OFIC global trade policy and politics panel - initial notes

At MOSTA's OFIC Module 2, we just had a great line-up of speakers and a good panel session.

Photo: Mr Syahril at the rostrum by Khor Yu Leng

Ms Sanya Reid Smith of Third World Network drew our attention to domestic agriculture subsidies remaining in places like the US and EU within the trade agreement contexts, Malaysia's bounded export duty (up to 8.5% on CPO)exemption under TPPA (and RCEP leaked documents showing Japan and South Korea asking for zero), that IP extensions may reduce availability of non-patent agricultural chemicals (that often result in prices being 3x higher), and TPPA's potential impact on procurement by federal government entities and large SOEs, ILO labour standards becoming enforceable, and question whether palm oil milling is a service and therefore subject to liberalisation. The USA certification process for TPPA may add more requirements (beyond the text, with topics as yet unknown), and that many countries wait until the USA proceeds before making changes to domestic laws and regulations. She offered a thorough applied analysis of TPPA on palm oil that has not featured in previous public for a.

Dr Joe Feyertag of LMC International Ltd explained a profound shift in grain and vegetable oil production post 2002 with large production and acreage growth amidst the biofuels boom, rapid meat consumption transitions, oil palm expansion less than a quarter of maize and soy acreage expansion, the 2010s being the end of the biofuels decade and rise of the protein decade, future growth scenarios showing a hypothetical moratorium on palm oil volume resulting in even larger increase in soy acreage likely in the Amazon Basin, a look at US biodiesel market volume, potential volume return from Argentina and Indonesia and EU biofuels policy news of no more public support for food-based feedstocks from 2020. He concluded that environmental aspirations need to take a more nuanced consideration of how demand drives expansion across the vegetable oil complex (palm, soy, rape/canola and sun), and for GMO products.

Mr James Caffyn of Gira Strategy Consultants provided major insights into vegetable oils usage in the dairy sector - specifically analog cheese, fat-filled milk powders, growing-up milk and infant formula - with great data on dairy-veg oils price arbitrage of over 4.5x, market size and growth, vegetable oil inclusion ratios and palm oil tonnage indicators (over 1.5 million tonnes in FFMP and GUM-infant formula). What came strongly across for palm oil was the fast growth potential of this segment (especially in Asia), its technical proficiency, compelling price arbitrage, market perception, regulatory concerns and food safety.

Mr Syahril Syazli Ghazali of Ministry of International Trade and Industry (MITI) of Malaysia offered wonderful insights into TPPA, as Lead Negotiator for the Market Access Chapter. 20% of Malaysia palm products go to TPPA countries and a focus was on Canada and Mexico on duty removals, Malaysia's ability to carve out export duties (bounded basis), and the need to comply to international standards will be a cost to Malaysia industry and government but it is the way forward.

In our panel discussion, we fielded a question on EFSA's 3MCPDE issue - the greater volume concern would arise if it also affects China dairy sector demand. As for biodiesel prospects, these are quite limited to Southeast Asia. Moreover sludge oil has been removed from double-counting and is unlikely to come back soon. From the floor, we heard from MR Chandran on the problem of definitions of by-products versus waste products, and that freedom of association for labour will be an issue especially since 30-35% of production cost is labour (Sanya mentioned PWC's report finding that one week stoppage could impact 2% of revenue). On my question about a pathway for palm to USA biofuels (beyond a handful of grandfathered facilities), Joe said that GHG emissions reductions is an official problem and Syahril clarified that USA biofuels access negotiation was tried but remains on the table without a solution via TPPA. To MR Chandran's added question on USA (California) market potential (this being a growth market versus EU not being seen as having much potential), I highlighted the change in the US Customs Border and Protection (CBP) rule against forced-labour imports in force since March 2016 and that it has already disrupted cargoes of tea and sweeteners; and  it is notable that California leads in lawsuits on child labour allegedly in the cocoa supply-chain of large brand name companies. Sanya notes that the US CBP rule reinforces TPPA requirements and that complaints can be made against products and producers.

In conclusion, we covered the development and prospects for important fast-growing end-uses for vegetable oils and focussed on issues for Malaysia palm oil. Palm oil has a complex processing chain and a big range of applications. It has tremendous technical proficiency and price advantage in food uses, but if needs policy support in biofuel applications. Success in market share penetration is mediated by trade policy and new breed trade agreements (require upgrade to international standards in production and more). This affects relative price-cost and some non-price/non-tariff issues may also affect price-cost.

