Expert sees consumption surging with supply still tight
JAYA: The growing world dependence on palm oil amid the severe tight
supply situation will limit the price of the commodity from falling
below RM2,000 per tonne experienced in late 2008, according to an
international commodity expert.
Hamburg-based ISTA Mielke GmbH executive director Thomas Mielke
expects the current world palm oil consumption from 38 million tonnes
to surge to 63 million tonnes in 2015 and increase further to 77 million
tonnes in 2020.
This would also translate into an annual average
growth rate of 3.1 million tonnes, which would be contributed by the
world’s largest producers Indonesia and Malaysia, he said.
Yesterday, the benchmark April CPO futures contract closed RM41 higher at RM3,931 per tonne, the highest level since March 2008.
palm oil will likely face a moderate downward price pressure by April
on slightly improved production but the decline may be cushioned by
continued bullishness in other major vegetable oils like soybean,
rapeseed and sunflower.
“Oil World (a publication of ISTA)
since 1958 had never seen such a severe supply-and-demand situation in
terms of lower production and depleting stocks in most world major
agriculture crops, vegetable oils and grains currently,” Mielke said at
the on-going Pointers on Price Trends Internet seminar organised by the Malaysian Palm Oil Council (MPOC).
January, prices of palm oil, other vegetable oils, oilseeds, grains and
several other agricultural products had approached or partly exceeded
the record highs registered in 2008. The annual growth rates of world
consumption of vegetable oils have virtually doubled since the late
In fact, producers worldwide have been struggling to raise
supplies sufficiently to cover demand. Thus, there is an urgent need to
expand plantings of the individual oilseeds, grains, cotton and sugar to
sufficiently raise production and allow for some recovery in depleted
The dynamics for oil palm planting expansion in Malaysia
and Indonesia had slowed down partly due to strong pressure by the NGOs.
In Indonesia, the slowdown in planting in 2009 and 2010 had jeopardised
production while severe labour shortage in Malaysia also pushed the
country’s oil extraction rate lower in 2010, Mielke said, adding: “In
the coming years, Malaysia and Indonesia will need to increase their
replanting activities while adhering to the consuming countries’
requirements on sustainability.”
Oil World in its latest forecast expects world palm oil production to increase by 3.2 million tonnes to 3.4 million tonnes this year.
the supply situation will not likely recover in 2013 onwards should the
existing production and depleting stocks not be replenished to meet the
surging demand from China, India and other developing economies,” said
In Europe, he said, biofuel industries had reduced consumption of vegetables oils because of their record-high prices.
“This will see total European consumption of oils and fats for biofuels declining this year for the first time ever,” he added.
Meanwhile, MPOC chief executive officer Tan Sri Dr Yusof Basiron in summarising the Outlook for 2011 Challenges and Opportunities for Palm Oil said
the shortage in supply among others was due to the increasing world
population leading to higher demand and consumption, lack of agriculture
land due to competition among other grains and higher cost of crude oil
leading to higher production cost of vegetable oils.
increasing demand for vegetable oils, especially in China, India, Europe
and the United States for food and non-food items will trigger the
growth in consumption,” he said.
In addition, the plan by Europe and the United States for biofuel development will lead to demand increases.
with its biofuels mandate is likely to see the need to increase its
consumption by close to 500,000 tonnes while the United States, with its
recent extension of biofuels tax credit, should see an increase in
demand by 300,000 tonnes.