March 22, 2004
Malaysia To Increase US Soybean Import In 2003/04
Malaysia's intake of U.S. soybean is expected to increase by 18% to 240,000 metric tons in 2003/04, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site, dated March 16 and released Friday.
A sharp drop in domestic demand for soybean meal due a weakening of the poultry and pig production during the Severe Acute Respiratory Syndrome period resulted in a 25% plunge in soybean imports to 544,000 MT and a 14% drop in soymeal imports in 2002/03. The U.S. replaced Argentina as the top soybean supplier with a 37% share of the Malaysian soybean import market while the latter remained the top source of soymeal in Malaysia, the release said.
Against the concern over the current avian influenza outbreak in the region and the current surge in feed-prices and sea freights, Post expects soybean and soymeal imports to rebound by 10% to 600,000 MT and 11% to 495,000 MT respectively in 2003/04. The prospect of U.S. soybean exports to Malaysia is bright with Malaysia's intake expected to increase by 18% to 240,000 MT.
Malaysia continues to lead the world as the largest producer and exporter of palm and palm kernel oil. Domestic crude palm oil production surged by 11% to 13.2 million metric tons in 2002/03. An increase in palm kernel crushing led to a 12.7% increase in the production of palm kernel oil. With additional area due for harvesting, Post forecasts CPO production at 13.7 MMT and PKO output at 1.7 MMT in 2003/04.
With an expected exportable surplus of over 12.2 MMT of palm oil and 700 TMT of palm kernel oil in 2003/04, Malaysia will remain a formidable competitor in the world vegetable oil market. Demand from China, India, Pakistan and the Netherlands will likely continue to be strong in 2003/04.
Total area under coconut cultivation has dropped steadily over the years and the outlook for copra output is on a slow downtrend in the near term. Domestic coconut oil output amounted to 36,000 MT in CY2003 mainly for the export market. Coconut oil accounts for only about one percent of total domestic oil consumption. Malaysia imported 135,000 MT of crude oil from Indonesia and the Philippines in CY2003. Exports of refined coconut oil reached about 166,000 MT with major markets being Sri Lanka, China and Singapore.
With expected expansion in soy crush in the near future, domestic soyoil output is expected to increase to 77,000 MT in 2003/04. Soybean oil consumption accounts for less than 4% of total food-use consumption of oil in Malaysia. Malaysia's soybean oil exports are expected to trend upwards in the next two years, mainly to Singapore, Hong Kong, China and South Korea.
In response to increasing overseas demand and rising fishmeal prices, the local fishmeal production is expected to show some increases in the near future. In normal years, Malaysian exporters diverted much of their fishmeal output to overseas markets. Exports amounted to 43,000 MT in CY2003, mainly to Vietnam, Indonesia, China and Thailand.
Exchange Rate: Malaysian Ringgit (RM) has been pegged at 3.799 to US1.00 since Sept, 1998.
TOTAL OILSEEDS
Soybean
Production
There is no commercial cultivation of soybeans in Malaysia.
Imports
A sharp drop in domestic demand for soybean meal resulted in a 25% plunge in soybean imports to 544,000 MT in 2002/03. The Severe Acute Respiratory Syndrome crisis in 2003 had a negative impact on the poultry and pig industry due to fewer travelers to the country. Although imports from the U.S. dropped by 24%, the U.S. managed to replace Argentina as the top soybean supplier with a 37% share of the Malaysian soybean import market. Canada continued to dominate the food-grade soybean market.
The current avian influenza outbreak in the region has affected consumer confidence and poultry consumption within Malaysia has fallen by around 30% temporarily. Although Malaysia is still declared free from AI, poultry farmers are reducing poultry production in order to avoid an oversupply situation.
According to an industrial analysis, the impact should be short-lived since the consumers' concern is fading away, the release said. Livestock farmers are also concerned that the current surge in feed-prices and sea freights are eroding their profit margins. At this point, Post expects domestic soy imports to rebound 10% to 600,000 MT in 2003/04. The prospect of U.S. soybean exports to Malaysia is bright with Malaysia's intake expected to increase by 18% to 240,000 MT.
Trade Policy & Market Access
Currently U.S. soybeans and meals have complete access into the Malaysian market. All import tariffs have been removed for many years. In addition, Malaysian has sound infrastructure (such as ports, rail and road networks and storage facilities), encouraging the bean trade flow from the United States to Malaysia. The GOM has no objection to the usage of GSM facilities although the Central Bank limits the tenure of a loan to one year in order to minimize the country's exposure to foreign loans.
