Thailand Cooking Oil Shortage: Imported RBD palm oil to be sold in market next week

28/01/2011 (Mcot), Bangkok - Thirty-thousand tonnes of RBD refined palm oil (refined, bleached and deodorised) which the government ordered earlier were imported from Malaysia to be sold in the Thai market next week, according to the director-general of the Internal Trade Department.

Director General Watcharee Vimuktayon said the RBD palm oil arrived in Thailand and will all enter the country by Jan 31. Thai producers have taken the palm oil to the refinery, and resale is expected at retail stores and department stores next week.

According to Ms Watcharee, the imported palm oil are to be packaged in bottles and one litre plastic bags.

The bottled imported palm oil of all brands will have blue lid covers but the price will still be at no more than Bt47 per unit.

The palm oil in plastic bags will be sold at no more than Bt45, while there will also be the tag of a manufacturing date in blue.

Commerce Ministry will closely monitor on this merchandise in term of production process, transportation of goods and retailing.

In addition, the ministry will propose on Feb 1 to the Palm Oil Policy Committee, chaired by Deputy Prime Minister Suthep Thaugsuban, at least 100,000 more tonnes of palm oil will be imported to compensate for the palm oil shortage in the country.

The latest arrival of the imported RDB palm oil is expected at the beginning of March.

Thailand Food

Global Prices of Palm Oil Soar on Speculated Shortage

Palm oil gained to a record high in more than 33 months on a speculated supply shortage of cooking oils.

The prices jumped after the heavy rains in Indonesia and Malaysia damaged the crops there, which are the leading producers of palm oil.

March-delivery futures advanced 1.7 percent to 3,852 ringgit ($1,257) a metric ton on the Malaysia Derivatives Exchange, the highest closing level since March 6, 2008. Prices surged 42 percent in 2010, a second straight year of gains.

Palm oil futures have advanced 68 percent in the past six months amid concern that the supply of cooking oils may tighten as dry weather in Argentina hurt the crop in the top soybean-oil producer and rains affected oil-palm harvests in Indonesia and Malaysia.

Vegetable oil reserves are forecast to touch a seven- year low at the end of this season, according to the Economic Research Service of the U.S. Department of Agriculture, Bloomberg reports.

Production of palm oil in Malaysia declined to a five months low in November, stocks also reduced to a four months low.

La Nina in Argentina has also affected the soybean production of the country, it is supposed that the soybean production may even come down by 17 percent to 43 million tons.

Meanwhile US had a record output of the crop this season, but the hungry China is increasing its demand day by day.

China imported 5.3 million tons of soybeans in December last year; shipments for January and February are forecast at 5 million tons and 3.5 million tons. China imports 60 percent of soybean to their country.

March-delivery soybeans, which climbed 33.8 percent last year, fell as much as 0.8 percent to $13.9225 a bushel on the Chicago Board of Trade. Soybean oil for delivery in the same month dropped as much as 0.6 percent to 58.01 cents a pound and traded at 58.48 cents at 3:33 p.m. in Mumbai. The vegetable oil’s premium over palm oil narrowed to $33.40 a ton from $49.5 a ton on Dec. 31, according to Bloomberg data.

Vegetable Oil Market

 

Redefining sustainability of palm oil

Edi Suhardi | Fri, 12/03/2010 

 

Sustainability of palm oil production, philosophically speaking, is striking a balance between the three bottom-line factors of economic prosperity, environmental quality and social justice. Such a broad concept has been interpreted in different ways by different parties to serve various interests and agenda.

Sustainability standards and parameters have been the subject of heated debates and adversity among concerned stakeholders, particularly the palm oil industry versus the NGOs.

There is a growing awareness among concerned stakeholders of the need to work together and reach a consensus to share a common set of values and standards in equal partnership.

The palm oil industry and its many actors, including smallholders, company growers, industry consumers and NGOs, is also one of the first industries to undergo the transformation from an adverse relationship into a partnership. This resulted in the Roundtable on Sustainable Palm Oil (RSPO), which many hailed as the forum where many actors with diverse interests got together as equal partners.