RSPO RT13: Reader feedback on HCS+ HCSA and RSPO convergence and more. RSPO Next "commensurate effort" and floor price efforts are no-go? Link for presentation downloads. Members terminated / suspended. EU’s Product Environmental Footprint (PEF) initiative.

RSPO Roundtable annual meeting was held in KL over three days, 17-19 November 2015 (well, there was also a reception on 16th evening).

 

24 Nov 2015: Reader feedback on HCS+ HCSA and RSPO convergence and more

Editor: Thank you for various reader feedback on several topics. One segment immediately below and incorporated into text further down.

Reader feedback on issue of HCS+ and convergence with HCSA and RSPO: By the way, HCS+ is proposing the Palm Oil Welfare Index (POWI). Is this required when growers are asked to do comprehensive SEIA /SIA / FPIC before any new development? Or is it the same data to be re-packaged under POWI? Some highly regarded new planting developments use the “simplified template for PalmGHG”. If growers feel the results from the simplified palmGHG is the answer to new development, then we can just forget about HCSA and HCS+?

 

Please also refer to other Reader feedback below in the relevant sections below:

• A subtle shift with NGO support to push buying / take-up of certificates....
• Lots of talk of smallholders.
• Floor price?

23 Nov 2015: RSPO Next "commensurate effort" and floor price efforts are no-go? Link for presentation downloads. Members terminated / suspended. EU’s Product Environmental Footprint (PEF) initiative.

 

Editor: Have heard from RSPO observers that RSPO Next "commensurate effort" and floor price efforts are delayed and may end up no-go. Also note that EU’s Product Environmental Footprint (PEF) initiative: Fratini Vergano report

http://khorreports-palmoil.blogspot.my/2015/11/eus-product-environmental-footprint.html

 

You can look at RSPO RT13 presentations here: http://rt13.rspo.org/c/rt13-presentations/

 

 

Other highlights from RSPO website:

 

• Progress on RSPO NEXT, smallholders, auditing standards and Jurisdictional Approach at the RSPO 13th Annual Roundtable and 12th Annual General Assembly, News, 20 November 2015 http://www.rspo.org/news-and-events/news/progress-on-rspo-next-smallholders-auditing-standards-and-jurisdictional-approach-at-the-rspo-13th-annual-roundtable-and-12th-annual-general-assembly
•  Termination and Suspension of RSPO Membership Announcements, 17 November 2015 http://www.rspo.org/news-and-events/announcements/termination-and-suspension-of-rspo-memberships
•  RSPO Next: Taking the Principles & Criteria to the next level, News, 28 August 2015 http://www.rspo.org/news-and-events/news/rspo-next-taking-the-principles-and-criteria-to-the-next-level
•  National commitments http://www.rspo.org/certification/national-commitments

 

 

Day 2 & 3: Market uptake problem, RSPO Next calls for "commensurate effort" but can quasi-matching get through legal compliance? Quality of audits. Floor price. Smallholders focus. Jurisdiction approach. Sec-Gen wrap up. A tame GA13? (updated 20 Nov morning to add what's new and data at top)

Below are abridged notes on selected talks and panel sessions at RSPO RT13. They are not comprehensive!

Editor's notes on what specialists say is new at RSPO RT13, includes:

• A subtle shift with NGO support to push buying / take-up of certificates already in production and for RSPO Next to have take-up commitments. The acceptance of the idea of "commensurate effort" is novel. And something that CGM and Retailer sector would find new in the 13 years plus of RSPO. [Reader feedback: The first RSPO certificates were only available from year 2008 onwards, United Plantations was the 1st company in the world to receive the cert].
• Call for comprehensive smallholder plan more or less acknowledges that trickle-down from corporate sector centric policies has been dissatisfactory. Will this find jurisdiction approach as sufficient? Audience was lackluster when asked on jurisdiction approach helping smallholders.
• RSPO alignment-convergence with other (higher) voluntary pledges mooted and some details suggested. But do other NGOs really want to converge? Market share tussles have been quite apparent. If policy innovation effort is any indicator (but data indicators this year not good, see below) the question is: Is RSPO gaining back its mojo? This is helped by buyers and producers readjusting and realigning after the big changes triggered by the trader-processors sub-sector to pull to non-certification traceability.

