YOY % change (RHS) % 15% 1 8 1% 6 4 5% 2 % Source: MPOB, Directorate General of Estate, Indonesia,

16 Millions But how much longer can this expansion last? Indonesia has about 15 million hectares of land available for new planting, while Malaysia only has about.5 million hectares left Additional land available for new oil palm plantation, Potentially suitable area Plantation Area Sumatra Kalimantan Papua Sulawesi Java P. Malaysia Sabah Sarawak Source: IPOC, MPOB, Directorate General of Estate, Indonesia, Rabobank estimate,

17 Million tonnes Million tonnes Shortage for suitable plantation area in Asia has pushed planters to consider Africa and Latin America Gradual increase in production in Latin America, but slow to pick up in Africa over the past two decades. Challenges in Africa include employee training, developing seed varieties and managing cultures. Brazil has a suitable climate but high cost of labour and sustainability pressures will remain as the largest challenges Latin America s palm oil production /93 22/3 212/13 Africa s palm oil production 2.5 Colombia Ecuador Honduras Brazil Costa Rica Others Nigeria Ivory Coast Cameroon Congo (Kinshasa) Ghana Others Source: USDA, /93 22/3 212/13 17

18 Sustainability issues are important; Expansion growth challenged due to labor, underdeveloped infrastructure & complex social issues VS Production of palm oil to feed the world population Unmanaged cultivation of oil palm leading to ecological and social problems Source: USDA,

19 Tonnes/ha however, improving yields can potentially boost global supply of palm oil Indonesia s oil yield has been increasing at a CAGR of 3.6% between 27 and 212, matching up to that of Malaysia s Best management practices and technical intervention play a crucial role in yield improvements Palm oil yields in Indonesia and Malaysia, Malaysia 2 Indonesia Source: MPOB, Directorate General of Estate, Indonesia,

20 3 Palm oil trade and consumption growth

21 Million tonnes Palm oil consumption continue to rise Global consumption increased by more than three-fold over the past 2 years, with India and China fueling the demand Global consumption of palm oil increased by a CAGR of 7.8% between 1992/93 and 212/13. Global consumption of palm oil, 212/ year CAGR = 7.% India and China, the top two consumers of palm oil, have increased their demand by a CAGR of 31.6% and 11.6% respectively during the same period year CAGR = 8.6% India Indonesia China EU-27 Malaysia 2 Pakistan Thailand Others /93 22/3 212/13 Source: USDA,

22 Palm oil has a wide range of applications drives the consumption growth Food use remains as a key application of palm oil while industrial use has grown at a CAGR of 1% over the past two decades Palm oil used in food grew at a CAGR of 7.3% during the past two decades. About 72% of palm oil consumption is used in food production in 212/13. Food uses Industrial uses Demand for palm oil is increasing as it appeals to manufacturers who seek cheaper and healthier alternative fats. Cooking Oil Savory Snacks Soap & Shampoo Margarines Ice Cream Detergents Energy Generation 22

23 Exports have grown tremendously over the years Palm oil accounts for 63% of total vegetable oil traded in 212/13, a huge jump from a decade ago Export of rapeseed oil has grown the fastest at a CAGR of 15.3% between 22/3 and 212/13, but it only occupies 6% of total market share. Palm oil shows resilient growth, with a CAGR of 7.6% during the same period, making it the top vegetable oil being exported. Vegetable oil trade breakdown, 22/3 Vegetable oil trade breakdown, 212/13 Palm Kernel Oil 4% Rapeseed Oil 3% Coconut Oil 5% Sunflower Oil 6% Olive Oil 1% Soybean Oil 24% Peanut Oil <1% Cottonseed Oil <1% Palm Oil 55% Coconut Oil 3% Palm Kernel Oil 4% Rapeseed Oil 6% Sunflower Oil 9% Soybean Oil 13% Olive Oil 1% Peanut Oil <1% Cottonseed Oil <1% Palm Oil 63% Source: USDA,

24 2/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/21 21/ / /213 Million tonnes..with more than 7% of total production being traded Vegetable oil trade breakdown, 212/13 Share of production traded, 212/ % 8% 7% 6% 5% 4% 3% 2% 1% % Palm Oil Soybean Oil Sunflower oil Rapeseed oil Others Palm Oil Rapeseed Oil Soybean Oil Others Source: USDA,