However, after some short years of experimentation, the relationship has been tainted by some blind spots from some actors that are preventing the industry from advancing in partnership.

Crane and Matten (2004) have predicted this as a result of the difficulties of managing relations between culturally diverse organizations, especially if they are from developed and developing worlds, and also ensuring consistency and commitment.

One could easily assert that when NGOs and businesses sit at the same table, the businesses will exert more power than NGOs, in terms of resources, political influence, capital, etc. However, we tend to overlook the power of NGOs in terms of their expertise in communicating with the public, exerting its credibility and public sentiments toward business.

The complexity of a multi-stakeholder nature augmented with diverse, sometimes contradictory interests along with suspicion over the power imbalance are seen as the main stumbling blocks toward achieving a more productive result from this mutual partnership. Taking those challenges into account, is there any way for regulating palm oil actors to achieve sustainability?

Crane and Matten identified at least three options: government as regulator, self-regulation by business and regulation involving business, governmental actors and CSOs. The third option is now considered the viable one.

They cited the Netherlands case on how the “covenant” approach was developed. It is a specific and unique approach to a national environmental regulation, by involving business, government, and other stakeholders in the specification, implementation and monitoring of the covenant. The covenant approach focuses on bringing relevant stakeholders together to find consensus on acceptable processes and outcomes.

The government of Indonesia is currently considering establishing a covenant unique to Indonesia, called Indonesia Sustainable Palm Oil (ISPO) to advance sustainable palm oil production in Indonesia. The primary focus of ISPO is to ensure legal compliance as the baseline of sustainability standards.

Elkington mentioned that a covenant usually creates a wider base of support from within the industry. The same goals would not be achieved through legislation, which in many cases, is time-consuming and not necessarily very effective.

The process will entail certification and standardization of palm oil production, in which the palm oil industry is bound to meet the agreed standards. By building the criteria on consensus among all concerned stakeholders in a transparent, fair, accountable and equitable manner, we can expect the palm oil industry to shape a sustainable future.

Certification and standardization of palm oil is one of key factors in shaping the sustainability. Another driving force to sustainability is market demand and public opinion toward sustainable palm oil.

For the past year, there has been some negative campaign targeted at the Indonesian palm oil industry, which hurt the goodwill of the industry to sit together to shape a common future. This is exactly how power imbalance takes place.

Many have tended to assume that among these three dimensions, economic and environmental concerns are the most important aspects of palm oil cultivation, and have largely ignored the third one, social justice.

Michael Porter and der Linde, noted that we need to forge strong links between environmental protection, resource productivity, innovation, and competitiveness. They stated that environmental constraints drive innovation and, as a result, eco-efficiency.

Porter and der Linde stated that the fixed trade-off: Ecology vs economy was a thing of the past. Today and tomorrow, eco-efficiency is one aspect of sustainability. Eco-efficiency in palm oil cultivation is striking a balance between economy and ecology within the sustainability framework of our agricultural operations.

A palm oil estate in general has far higher productivity, 6-10 times more, than any other oil vegetable crop in terms of efficiency in land use and productivity. This is what Porter described it as eco-efficiency.

Furthermore, palm oil cultivation promotes social development in otherwise abandoned and marginalized areas. Palm oil plantations play a critical role in the advancement of social development, including poverty alleviation, food security, employment creation, human rights observance, community development toward improvement in the quality of life, distribution of wealth, and providing an alternative source of energy (biofuel).

John Elkington noted that eco-efficiency is a necessary condition for fully sustainable development, but it is not sufficient. Genuine sustainability also means that we seriously look at social justice.

Social justice is often overlooked in the discourses on sustainability of palm oil among stakeholders. There are two conflicting mainstreams of environmental consciousness brought by market and civil society against the economic profitability of business.

The socio-economic benefits of palm oil plantations must be taken into account and treated with equal importance as financial profitability and environmental conservation in the development of standards and building public opinion.