Editor's notes for the data minded:

 

• In LMC reports (http://www.lmc.co.uk/Oilseeds_Oils_and_Oleochemicals; including presentation at MPOB PIPOC on cost of certification compliance driving the push toward non-certification traceability), this year's RSPO market share of global palm oil seen by some specialists as stuck at about 20pct. It has been increasing at 2pct-age points per year in recent years. So the slowdown this year raises many questions. Editor: This data point might explain the innovative moves on jurisdiction approaches to attract new membership volume, including for smallholders.
• RSPO panelist notes the need for a lot of buying in the last 6 weeks of the year. There are many CGM and Retailer buyer pledges set for end 2015!
• GreenPalm experts point out the drop in PKO certificates price and volumes. They reckon that the push up of PKO certificates to $80 plus has diminished demand volume. Worth checking this out.

source: www.greenpalm.org

 

Day 2. Opening ceremony for RSPO RT13.

Zainal Abidin rendered two hit songs. Hijau - Zainal Abidin  https://www.youtube.com/watch?v=BnoYNt-f2UE

Biswirajan Sen of Unilever, RSPO head. Talked of Haze Crisis pointing to need for sustainable palm oil not avoiding palm oil. Focus on jurisdiction approach to simplify admin (ed: and cost?) and include smallholders and government. RSPO Next voluntary add (ed: help get back mind and market share?). Coalition of capable and willing with inclusiveness

Bakke of Sime Darby. Sustainable Palm Oil Manifesto spent RM12 million on HCS and socio-economic development studies. To varying degrees, there are commitments to sustainable development. RSPO has reached 20pct of global production and Sime Darby has reached 99pct. But only half is sold as certified product. He calls on buyers not to wait, but to buy. Calls on working on the rest of agriculture (palm oil as a small land use footprint). Step away from propaganda, and work openly and honestly. Small farmer are important. Developing countries lack the funds to subsidise. Developed countries don't have much natural forest left. We need equitable development. Sime Darby initiatives: a) A new platform - Open Palm - traces high proportion of FFB, CPO, PKO to mill and estate and b) To assist small farmers, look and act beyond boundaries for fire safe zone up to 5km.

 

Oil palm versus primary forest. University of York study for RSPO. Reporting oil palm at half of biodiversity and quarter of carbon versus primary forest. Fragments need to be over 10,000 ha to recover.

Quality of audits. Answering strong questions on credibility of RSPO audits. A panelist suggestion to break link the between company that hires the auditor by allocating the auditor at random. No other concrete answer. Resolution for GA later on this issue. RSPO says it will fix the situation.

Link: Dodgy auditors undermine palm oil group’s ‘sustainability’ claims 16 November, 2015 https://eia-international.org/dodgy-auditors-undermine-palm-oil-groups-sustainability-claims


RSPO Next. Some worries about its take up rate and cannibalise demand for regular CSPO but RSPO reps strongly assure audience this will not happen! Look also at "free and fair labour" and "commensurate effort."  

Jurisdiction approach.

• Sabah says it has to be competitive and needs to attract investors including for POIC project. Why would buyers focus on Sabah product. If palm oil market collapses, Sabah can still sell if it goes branded. Sabah confirms that its goal for 100pct CSPO is entirely RSPO.
• Seruyan in Central Kalimantan. Its Bupati/Regent worries that deforestation has not benefited locals peoples. Sees palm and other commodity certification has the only way to help smallholders. Fears for loss of market access. Not sure yet which brand to adopt.
• South Sumatra. It's Governor reports 200,000 smallholders for oil palm. It will work with assistance from IDH in a program that covers palm oil and other commodities.
• RSPO explains that the jurisdictional approach is to reduce transaction cost for smallholders. Save on HCV assessment, HCS and SEIA by doing all this at landscape level as shared cost with government and NGOs. This will also remove need for HCV set-asides and allow land swaps. With such scale, individual smallholder transaction cost can fall. Question was asked to audience if the jurisdictional approach will help smallholders. Response perhaps less than half certain?

 Including smallholders.