GMO/Biotech Safety Issue: To date, the only GM ag product officially approved to be imported into Malaysia is soybeans. Local soy product exporters also need to conform to EU's GMO requirement when they export processed soy- related food such as soy sauce, canned tuna in soy oil and soy milk to the EU.
At the conclusion of the of the first meeting of the Parties of the Cartagena Protocol on Biosafety in Kuala Lumpur, February 23-29, 2004, documentation accompanying all bulk shipments of GM crops intended for food, feed or processing is required to be identified as 'may contain LMOs' and should indicate the contact details of the importer, exporter or other appropriate authority.
A group of experts will meet over the next year to further elaborate the documentation and handling requirements for bulk agricultural shipments. Key issues to be resolved include the percentage of GM materials the shipment may contain and still be considered GMO-free and the inclusion of any additional detailed information. A decision is to be considered at the next meeting in 2005.
As for the Malaysian biotech regulations, the Cabinet has approved the Biosafety Bill. This legislation has been in the drafting stages for more than four years and has been the subject of extensive interagency meetings within the Malaysian Government. Due to the Malaysian Secrecy Act, the details of these bills and the internal debates are not publicly available. The Bill is to be tabled when the Parliament next convene after the next General Election to be held on March 21, 2004. The Ministry of Health (MOH) is responsible for food safety in Malaysia.
While MOH has been supportive of U.S. efforts to block European initiatives on biotechnology traceability and precaution within the on-going multinational Codex Alimentarius discussions on biotechnology and food, Malaysian officials intend to implement labeling requirements for biotechnology-derived foods. U.S. has commented on MOH's WTO Notification on the subject. The final amendment is not available for public viewing. The new regulations are supposed to be implemented as soon as the Biosafety Act is in place. There is no regulation governing the use of "GMO-free" or "non-GMO" labels.
Consumption
Post expects soy food consumption to increase at around 5% per annum, the release said. Consumption is forecast to rise to 124,000 MT in 2003/04 and 130,000 MT in 2004/05.
Food-grade soybeans are used in the manufacture of soy-based products such as tofu, soy milk, and soy sauce. Most of the food beans are brought in via containers primarily from Canada, the U.S. and China.
Factors Affecting U.S. Trade
Currently, the main concern is the effect of the avian influenza outbreak in the region on consumer confidence and poultry consumption. Although Malaysia is still declared free from AI, poultry farmers are reducing poultry production in order to avoid an oversupply situation. Livestock farmers are also concerned over the effect of the current surge in feed-prices and sea freights on their profit margins.
Severe Competition: Argentine bean and meal - and lately, Chinese soy meal to a lesser extent - have made major inroads into the Malaysian market in the recent years. Price is still a major factor in the buying process.
The addition of new facilities at Westport in Port Klang will further enhance the position of the U.S. as the principal supplier of soybeans. Private storage facilities and crushing mills are being planned or constructed near the Panamax berths at Westport. These facilities will provide a first stop for Panamax vessels. When these ships are partly unloaded at the deep- water berth at Westport, they will then be able to go on to shallower ports to service older existing crushing mills.
Market Development Opportunities
A significant increase in soymeal consumption in Malaysia will largely depend on a robust pig industry. As an aftermath of the ravage caused by the outbreak of the Nipah virus (Japanese Encephalitis) in 1999, the farmers and governmental officials have to develop a modern, integrated pig farm system. There are opportunities to link resources in the U.S. to assist in the following areas:
a. The use of good-quality US swine breeds/semen;
b. Improvement of nutrition for swine; and
c. Transfer of technical knowledge on swine management, swine housing, waste treatment and slaughter plants.
The National Swine Registry (NSR) conducted technical seminars in three locations in East Malaysia in early March. Officials in Sarawak showed seriousness in developing a modern, integrated pig farm system. Further, education on breeds should be coupled with education on sound nutrition, to help preserve breed integrity and promote U.S. feeds. Educational cum buying missions to the U.S. should also be considered in face of growing competition from the European counterparts.
