October 2012

APPEN DIX IA: THE PALM OIL INDUSTRY

Demand - food products such as oleochemicals, soaps and biodiesel. As palm oil is in a semi-solid state at room

products are then used in the manufacture of food products such as cooking oil (olein), shortening/dough f stearin). Besides the usage of CPO from the mesocarp (the pulp of the fruit) in food products, palm kernel oil is used in the oleochemical industry to produce chemical feedstock for non-edible products globally (around 77%) is used in the food industry with the remainder (c.23%) for industrial purposes. The propor with only 14% being taken for industrial purposes:

Source: USDA

Key Consumers: China are the largest consumers of palm oil,

phenomenal growth in demand for palm oil, with y/y increases averaging 22% in the past four years, which meant it surpassed China as the largest consumer of palm oil in 2008/09. Even so, Chinas uptrend, with average growth of 5% pa in the past four years. Other large consumers include EU-27 (11%), Indonesia (10%) and Malaysia (8%).

Source: USDA

October 2012

Palm oil is one of the 17 major edible oils and fats traded globally. It surpassed soybean oil in 2004 to become the most traded product, especially in the US (the largest soybean oil producer) and China, which is the largest oil deteriorates below a certain temperature. Rapeseed product, primarily in Europe (which produces 35% of global rapeseed supply). As there is scope for product most vegetable oils, demand is other vegetable oils (soybean oil, rapeseed oil and sunower oil Nevertheless, factors. Palm oil is the most ecient oil- bearing crop Being a perennial crop that is less to severe damage by weather changes, CPO has historically traded at a discount to other vegetable oils such as soybean and sunower oil

Source: Bloomberg

Supply Key Producers or south of the equator. Suitable countries include Indonesia, Malaysia, Thailand, Nigeria, Colombia, Papua New Guinea, Ecuador, Ivory Coast, Honduras, Brazil and Cameroon. Humid tropical climates with a temperature range of 24-32 degrees Celsius throughout the year, ample sunshine and evenly distributed annual rainfall of almost 2 Indonesia (48%) and Malaysia (39%) account for almost 90% of global supply. Other key producers are Thailand, Nigeria and Colombia.

October 2012

Source: USDA

Types of Palm Oil & Yield There are three main types of oil palm: 1) Dura, which has the thickest shell; 2) Pisifera, which has the has a thinner shell than Dura, which means it has a thicker oil-bearing mesocarp and, therefore, higher oil yield. While the thinner shelled Pisifera has a much thicker oil-bearing mesocarp, the Tenera produces more fruit bunches. response to stage of 12-18 months, it harvest. In eect, a material increase on. Once established, oil palm will typically have a in the 8th to 15th year ranges. fruit bunches (FFB) are produced per palm per year. With an average weight of 15kg per can amount to 1920 tons/ha. produce around four tons of palm oil. to diseases in each region. Oil palms in Malaysia typically produce higher yields, ranging from 4.3 to 4.5 tons/ha pa (Indonesia is slightly lower at 3.8-4.0 tons). The yield in Thailand, the other key producer in Southeast Asia, is just 2.4-2.5 tons/ha pa. Elsewhere, Nigeria and Colombia are the next largest producers, but ns and 3.0-

in supply takes about four years to come t lifespan of 25-

October 2012

APPEN DIX 1B: PA LM OIL OUTLOOK

A recovery of palm oil prices is expected in the near term because of some of the following reasons: Malaysian supply growth is likely to ease Q4 2012 - China was up 36% month-on-month while India was up 50% month-on-month Palm prices is near its largest discount to soy oil since September 2008 and this is likely to cause Nonetheless, price recovery is likely to be moderated by: Higher Malaysian stock Market rumors of hidden inventory in Indonesia rican soybean crops

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