• Lots of talk of smallholders. A panel leader asked if there is a need for "RSPO Light" for smallholders as there has been a lot of talk of smallholders but few of them. [Reader feedback: Instead of making the requirements easier for smallholders, it was tightened further. They are certified under Group Certification. The first draft review was rejected by stakeholders (mainly grower) and the RSPO WG came up with the 2nd draft - still not yet approved. The requirement for smallholders is not much easier or simpler compared to what a large company has to do. There has not been much voice or bargaining from the smallholders all this while, in spite of having a seat. I am sure strong representation can do this more justice].
• Editor: past promotion of smallholders has centered on talk of increased yield including startling big claims e.g. 50pct yield increase.
• This time a RM150,000 study done by UPM on Keresa and Sapi mills taking into consideration tree age and other key factors. Editor: But questions remain on key issues: i) on cost of certification - not asked, ii) no clear presentation of before-after time periods for the changed outcomes, iii) with "to be certified" status included, perhaps not an unsurprising to see some focus on perceptions instead of hard data (more of the latter better?), and iv) clarification on who paid for what - did palm oil mills pay for smallholder groupings and extension services or was it MPOB?
• From question from the floor on funding of reports, ISEAL panelist noted their efforts to encourage studies without directly paying for it. Panelist also raised question of RSPO transparently looking at possible negative outcomes of its programmes. Editor: Indeed, on the side-lines an NGO complained to me that one presenter was too concise about sources of funding: "That study was actually mostly paid for by xxxxx! Why wasn't that mentioned?" But I do think that if you do need a specific study, you may need to fund it - but that does means that the study has to be more rigorous than ever!

Floor price? Ceres asked about floor price on certificates set at smallholder costing. MPOA notes that asking smallholder to make a "leap of faith" to achieve only a 20-50c premium is a problem! There needs to be buy in from smallholders i.e. there need to be solid financial benefits. Committee is being set up to look at the floor price question. Editor: Some very senior agriculture specialists worry that a floor price would become the traded price and would end up distorting the economics of certification. [Reader feedback: For many years the RSPO ex-president (Jan Kees Vis of Unilever) has made it clear that there should be no discussion on premiums for CSPO etc. This is apparently against competition rules. I thought premiums are based on willing buyer,willing seller basis?]

  

RSPO Sec-Gen's wrap-up comments. Includes:

• "Beli yang baik" consumer campaign in Indonesia.
  
• Singapore's "Axe the Haze" consumer campaign. He notes that buying RSPO products is one part of the solution, but that alone cannot save the haze problem.
• Markets. CFNA participation about China market and looking to sustainable guidelines for China investments overseas. UK collaboration via Infit (fact check needed). Editor: Attendees point out that China and UK say they will commit to RSPO and other credible programmes. Link: RSPO statement on UK progress report News, 18 November 2015 http://www.rspo.org/news-and-events/news/rspo-statement-on-uk-progress-report
• EU has goal for 100pct sustainable. Latest national alliance (to drive uptake) is for Italy.
• Remediation and HCV Compensation Procedure policy has been endorsed by the Executive Board. This was 4 years in the making. (Editor: Specialists note that NGOs were surprised by relatively low level of compensation funds generated by the RSPO companies. but this policy is regarded as being a limiting factor in new grower membership sign-ups).
• Those not submitting ACOP reports will be taken to task. 15 members have been terminated and 20 suspended with due process. Action taken last year too.
• RSPO members need to band together to mitigate the haze. RSPO will convene the best on this. Certified areas are safe haven from rampant fires. How to help outside concessions? Concession map disclosure is important (Editor: legal position is that information may be voluntarily released by the company in Indonesia and many countries but Malaysia map release legality not checked yet?). Look and act beyond boundaries. In 6 months, to come out with something concrete on this.

 

RSPO GA13. Includes financial report. RSPO update on its smallholder fund - noting slow disbursement trend. Proposal from Oxfam, something long needed - a comprehensive smallholder focus (voted for strongly at 186). Code of conduct resolutions to strengthen action on members not promoting palm oil. Committee set up to look at floor price. Editor: Broadly, no major contentious resolutions as some in audience says RSPO issues are in maturity (and specialists also say some contentious issues were taken off!).

Post GA ruminations. Editor: RSPO Next expected to generate some legal compliance worries resulting in time out for possible reconsideration of committed ratios / volumes matching approach.

  

........................

 

Editor's notes for Day 1.