With the GOM's intention to make Malaysia the leading 'halal' food manufacturing center in the world, ASA has ample opportunities to promote the production of soy food, especially in the areas of health, organic and snack food (such as soy ice-cream). Post's commercial section has interest in promoting machinery/equipment in the same sector and should able to provide leads to potential investors.
Palm Kernel
Malaysia is the world's leading producer of palm kernel. Palm kernel output rose 8.3% to 3.6 MMT in MY2002/03. In line with the expected increase in CPO output, the outlook for 2003/04 is for an increase in kernel production. A small increase in production is expected in 2004/05 due to an expansion of fruit- bearing area.
There are no exports of palm kernel as all domestic output is crushed locally.
Copra
Total area under coconut cultivation has dropped steadily over the years. Harvested area is only for copra delivered to crushers and not for food-use. This explains the big gap between planted and harvested area. Most of the copra was consumed as food leaving a smaller amount for the crushing sector. The outlook for copra output is on a slow downtrend in the near term.
In CY2003, Malaysian imported about 15 TMT of copra, mainly from Indonesia and Thailand. Exports were insignificant. With better economic returns available from oil palm and a lack of interest by the GOM to support or encourage coconut production, the long-term viability of this industry is in doubt. Future production will likely be limited to the cultivation of coconut to meet only domestic requirements for food-use.
TOTAL OILMEALS
Soybean Meal
Production and Imports
A sharp drop in domestic demand for soybean meal resulted in a big drop in both locally produced as well as imported soybean meal in 2002/03. The SARS crisis in 2003 had a negative impact on the poultry and pig industry due to fewer travelers to the country. Argentina was the top soybean meal supplier to Malaysia in 2002/03, accounting for over 80% of the Malaysian meal import market.
Post expects domestic soymeal imports to rebound by 11% to 495,000 MT in 2003/04. It would have been higher if not for the current avian influenza (AI) outbreak in the region and livestock farmers' concern over the current surge in feed- prices and sea freights.
Except for some dehulled soymeal, it is unlikely that the local traders would purchase U.S. meal during this current marketing year.
Consumption
The Malaysian pig sector is expected to perform better than the poultry sector in the current year (2003/2004) as the AI "crisis" in the region is not affecting pig production. Farmers are still interested to import breeding pigs. Ex-farm prices pigs are attractive and Post expects domestic soybean meal consumption to increase by 10% to 11% in 2003/04.
Palm Kernel Meal
In line with the increase in palm kernel output, palm kernel meal production increased to 1.9 MMT in 2002/03. Essentially a by-product of the palm oil industry, it is used primarily in cattle feed. With a very small domestic beef and dairy cattle sector, only minimal quantities are consumed locally. In 2002/03, 1.8 MMT of PKM were exported with the bulk going to the Netherlands, Germany, Australia and South Korea. The ban on the use of meat and bone meal in various countries has opened many more overseas markets for Malaysian PKM exports.
Copra Meal
In line with an increase in crushing activities, Malaysian copra meal output rose to 25,000 MT in CY2003. The future copra meal production over the near term will largely depend on copra imports. The domestic feed industry consumes most of the local meal output.
Malaysia exported only 3,000 MT of copra meal, mainly to Taiwan in CY2003.
Fishmeal
In response to increasing overseas demand and rising fishmeal prices, the local fishmeal production is expected to increase to 62,000 MT in CY2004. Imports are expected to be in a decline due to over-fishing. In normal years, Malaysian exporters diverted much of their fishmeal output to overseas markets. Exports amounted to 43 TMT in CY2003, mainly to Japan, Vietnam, the Philippines, Indonesia and Bangladesh.
TOTAL OILS
Palm Oil
Malaysia continues to lead the world in the production of palm and palm kernel oils and is the largest exporter of vegetable oils (mainly palm oil). Malaysia met about 15.5% of the global consumption of vegetable oils in 2002/03. Domestic crude palm oil production surged by 11% to 13.2 MMT in 2002/03. Yields rebound as the palms recovered from the biological stress experienced in 2001/02.
Yields are expected to decline due to a cyclical downturn in 2003/04. However, with an addition of 63,000 hectares of palms reaching fruit-bearing stage, Post forecasts CPO production to increase to 13.7 MMT in 2003/04. As for 2004/05, Post expects that the decline in yield to continue albeit at a slower rate. Despite the addition of 122,000 hectares reaching fruit-bearing stage, output is expected to increase marginally to 13.8 MMT.