The sustainable future of palm oil is to be shaped by placing the social dimension of palm oil cultivation on a par with economic prosperity and environmental quality. Only when the three dimensions of sustainability are proportionately accounted for and treated equally, then common and generally accepted terms and a definition of sustainable palm oil plantations can be achieved.

Edi Suhardi is Head of CSR, PT Agro Harapan Lestari

Indonesia Plantation

 

Palming Palm Oil Profits

14/12/2010 (Money Show) - A London-listed operator of plantations in Papua New Guinea looks cheap given the soaring prices of its main product, writes Peter Shearlock in The IRS Report.

Next time you fill up a supermarket cart, check how many items contain palm oil. If your shopping includes soap, detergents, bread, pizzas, and other processed foods, you will probably see palm oil listed among the ingredients. Where only “vegetable oils” are listed, chances are that palm oil is among them.

The growth of demand for palm oil over the past decade has been dramatic. In part, that’s because of its newfound use as a feedstock for biodiesel. But it is the food industry worldwide that accounts for the lion's share of the near-50 million tons of the stuff currently being produced.

La Nina Pumps up Prices

According to the publication Oil World, global demand for eight key vegetable oils will exceed supply this year for the first time in eight years. A La Nina climate event has resulted in excessive rain in Indonesia and Malaysia, which produce 90% of the world palm oil crop. Estimates for production of soybean oil—a competitor to palm oil—have also been cut.

Given this backdrop, it is not surprising that the price of crude palm oil recently pushed back over the $1,100-per-ton mark. That compares with a pre-crisis high of close on $1,400 per ton in 2007 and a low of $435 in 2008.

While the shares of the world's leading palm oil producers have all performed strongly this year, one still stands out as offering real value: New Britain Palm Oil (London: NBPO). After a big acquisition earlier this year that expanded its plantations by about a half, it now has more than 75,000 hectares, or 185,000-plus acres, of plantations, largely in West New Britain, which is part of Papua New Guinea (PNG).

The Grower with the Greenest Thumb

NBPO is a high-quality producer in every sense. First, it is among the most efficient. The yield on plantations that have been within the company's ownership for any length of time is an industry-leading 28.4 tons per hectare. That compares with returns of less than 20 tons per hectare for the two most recent acquisitions. NBPO is also expected to become one of the most efficient upstream producers in the industry.

All told, NBPO is set to generate the highest earnings growth of any of the leading palm oil producers over the next few years. One reason is the company's position as the largest producer of certified sustainable, segregated and traceable, palm oil in the world. NBPO is reaping dividends from its investment in sustainable production.

In the first nine months of this year, NBPO lifted production by 22% and revenue and profits before tax by 49% and 42% respectively. The company has been making forward sales of palm oil at prices ranging between $820 and $863 a ton but is likely to achieve significantly more for the bulk of its 2011 output. It also produces a small amount of sugar, whose price has been generally strong in the past year.

Hidden Value on the Books

Despite this good news, NBPO has been trading at a discount to most of the big Malaysian producers. Macquarie recently lifted its price target to 933 pence, which compares with a current share price of 835p. Liberum Capital, NBPO's other broker, forecasts a rise in earnings from around 37p this year to 46p next and 52.5p in 2012. That puts the shares on a 2011 price/earnings ratio of 18.

However, the figures assume an average palm oil price of just $820 a ton next year. And NBPO shares are better value than these numbers would suggest.

The last accounts show net worth of around £330m, but taking the price per hectare paid for the last acquisition puts a value of well over £400m on the company's plantation land alone.

At the time of its latest acquisition, which was financed with around £130m of borrowings, the company said it was to suspend dividends for a year. They will recommence in the second half of next year. NBPO has about £170m of debt, which is easily manageable.

Clearly, much depends on the future price of palm oil. Demand from China and India, two of the biggest markets for palm oil, shows no sign of slackening. Western food producers are using more and more vegetable oils, palm oil included, and are being pressed to show that those oils are responsibly sourced.

The recent price action looks soundly based, while NBPO's credentials as a “green” producer leave it ideally positioned at the fastest-growing end of the market.

Vegetable Oil