6th GOFF a Runaway Success

6th GOFF A Runaway Success
And The American Palm Oil Industry Must Pay More Attention

VERY fruitful. That will best describe the 6th Global Oils and Fats Forum held in the United States on October 5 and 6, this time in the historic city of New Orleans, a major US port and the largest city in the State of Louisiana.

The 6th GOFF attracted many great speakers, with sessions chaired by equally eminent people in the Malaysian Palm Oil Industry. Check out these presentations under the 6th GOFF site in at www.mpoc.org.my. You will surely be impressed.

The two-day session at the JW Marriott Hotel saw the presentation of 19 working papers, followed by lively discussions amongst the 150 highly enthused participants.

Malaysian Palm Oil Council’s Chief Executive Officer Tan Sri Datuk Dr Yusof Basiron in his paper stresses Malaysia’s commitment not only to food security but also sustainability.

He points out that oil palm cultivation is planet friendly as it is grown on legitimate agricultural land. In Malaysia, permanent forests form 56% of total land devoted to wildlife habitat and biodiversity conservation. Oil palm cultivation therefore does not cause deforestation or loss of wildlife and habitat and further, responsible agricultural and land management policies that minimise the generation of wastes and pollutants are practised.

Oil palm is a suitable crop for tropical developing countries and for Malaysia, it is a major revenue earner, with palm oil accounting for 10% of total export earnings, besides eradicating poverty among the rural poor.

Further, Tan Sri Dr Yusof points out, palm oil biofuel is “green” biofuel, with the LCA GHG emission savings definitely exceeding the 35% threshold value of the EU Directive.

Thomas Mielke of Hamburg, Germany-based Oil World in his presentation argues that low world stocks will raise dependence on South American soybean and palm oils.

While dry weather linked to the El Niño in May to September 2009 may slow the output of oil palm, the consequent lower growth in rapeseed and sunflower oils will also raise greater dependence on palm and soybean oils.

Mielke also points out that oil palm is a far more sustainable crop. It takes up 6% of the global area under oilseeds, but produces 38% of the world vegetable oil output. Palm oil yields per hectare are much higher than soybean and rapeseed oils. In Malaysia, the yield is 4.5 tonnes per hectare while in Indonesia, it is 3.8 tonnes per hectare of palm oil. However, for soybean oil, it is 0.53 tonne per hectare in the United States and 0.51 tonne per hectare in Brazil, while for rapeseed oil, it is 1.3 tonnes per hectare in much of the European Union and 1.6 tonnes per hectare in Germany.

James Fry of London-based LMC International says vegetable oil prices as a whole, and most agricultural commodity prices in general, have today become linked to energy markets by biofuel demand.

In recent months price relativities between oils and fats have been responding to new realities. Vegetable and crude oil prices have been linked for the past three years and when vegetable oil prices rise too high, biodiesel (and therefore vegetable oil) use is reduced very quickly.

The biodiesel industry seems to be learning more about the substitutability of different oils in biodiesel manufacture. In the US, biodiesel demand is not synonymous with soybean oil use, just as it is in the EU, where processors do not confine themselves to rapeseed oil.

Substitution in biodiesel, food, feed and oleochemical applications plays a major role in ensuring that the prices of different oils and fats are linked to one another. For this reason, non-tariff barriers, like those proposed in the EU against palm oil in biodiesel use, act mainly as an irritant, since palm oil substitutes for other oils in food and other uses. In the same context, Fry adds, it is ironic that biodiesel use has helped the EU to by-pass the efforts to keep out genetically modified (GM) oils.

Within the spectrum of prices, not everything has behaved quite the way one might have expected and if one did no more than look at the relativities between soybean oil and other oil prices, one would never guess that soybean supplies are tight.

Another puzzle is that in the US, which is importing increasing amounts of palm oil, its prices remain stubbornly US$40 to US$50 above those in the EU. The EU policy of not blocking GM oils has allowed the import of soybean and canola oils, with the prices reflecting this.

The policy change that Fry believes would do most to disrupt the new-found link between mineral and vegetable oil prices would be if countries round the world opted for strict mandates on biofuel use, rather than policies that retain a price incentive.

However, many governments feel it is not good policy to allow food prices to be driven up excessively high just to meet an arbitrary biodiesel mandate.

Nevertheless, he adds, a price band has been established linking vegetable and mineral oil prices. Instead of stocks acting as the main driver of prices, the Brent crude price band is now the major influence.

And, would you have guessed that just 8 edible oils made up 80% of the global production of 17 oils and fats last year? Or that the amount of palm oil, including crude and palm kernel oil, produced during this period was 30%?

Go further into the presentation by Dato’ Sabri Ahmad, Chairman of the Malaysian Palm Oil Board (MPOB), for details. And among them, the compulsory labelling of trans fats in the United States and plans for increased usage of biofuel.

Dato’ Sabri points out that MPOB’s Code of Practice for the entire oil palm supply chain that ensure consistent quality, food safety and compliance with international standards as well as PORAM’s Standard Trading Specification for processed palm oil have contributed to palm oil’s wider use by the US food industry and greater acceptance as a replacement for trans fat.

Another “must read” paper is that by Andrew Bunger of Fuji Vegetable Oil Inc, who touches on the trans fat-in-food scare in the US. He says food outlets are doing away with trans fats through various means.

Moves like extra processing adds to the cost and he suggests that raw materials are readily available: one of the best, easy solutions to replacing trans fats in frying applications is simply to switch to high oleic oils such as palm oil.

Bunger also points out that in 2006, New York City was one of the first large US metropolitan areas to ban trans fat in restaurants. The ban took full effect in July 2008.

Also, a citizens petition has been submitted to the US Food and Drugs Administration that wants all partially hydrogenated vegetable oils to be banned from use in food in the US.

More for the health-conscious: Brandeis University’s Professor of Biology (Nutrition) Dr K.C. Hayes advises that balancing one’s your fat and protein intake will keep the body weight stable.

Laboratory tests done on mice, he says, show that adipose increases as protein decreases. But there is danger in high fat or high protein intake, as this may promote insulin resistance, Hayes cautions. A warning on diabetes?

Those in the industry may also want to pay special attention to the presentation by the Roundtable on Sustainable Palm Oil (RSPO), titled Promoting the Growth and Use of Sustainable Palm Oil. Demand is going to exceed supply!

Also, check out the US Biodiesel Industry Outlook by J. Alan Weber of National Biodiesel Board which is the coordinating body for research and development for the industry in the US.

To learn more, go to the 6th GOFF site at www.apoc.com and the MPOC website at www.mpoc.org.my.

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