Fruit-bearing area is expected to expand to 3.5 million hectares in 2003/04, while fully matured hectare equivalent (MHE) should reach 2.05 million hectares. CPO yield per MHE is expected to decline to from 6.79 tons per hectare in 2002/03 to 6.7 tons in 2003/04. As for 2004/05, we expect a further drop in yield/MHE, bringing CPO output to 13.8 MMT. The increase would mainly be the result of an increase in fruit-bearing palms.
In 2002/03, domestic food use amounted to only 460,000 MT or about 3.5% of total CPO production. Cooking oil accounted for 80% while margarine/shortening took the remaining 20% of the edible palm oil market. Palm oil fractions dominated the local edible oil market. Malaysia consumed a small amount of other oils, namely palm kernel oil (about 9% market share), soybean (4%), sunflower (3%), corn (2%) and coconut (1%). The livestock sector consumed about one percent of CPO output. The rest of the palm oil went to the industrial sector, with a significant amount being used in the oleo-chemical industry.
In terms of volume, Malaysia exported 9.1 MMT of palm oil during Jan-Sep 2003, an increase of 21% from the corresponding period of the previous year. The top five destinations (India, Pakistan, China, the Netherlands and Egypt) accounted for 57% of total exports. According to preliminary data, exports for the whole of 2003 were expected to be close to 12.7 MMT with China purchasing about 2.5 MMT, followed by India (1.5 MMT) and Pakistan (1.1 MMT).
As would be expected, palm oil occupies the top position in export earnings among Malaysia's vegetable oils. The surge in palm oil prices resulted in a 45% increase in export earnings in 2003. With current CPO prices hovering about US$535/ton, an even bigger increase in export earnings is expected in 2004.
With the expected increase in CPO output, Malaysia is estimated to have a bigger exportable surplus of about 12.2 MMT of palm oil in MY2003/04. While demand from China, India, Pakistan and Egypt will likely continue to be strong in 2003/04, Malaysia intends to sell more to Russia, the Middle East and Eastern Europe. The GOM is encouraging plantation companies to forge joint ventures with buyers, allowing them to invest in building bulking and refining facilities in importing countries.
Palm Kernel Oil
Palm kernel oil production increased by 12.7% to 1.66 MMT in 2002/03 due to an increase palm kernel crushing. PKO output is expected to increase to 1.7 MMT in 2003/04. A further small growth is expected in 2004/05.
The expanding local oleo-chemical industry utilized 58% of the PKO production in 2003. With 16 oleochemical plants with a capacity of 1.9 MMT, there is much potential for growth in the Malaysian oleo-chemical industry in the near term. The sector will continue to compete with overseas buyers for crude as well as processed PKO.
PKO exports rose 16% to 732 TMT in 2003/04. The U.S., the Netherlands, China, Sri Lanka and Japan were the top destination markets. With an expected increase in PKO output in 2002/03, about 700 TMT of PKO are expected to be available for exports.
Soybean Oil
In line with a sharp drop in soy crush, local soyoil production plummeted by 44% to 59,000 MT in 2002/03. With expected expansion in soy crush in the near future, domestic soyoil output is expected to increase to 77,000 MT in 2003/04 and 93,000 MT in 2004/05.
Soybean oil consumption accounts for less than 4 percent of total food use consumption of oil in Malaysia. Soyoil is consumed primarily as a premium quality cooking oil and is priced well above the price for palm oil. It is also blended with local tropical oils and sold in the domestic retail market.
At times, Malaysian soy crushers continue to find it profitable to refine imported crude soyoil for re-export to third countries. However with the current high global soyoil prices, domestic soybean crushers are likely to lower imports of crude soy oil for refining in 2003/04. Singapore, the Philippines and Hong Kong are the main destinations for Malaysia's value-added soyoil re-exports.
Coconut Oil
In response to high global lauric oil prices, domestic coconut oil output rose to 36,000 MT in CY2003. The long-term outlook is not bright as the local coconut industry has been relegated to supplying minor food needs (desiccated coconut, coconut cream, etc). Coconut oil accounts for only about 1% of total domestic oil consumption, the release said.
Imports reached 135,000 MT in CY2003 with most of them further refined and re-exported to third countries. Exports of refined coconut oil reached about 166,000 MT with major markets being Sri Lanka, China and Singapore.
Source: USDA