25 USD (billions) and trade value among top agricultural commodities Palm oil s export value grew at a CAGR of 18% over the past decade, the highest among other agri commodities Trade value of key commodities, 212/13 6 2% 5 16% 4 12% 3 2 8% 1 4% Soybean Wheat Palm Oil Sugar Corn Coffee Cotton % 22/3 212/13 1-year CAGR Source: USDA,

26 Consumption landscape has also changed over the years India has overtaken Indonesia as the top palm oil consuming country, while China grows to become the third largest consumer Consumption share breakdown, 1992/93 Consumption share breakdown, 212/13 India <1% Others 47% Indonesia 15% EU-27 12% China 6% Others 35% India 16% Indonesia 15% Thailand 2% Malaysia 11% Pakistan 8% Thailand 3% Pakistan 4% Malaysia 6% EU-27 1% China 12% Source: USDA,

27 Million tonnes Million tonnes India and China have witnessed tremendous growth in palm oil consumption over the years Palm oil consumption in both India and China are mainly for food use. Palm oil used in food has grown at a CAGR of 31.3% and 9.2% for India and China respectively, between 1992/93 and 212/13. China saw a gradual increase in palm oil consumption for industrial purposes in the late 199s and early 2s. India s palm oil consumption Food Use 4 Industrial Use year CAGR = 7.8% 1 1-year CAGR = 6% 1992/93 22/3 212/13 China s palm oil consumption year CAGR = 6.3% Food Use Industrial Use 1 1-year CAGR = 9.8% 1-year CAGR = 12.3% 1992/93 22/3 212/13 Source: USDA,

28 Million tonnes Million tonnes Likewise, MENA and Sub-Saharan Africa have also shown strong growth Palm oil is heavily used for food in both MENA and Sub-Saharan Africa. Middle East & North Africa (MENA) s palm oil consumption 4 Oil consumption for food in MENA and Sub-Saharan Africa has grown at a CAGR of 5.4% and 5.% respectively. 3 2 Food Use Industrial Use 1 1-year CAGR = 4.3% 1992/93 22/3 212/13 Sub-Saharan Africa s palm oil consumption Food Use Industrial Use 2 1-year CAGR = 5.2% 1 Source: USDA, /93 22/3 212/13 28

29 Million tonnes Million tonnes North America s consumption increased sharply after 2s, while EU has grown gradually North America s palm oil consumption year CAGR = 22% Food Use Industrial Use 1-year CAGR = 7.8% 1992/93 22/3 212/13 EU s palm oil consumption year CAGR = 17.9% Food Use Industrial Use 1 1-year CAGR = 3.% 1992/93 22/3 212/13 Source: USDA,

30 4 Key drivers propelling the growth

31 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 USD/tonne Palm oil is the cheapest among all vegetable oils Indonesia and Malaysia oil palm plantation, Palm Oil (M'sia) Soybean Oil (CBOT) Rapeseed Oil (Rotterdam) 31

32 Tonnes/ha due to biological yield advantage Estimated yield of various oilseed crops Soybean Sesame Sunflower Peanut Rapeseed Coconut Oil Palm Source: Rabobank estimate,

33 Million tonnes Demand continues to rise from emerging economies More than 5% of the imports are in developing Asian economies Selected countries palm oil imports, 212/13 Palm oil imports CAGR (last 5 years) 1 16% /12 212/13 213/14(f) 14% 12% 1% 5 8% % 4% 2% % Source: USDA, Bloomberg, 213 Source: USDA,

34 Million outlets Million outlets Besides home consumption, food services is a major driver of palm oil consumption Emerging markets in Asia drive palm oil consumption with increasing food services outlets Global food services grew at a CAGR of 3.5% between 27 and 212, and is expected to grow at 2.8% in the next 5 years. This growth is highly driven by Asian consumers. Food services (number of outlets) 25 World Asia Pacific 2 Top two players in food services industry 1 China India 9 8 China s food services grew at a CAGR of 7.1% during 27-12, making it the largest player. It is forecast to grow at 4.8% during , leading the global increase Source: Euromonitor, 213 Source: Euromonitor,

35 Million tonnes Million tonnes Noodle consumption also fuels demand for palm oil Likewise, Asia is the largest consumer of noodles among the world Global noodle consumption grew at a CAGR of 3.4% between 27 and 212, and is expected to grow at 3.6% in the next 5 years. This growth is highly driven by Asian consumers. China s noodle consumptions grew at a CAGR of 4.1% during 27-12, making it the largest consuming nation. It is forecast to grow at 3.6% during , leading the global increase. India s consumption increase at a CAGR of 16.5% during 27-12, and expects to grow further at a CAGR of 16% during World noodles consumption 16 World Asia Pacific Consumption in China and India 7 China India Source: Euromonitor, 213 Source: Euromonitor,

