Strong EU Craving for Palm Oil

THE European Union (EU) has always been a major importer of palm oil.

Even before Malaysia hit the big time in the palm oil business, the EU

had already been importing substantial quantities from Western African

countries, the home of the oil palm.

Those days, much of the

EU’s palm oil purchases came from Nigeria and Cameroon. The real

motivation behind the EU’s everlasting love affair with palm oil had a

lot to do with the oil’s versatile nature.

In the EU, even to this day, palm oil is almost indispensable in the manufacture of both food and non-food items.

In the food applications, palm oil is a much sought after ingredient

for making margarine, shortening and specialty fats. While in the

non-food area, palm oil has always been the preferred raw material for

soap and detergent manufacture.

This explains why the import of palm oil into the EU has always been among the highest in the world.

Lately, it has been consistently in third place, behind China and

India, the other two big palm oil lovers! According to the Oil World, a

Hamburg-based analyst, palm oil demand in the EU for the oil marketing

year to September 2010 is to rise by 4.4 per cent to 5.7 million tonnes.

The EU’s craving for palm oil is quite widespread. It is not merely

confined to the public at large. Consumers in the EU adore palm

oil-based margarine, for example, because it is much more nutritious and

tastier.

Recent revelations about the unhealthy nature of trans fats have further enhanced the popularity of palm oil-based margarine.

Margarines made from palm oil do not have trans fats. Trans fats are

more associated with margarines made from partially hardened soft oils,

including soya oil, rapeseed oil and even sunflower oil.

This is

also the reason why compared to the US, the incidence of heart-related

ailments in the EU is lower. Most of the margarine consumed in the US

are loaded with trans fats!

The craving for palm oil is also

evident among the business and investor communities in the EU. This is

because palm oil is the most economic edible oil the world will ever

see.

Palm oil’s runaway yield compared to the other oils is the

main reason why it is attractive to businesses. It is therefore no

wonder that over the years, the EU has reaped much profit from the

global trade in palm oil.

The bustling port of Rotterdam, for

example, is a clear evidence of the EU profiting the palm oil’s

expanding logistic business. And despite a number of attempts to derail

palm oil from the top spot in the export trade, experts predict the EU’s

addiction to palm oil will continue well into the future.

A

recent attempt by some environmental NGOs to make it difficult for palm

oil biodiesel to enter the EU market will eventually end in palm oil’s

favour. This is because palm oil biodiesel is not only the most economic

biofuel for the EU, but it is also the one which demonstrates the

highest reduction in the greenhouse gas (GHG) emission.

Contrary

to the claim made under the EU’s Renewable Energy Directive, experts

have calculated that GHG reduction in the case of palm biodiesel is much

higher than that reported for rapeseed biodiesel.

At a recent

forum hosted by the Malaysian Palm Oil Council, a trade expert from the

EU has suggested that the palm oil industry has a case for the WTO. But

the most revealing fact which supports the contention that the EU will

soon come to their senses is the recent data on a jump in palm oil

import into the EU.

It has been reported recently that the EU

will have to increase its import of palm oil despite a vigorous campaign

by green groups against it, after a drought that shrivelled oilseed

crops across the Black Sea region.

In fact, palm oil futures on

the Bursa Malaysia Derivatives Exchange has climbed to a 15-month high.

And the market is set for further gains as EU consumers scurry for

supplies to satisfy demand from the food and fuel sectors.

It is bullish time for palm oil prices in the coming months.

A commodities analyst at Rabobank in London was quoted as saying that

Europe’s rapeseed crop was lower than expected and Ukraine is going to

have a very limited supply available for exports. He added that with the

restrained rapeseed oil supplies, palm oil will come handy as a

substitute.

It is expected that the EU’s rapeseed crop will fall by 7.8 per cent to 19.9 million tonnes this year compared to a year ago.

Ukraine’s sunflower crop on the other hand may drop 2.7 per cent to 7.1 million tonnes.

In addition, excessive rains are likely to cut canola production in Canada.

This will consequently reduce exports by nearly 20 per cent to six million tonnes.

Many believe EU buyers may have to push their grossly unsubstantiated

environmental issues linked to palm oil on the back burner as they

struggle with lower domestic supplies.

It would be disastrous

for the EU if they cannot have access to sufficient palm oil to offset

their supply deficiency. This can well happen if palm oil exporters from

Malaysia and Indonesia decide one fine day to just ignore the EU.

That should teach them a lesson never to bully palm oil with all kinds of discriminating non-tariff barriers.

The writer is a fellow with Academy of Sciences Malaysia

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