 

Editor's notes and items noted by industry: a) "Free and fair labour" concept which includes living wage and industry note on problems of casual labour, b) apparent dial-back on RSPO HCV Compensation which has been challenging RSPO membership growth - specialists note simplifications of the matrix into two columns (instead of three which previously differentiated members with certified units and members without) and provision for certificates even after a tough Compensation status (not entirely surprised given the halt in production capacity market share growth at 19-20% this year and uncertainty driven by HCV Compensation?), c) Convergence talked of for HCS methodologies of RSPO GHG Calculator, HCS+ of Sustainable Palm Oil Manifesto, and Greenpeace's HCS Approach (which does notes it is different in protecting young regrowth trees), d) Marketing efforts in China and India - RSPO promoters continue to ask for tariff differential to favour CSPO in India, e) Side-lines chatter about the relative silence on the Haze crisis, f) intriguing to see how mills market themselves for traceable-to-mill GreenPalm certificates, g) oleochemicals wondering about traceable oleo amidst frank views by L'Oreal that its buyers only really care about safety and animal testing issues, h) Lots of talk of including smallholders and government, both of which lacked clear focus for quite a while but now to receive more attention and i) the related shift to jurisdictional marketing (sub national units eg. South Sumatra with IDH and Sabah with RSPO?).

 

 

I am attending RSPO RT13. First talk attended on social and labour issues. Prevalence of casual plantation workers, lack of independent unions, need for living wage, problem of forced labour and female workers issues discussed.

 

HCS+ study sets 75tC/ha hard threshold within carbon neutral approach and seeks more benefits to smallholders and fairer model. Looking to converge with Greenpeace's HCS Approach.

 

 

 

Greenpeace HCS Approach for landuse planning. Reports Asian Agri and BASF to join. Not just palm oil but also for pulp and paper, rubber and soya. Geographic expansion to Africa and Lat Am.

 

At RSPO RT13 talk on FFB supply chain issues. Talk by WWF Indonesia.

 

Traceable Greenpalm certificates coming January 2016!

 

On attendance, organizers report 800 plus. Still strong despite switch from Bangkok venue plan. Expert observers reckon on 1/3 new faces including lots of apparent non Asia origin young executives and many NGOs new to palm oil scene.

At PIPOC 2015 in Kuala Lumpur

Editor's note: We're at PIPOC 6-8 October 2015. Will put up news link and a few shots and notes.

Link to conference website: http://pipoc.mpob.gov.my/index.php

Malaysia looks to maintain palm oil stocks at 2m tonnes: Unggah  6 October 2015 @ 12:46 PM;  KUALA LUMPUR: Malaysia hopes to maintain palm oil stocks at about two million tonnes from the 2.49 million tonnes recorded as at end-Sept by implementing replanting incentives and minimising imports. Minister of Plantation Industries and Commodities Datuk Amar Douglas Uggah Embas said the replanting incentives, to be implemented on Oct 1, aims to reduce by 83,000 hectares, the area planed with oil palm and drop production by 250,000 tonnes. “We will also minimise palm oil exports until our stocks reach about two million tonnes. This is a temporary measure and we do not have a timeline for the target. http://www.nst.com.my/news/2015/10/malaysia-looks-maintain-palm-oil-stocks-2m-tonnes-unggah

Notes and photos

Minister Uggah Embas talks of implementation target for MSPO by 2020 and harmonisation with Indonesia policy.

Minister Uggah Embas says TPPA will benefit Malaysia palm oil via better access to USA, Canada and other member markets.
Plenary lecture by Carl Bek Nielsen of need to embrace sustainability for sake of the industry. Poor people deserve a right to palm oil development that offers a middle class opportunity. Need to stop the polarising debate and uninformed rhetoric. Cost of inaction now raises cost of action in future. Support RSPO, MSPO, ISPO....