36 Million tonnes Million tonnes and snacks & savories among other institutional food usage Booming demand for snacks and savories in China and India Global snacks consumption grew at a CAGR of 2.9% between 27 and 212, and is expected to grow at 3.7% in the next 5 years. This growth is driven by EU. Nonetheless, Asia forms a major driving force. China s snacks consumptions grew at a CAGR of 6.5% during 27-12, making it the largest consuming nation. It is forecast to increase further at a CAGR of 9.% during India s consumption grew at a CAGR of 22% during 27-12, and forecast to grow at 14% during World snack & savories consumption 16 World Asia Pacific Consumption in China and India 3. China India Source: Euromonitor, 213 Source: Euromonitor,

37 5 Myanmar: Palm serving the vegetable oil demand

38 (f) 214(f) 215(f) 216(f) 217(f) Millions Population and economic growth are key drivers for edible oil consumption Outlook is positive as GDP growth is forecast to grow above 6% in the next 5 years to come Myanmar s population has grown at a CAGR of 2% between 2 and 212, and is expected continue increasing at 2% till 217. Myanmar s population (millions) Myanmar s GDP growth rate (%) 8 8 CAGR = 2% 7 7 CAGR = 2% GDP growth rate jumped significantly from 3.6% in 28 to 6.3% in Source: IMF,

39 however the GDP growth has outpaced edible oil consumption Myanmar s GDP > edible oil consumption Growth in GDP and vegetable oil consumption (indexed) GDP growth rate Vegetable oil consumption (f) 214(f) Source: IMF,

40 Thousand tonnes pushing domestic vegetable oil consumption to higher levels Palm oil is the most consumed vegetable oil in Myanmar, occupying 52% of total market share Total consumption of vegetable oils in Myanmar increased at a CAGR of 7.1% between 1992/93 and 212/13. Myanmar s consumption of key vegetable oils, 212/13 1,2 Likewise, palm oil has also grown at a CAGR of 7.1% during the same period. 1, 8 CAGR = 7.1% Cottonseed Oil 6 Sunflower Oil Peanut Oil 4 Palm Oil /93 22/3 212/13 Source: USDA, 213 4

41 Palm oil is gaining market share over the years Palm oil has increased its market share from 46% in 22/3 to 51% in 212/13 Consumption share, 22/3 Consumption share, 212/13 Cottonseed Oil 6% Cottonseed Oil 3% Sunflower Oil 15% Palm Oil 46% Sunflower Oil 2% Palm Oil 51% Peanut Oil 32% Peanut Oil 26% Source: USDA,

42 Thousand tonnes However, palm oil consumption relies solely on imports Key vegetable oil produced in Myanmar are cottonseed oil, sunflower oil and peanut oil Total production of vegetable oil grew by a CAGR of 7.3% over the past two decades. Myanmar s key vegetable oil production, 212/13 6 Peanut oil and sunflower oil form the bulk of the production. Production of vegetable oil is mainly consumed domestically Cottonseed Oil Sunflower Oil Peanut Oil /93 22/3 212/13 Source: USDA,

43 Thousand tonnes due to lack of commercial production the import of palm oil is set to continue increasing going forward Myanmar is likely to import more palm oil as economic conditions improve Import of palm oil has increased at a CAGR of 3.7% between 1992/93 and 22/3, and it surged to a CAGR of 1.6% in the past decade. Myanmar s palm oil imports, 212/ year CAGR = 1.6% 4 1-year CAGR = 3.7% /93 22/3 212/13 What is the domestic production potential?? Source: USDA,

44 6 Conclusion

45 Conclusion Demand for vegetable oil will continue to rise at 2-3% for the next 5-1 years Palm oil will continue to have increasing share of global vegetable oil consumption; 38% of total market share by 22 Palm oil production expansion faces challenges ahead; land & labour availability and yield improvements Asia continues its lead position as top destination of palm oil imports; driven by India and China Positive economic outlook in Myanmar will continue to increase palm oil demand in the next 5 years 45

46 Thank You Rabobank International Singapore Branch & Rep 77 Robinson Road, #8- Singapore Telephone: (65) Rabobank International Pawan Kumar Director Food & Agribusiness Research & Advisory Telephone The financial link in the global food chain 46