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FBA Issue 23: November / December 2008
 
WOOC 2008: Price swings & a tense relationship with the energy sector
 
by Arianne PEREZ
 
 
Reclaiming palm oil supplies from the biofuel sector and recent commodity market turbulence highlighted this year's World Oils & Oilseeds Convention (WOOC 2008).
 
Omar Merican, chief operating officer of Bursa Malaysia, which operates the world's largest crude palm oil futures market, underscored the unstoppable emergence of palm oil as the world's most traded oil at around 60 million tonnes yearly. The two iconic producers of palm oil today are Indonesia and Malaysia, with Asia being the biggest producer and consumer of palm oil, he added. Currently, at least four oilseeds conferences are happening around Asia – in Singapore, Malaysia, Indonesia and India.
 
James Fry, chairman of LMC International, also shared insights on the expanding use of biofuels. Fry looked on how instituting a 5-percent blend of biofuels in transport fuel by 2020 would affect the area of land in cultivation for the main food, feed and biofuel crops. He concluded that given today's biofuel raw material mix, there would not be enough arable land in the world to allow for such a measure while ensuring adequate supplies of food and feed.
 
He said that "if nationalism prevails and biofuel policy favours local crops (rapeseed oil and wheat in the EU or soy oil and corn in the US, for biodiesel and ethanol), with biofuel raw materials shared pro rata among all major food crops, it is quite conceivable that the world would have to find another 100 million hectares of arable land (an increase of around 15 percent) to meet its food and fuel demands."
 
He pointed out that the biofuel solution that makes the least overall demand upon land use would be to concentrate upon crops with the highest biofuel yields per hectare, namely palm oil for biodiesel and sugarcane for ethanol. He also added that the only way out of this dilemma is stop making biofuel usage levels mandated by law and to let the market itself decide.
 
Other key topics discussed during the first day of the conference are the "Changing market trends in the oils and fats sector" and "Certified sustainable edible oils and fats."
 
On sustainability of edible oils and fats, speaker M R Chandran, advisor of Roundtable on Sustainable Palm Oil (RSPO) Board, said that responses from planters and farmers indicate that it is possible to meet the burgeoning oils and fats needs of a growing population. However, he did emphasise that this was an ambitious goal that is very much contingent upon a considerable improvement in agricultural productivity.
 
Furthermore, Chandran explained that inefficiencies and waste also need to be reduced in other parts of the agri-food chain. For instance, losses due to pre and post-harvest pests average around 35-50 percent of the crop in poor countries.
 
A significant amount of currently cultivated land is producing far below the optimal level. This is especially true in highly-populated developing countries, where land degradation, water stress, lack of infrastructure and limited access to modern agricultural technologies and techniques prevent farmers from improving their yields.
 
Other equally prominent issues discussed at the conference included "Price risk management and managing procurement and selling strategies during volatile times" by Thomas Lee Bauer, Head of Food & Agribusiness Strategic Advisory & Research for  of Rabobank in Southeast Asia and "Vegetable oil complex - an analysis of the fundamentals" by Dorab Mistry of Godrej International Limited, "Rising costs of shipping Tropical Oils" by Charles Barton of Drewry Shipping Consultant and "Oil market outlook: Critical developments that will impact the oils and oilseeds industry" by Jeffrey Brown of FACTS Global Energy (FGE) Singapore.
 
The overall theme was that while a recent commodity market crash has given oils and oil seeds a rather hard clubbing, there remains plenty of pent up demand left, along with raft of issues left unresolved in oil seed's tense, ongoing relationship with the energy industry.

 
The above are excerpts, full versions are only available in FEED Business Asia. For subscriptions enquiries, e-mail membership@efeedlink.com
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