Plenary talk by Dr James Fry of LMC

Information on MSPO

At Bursa Price Outlook Conference / POC in KL

News links:

Palm oil prices set for a "year of two halves", biodiesel demand eyed - Reuters Thursday, 5 March 2015; The bullish short-term outlook drove up palm futures to an almost eight-month top of 2,400 ringgit ($659) per tonne on Wednesday, but prices gave up gains to end at 2,365 ringgit on the long-term bearish view.... Vegetable oils analyst Dorab Mistry sees palm rising to 2,500 ringgit by May, but dropping to as much as 2,100 ringgit by December as output rises.... "This is going to be a year of two halves. Demand will outstrip supply in the first six months and gradually supply will increase in the second half," said Mistry, who heads the vegetable oil trading arm at India's Godrej Industries.
Thomas Mielke, editor of Hamburg-based newsletter Oil World, also sees "bullish supply fundamentals". He expects 2014/15 global palm oil output to grow, but by 1.5 million tonnes - the smallest rise in 13 years.... Mielke, however, said the industry must stop looking at mineral oil prices as an indicator for the edible oil market.... James Fry, chairman of LMC International Ltd, expects palm prices to average 2,260 ringgit in the first half on low demand from biofuel producers, who accounted for millions of tonnes of consumption per year for most of the past decade. Prices may drop to more than six-year lows of 1,770 ringgit if biodiesel demand does not pick up, he said. "India is the one that is most interesting," Fry told Reuters on the sidelines of the conference. "India can swing - and India does swing as prices change."... http://www.thestar.com.my/Business/Business-News/2015/03/05/Palm-oil-prices-set-for-a-year-of-two-halves/?style=biz

Energy Rout Resuming Seen by Coleman Weighing on Palm Oil Prices http://www.bloomberg.com/news/articles/2015-03-04/energy-rout-resuming-seen-by-coleman-weighing-on-palm-oil-prices

Palm Seen Rising to May by Mistry in ‘Year of Two Halves’ http://www.bloomberg.com/news/articles/2015-03-04/palm-seen-rallying-through-may-by-mistry-in-year-of-two-halves-

Palm Crop Optimists Seen by Mistry Overlooking Harvest Risk http://www.bloomberg.com/news/articles/2015-03-02/palm-oil-production-the-story-in-15-as-mistry-sees-crop-risk

Biodiesel prog in Malaysia and Indonesia key to CPO price stability Intan Farhana Zainul, The Star/ANN, Kuala Lumpur | Business | Wed, March 04 2015, 12:40 PM; The continuous implementation of the biodiesel programme in Malaysia and Indonesia would be the key to ensure price stability of crude palm oil (CPO) prices for this year.United Plantations chief executive director Carl Bek-Nielsen said he expected CPO prices to trade between 2,150 ringgit (US$593) and 2,450 ringgit per tonne this year if Indonesia was able to execute its biodiesel programme well.“If it’s not going very well, I estimate the average CPO price would be between 2,000 ringgit and 2,200 ringgit per tonne,” he said during the roundtable session at the Palm and Lauric Oils Conference and Exhibition Price Outlook 2015/2016 (POC 2015) yesterday....Bek-Nielsen said bio-fuel accounted about 44 per cent of annual growth in demand for the 17 oils and fats from 2013 to 2014. “Indonesia will hold the key where the price will go. Having said that, it is still early part of the year. We have to keep an eye on the one factor and the biggest joker of them all, namely the weather,” he added.According to plantation industries and commodities minister Amar Douglas Uggah Embas, the full implementation of the B10 biodiesel programme in Malaysia will see domestic annual consumption of palm oil, reaching 1.2 million tonnes..... http://www.thejakartapost.com/news/2015/03/04/kuala-lumpur-biodiesel-prog-msia-and-indonesia-key-cpo-price-stability.html#sthash.v2i8rAYp.dpuf

Attended MPOC forum (update 1a)

It was very useful to attend the MPOC forum yesterday. Thank you MPOC.

 

Useful highlights include:

 

- Biodiesel call for B20 and view on this implementation by both Malaysia and Indonesia could rebase palm oil price to over RM3,000 per tonne. Assertions on financial viability of biodiesel on its own under Euro 5 standard without subsidy. But on the no subsidy viability point we have heard other views from analysts and others.   

          *Post conference info: Ambank in its 16 February note says "Reuters reported that Malaysian biodiesel producers are seeking new incentives after their Indonesian peers were given subsidies. A source said that Malaysian biodiesel producers are looking for tax incentives. The source added that it is unlikely that Malaysian producers would be receiving the type of subsidies given in Indonesia as Malaysia is moving away from that. Presently, the pricing formula of biodiesel in Malaysia is linked to CPO price." Thus, analysts note the CPO+ price basis has been advantageous to Malaysia biodiesel and added support is sought (which is a contrast to the statements in the paragraph above?)

 

- Labour permits for G2G Bangladesh worker recruitment proceeding (and to look into improvements in the process) but the Ministry observes some slowness in companies finding and bringing in workers once given the permit.

 

- Update on 3 new refinery licenses granted for 1.6 million tonnes of capacity.

 

- Info cited of a real quote on smallholder RSPO certification costing from a service provider. About RM400,000 per site per year; for a site comprising 50 smallholders of 50 hectares each. We did ask, but the name of service provider is not disclosed at this point. We know a handful are active in this sector. The conclusion is that the current premia indicate break-even for such a smallholder (assumes 100 percent of certificates sold under mass balance); which means no incentive to certify unless with the financial support of a large company. Bottom line: companies with processing assets can garner more from RSPO certification; the premia gains are out of reach of smallholders.

 

You can download the presentations from here: http://www.mpoc.org.my/Reach_and_Remind_Friends_of_the_Industry_Seminar_2015_and_Dialogue_-_Download_Presentation.aspx

Conference season (update 6): downstream merchandising for sustainable palm oil

6 December 2014: downstream merchandising issues for sustainable palm oil

On Wednesday morning I had a long 1 hour session to present on "Downstream merchandising of palm oil - adjusting for sustainability" with a Q&A after. Thanks to Trueventus for inviting LMC International. 

I presented on various key statistics for downstream example the oddity of number of trademarks on sustainable palm oil versus number of products being launched with the troubling "palm oil free" label. 

One palm oil merchandiser (some months ago) pointed out to me that certification to use a trademark to highlight the presence of palm oil is not what many manufacturers want to do. They would rather remain silent on the issue. This may explain the above factoid. Because of this apparent shyness, the logic is that a (presumably cheaper) traceability program that is more inclusive of the supply chain is a good alternative as it may be that the need is for a sort of insurance on the supply chain and not marketing publicity. Let's see how the marketing on sustainability / traceability evolves on this.

Downstream players also need to pay attention to their upstream sourcing strategies as traceability both within and outside certification points to a palm oil mill risk rating system.

29 November 2014: checking out Indonesia snack foods and sauces (post GAPKI)

Post conference, I hit the super market next to the conference venue and stocked up on Indonesia snack foods (instant noodles with a wonderful range of local regional tastes; flavoured chips / crisps from tapioca - spicy ones with lime / lime leaves especially caught the eye e.g. keripik singkong balado dengan daun jeruk) and ready mix sauces for Indonesia favourites like soto ayam, sop buntut, opor ayam and more. Indonesia domestic consumption of palm oil is very big, given the country's large population. However, I agree with a friend that the supermarket aisles in Thailand may have an even larger range of domestic processed and ready foods.

Shopping basket of Indonesia processed snacks and sauces

.

29 November 2014: Day 2 at GAPKI conference, Bandung

Day 2, I was the first presentation of the day at the morning session in the technology grouping. However, while sustainability may be a technical and/or CSR issue, I focused on the commercial and strategic business issues relating to it.

At technology session

Price outlook speech

This website was pointed out to be for Indonesia palm oil information: http://www.sawit-center.com


28 November 2014: At GAPKI conference, Bandung

Day 1 was busy with meetings. President Jokowi unable to attend after all. It's a huge crowd here. Good to see industry friends and meet more.

 

I was here two years ago (venue was Bali), speaking on sustainability and I'm speaking on the same topic early this morning, with some nice data courtesy of work at LMC International. It's a big crowd here and its one of the must-go events of the palm oil calendar (with the highest production values and effort).

At GAPKI's Bandung conference this afternoon, Dr James Fry of LMC International (yes, where I work) will be talking about the energy sector prices in relation to palm oil prices. Energy sector cost of production indicators will also be referred to. That will be worth checking out.
Oil price news (update 5): OPEC keeps production up and oil prices drop, http://khorreports-palmoil.blogspot.com/2014/10/oil-price-news-its-fallen-from-105-110.html

at the GAPKI gala dinner

at the GAPKI opening on Day 1

View of Bandung

 

  

26 November 2014: Post RSPO RT 12 and ICIS Asian Surfactants

These were two useful events. Papers not freely downloadable though.

Our summary of RSPO RT12 here:
http://khorreports-palmoil.blogspot.com/2014/11/rspo-roundtable-rt12-2014-is-around.html and also search "RT12" in this site.


12 November 2014: MPOC POTS KL 2014 download link

Palm Oil Trade Fair and Seminar (POTS) Kuala Lumpur 2014 - Download Presentation

http://mpoc.org.my/Palm_Oil_Trade_Fair_and_Seminar_(POTS)_Kuala_Lumpur_2014_-_Download_Presentation.aspx


5 November 2014: At OFIC KL 2014 conference.

MOSTA is the key organiser.  OFI Congress Programme - organised by MOSTA; http://www.ofievents.com/asia/ofic. Awaiting downloadable presentation.

 

This is AOCS speaker on consumer attitudes and a nice infographic on GMO.

 

Research highlights by MOSTA for OFIC KL 2014

Tan Sri Augustine Ong of MOSTA highlights the following new research featured at OFIC KL 2014:

• Palm oil mill with zero effluent. Think of palm oil fruit as pulp processing.
• Obesity and the impact chain length and fatty acid position on health outcomes which places palm oil in good status akin to olive oil.
• Genome guided breeding.
• A Melbourne expert presents on mega sonics in palm oil milling.
• Biodiesel substitute, B100. A two year field trial with engine dissection shows better state than petrodiesel use.

Sunny Verghese of Olam on structural trends

No slides during his talk but slide deck will be given later. Olam has stopped powerpoints for the last two years to improve communications. Previously, analysts will know Sunny Varghese was famed for big powerpoints.

 

He's now talking about FAO food index, previoys price declines and inflection to price rise in last decade plus. China inflation largely due to food prices. He expects higher food prices to stay with us.

Demand drivers. Population: 9 billion plus people by 2050 and many most populous countries will be in Africa. Per capita income: rising faster than in past on larger populations, notably China and India doubling in 12 and 16 years. Income and middle class size as low/mid/high income consume 2600/3000/3600 calories respectively.

 

Another game changer is urbanisation. Urbanites consume 2.5X dairy, 3.5X meat than rural. West consumes over 130kg per capita and it's not just culture as HK and Taiwan consume over 100kg meat.

 

Supply is "shot in foot" by biofuels. FAO blames 2008 price crisis in most part to misguided policy on biofuels. Plus there's loss of farm land over time. Supply affected by declining productivity growth that has halved more recently and is now below population growth. Expansion car usage means there's set aside 0.74 ha for each new China car and take away farm land.

 

Water tables are receding in large zones. Olam is the world's largest corporate farmer and knows that wells now cost $0.5 million, going to depth. Wars might come about over food and water if it can happen over oil. 1300 liters of water for a big breakfast. One calorie needs one liter if water. 55 liters for personal need and 1-2 liter for drinking. China imports water by importing soybeans.

Climate change. Evidence is there from extreme weather events.

 

We need lot more investment on agricultural research. So much spent on defense but hard to find sufficient spend on food. Also to reduce 40 percent wastage. 

 

Can companies create value without destroying the environment. Nature does not issue invoices. Olam buys 2 billion bees a year for its almonds estates for $80 million.

 

Can we have inclusive growth? 400 people have more money than 4 billion. Such massive inequality usually addressed by revolution. Politicians are not working on this.

 

Indonesia palm oil: 2025 outlook from PT SMART

Pak Daud of PT Smart speaks at OFIC KL 2014. This is the 166th year of palm oil in Indonesia.
 

2025 Indonesia palm oil consumption expected to be about half for food and oleo and half for biodiesel (under the 2014 energy decree). Mielke notes that this suggests no increase in Indonesia palm oil exports which will not serve global consumer needs. 

What is the 2015 biodiesel implementation expectation versus 2014 (10-20 percent transport-power under target)? With lifting of subsidy there can be extra funds for cash subsidy to the poor. The fossil fuel and palm oil price will be better balanced to improve prospects. Improved logistics is also needed and a policy priority.

Pak Daud expects new areas 350,000 ha per year expansion in 2015, falling to 150,000 ha by 2025. 

One land map is a challenge. Spatial mapping should be done by Ministry of Public Works. Forestry has its map for it's 110 million hectare area. This map should be done a day this will clarify land that can be cultivated and for other uses. This should be finalised in 2015.

Foreign ownership limit will be delegated and set by government regulation which is not known yet.