Palm Oil Report 2012

MARKET NEWS SERVICEMNS PALM PRODUCTS GLOBAL MARKETS AND DEVELOPMENTS Crude palm and palm kernel oils Fresh palm fruit bunch African crude red palm oil “Ayoola” Pure Palm Oil Nigeria Hornbill Foods USA Palm kernel cake, ACE (Singapore) Pte Ltd Palm wine The designations employed and the presentation of material in this report do not imply the expression of any opinion whatsoever on the part of the International Trade Centre concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. This document has not formally been edited by the International Trade Centre August 2012 1 TABLE OF CONTENT Acronyms and abbreviations ................................................................................................ 6 Background, objectives, targeted audience, coverage and content of the study …………………………………………………………………………. PART ONE: GLOBAL ISSUES 7 ..……………………………………………………………….. 9 1. Palm products and general considerations on palm sector ................................................ 9 1.1 Palm products............................................................................................................ 9 1.2 General considerations on palm oil position in the vegetable oils complex ............... 11 2. Factors affecting market fundamentals .............................................................................13 2.1 Supply Issues ...........................................................................................................13 2.2 Demand and consumption ........................................................................................16 2.3 Trade ........................................................................................................................19 2.3.1 Participants in trade...………………………………………………………… 19 2.3.2 Government trade control ……………………………………………………. 20 2.3.2.1 Tariff-based instruments ……………………………………………. 20 2.3.2.2 Non-tariff trade control measures ………………………………… 24 2.3.2.3 Trade defence mechanisms ………………………………………. 27 2.3.2.4 Technical barriers to trade - TBT …………………………………. 28 2.3.2.5 Trade development instruments …………………………………… 30 2.3.2.6 International and national trade policy instruments ……………….. 32 2.3.3 Cross-border trade issues …………………………………………………….. 33 3. Price issues .....................................................................................................................35 3.1 Correlation between prices of vegetable oils .............................................................35 3.2 Correlation between crude petroleum and vegetable oils prices................................37 4. Physical and futures trading ............................................................................................38 4.1 Physical (cash) trading ..............................................................................................39 4.2 Futures trading..........................................................................................................40 4.3 Contracts ................................................................................................................ 44 4.3.1 Physical (cash) contracts …………………………………………………… 44 4.3.2 Shipping contracts ………………………………………………………… 46 4.3.3 Futures contracts ……………………………………………………………. 48 PART TWO: PALM OIL ………………………………………………………………………… 50 1. Cultivation and harvesting ................................................................................................50 1.1 1.2 1.3 1.4 1.5 1.6 1.7 Varieties…………………………………………………………………………………… 50 Soil and climatic requirements …………………………………………………………. 50 Harvesting ………………………………………………………………………………… 51 Commercially cultivated areas ..................................................................................52 Yields ........................................................................................................................53 Costing Fresh Fruit Bunches.....................................................................................57 Sustainability of oil palm cultivation ...........................................................................59 2 ............. PART FOUR: BIOFUELS AND PALM OIL ......BASED BIODIESEL ………………………… 84 1 Definition and key issues ………………………………………………………………… 84 2 Current market situation ....... 75 ECOWAS region ..... 68 Comparison of crude palm oil production costs in selected countries.. 79 3 ...61 Recycling and waste management in crude palm oil production ..2 Imports …………………………………………………………………………… 81 3......................1 2..2.3 Price outlook ………………………………………………………………………..............…………………………………………………………………85 2... …..69 2.............83.....1 Exports …………………………………………………………………………… 80 3......1 Key stakeholders involved in the development of sustainability certification schemes …………………………………………………………… 92 4......56 FFB production cost estimate .....67 Refining and fractionation ....... kernels and palm kernel oil ……………………………….. Sustainability certification developments …………………………………………… 92 4..........3 2. 2010 …………………………... palm kernels and palm kernel oil 2010/2011 …………………………………..... 73 PART THREE: RECENT MARKET DEVELOPMENTS …………………………….........76 3 International trade ………………………………………………………………………….................palm oil........... imports and trade balances of palm oil..4 Crude palm oil and palm kernels extraction .1 Refining … ……………………………………………………………………… 69 2.2 Production and consumption …………………………………………………… 86 2.......3 Trade ……………………………………………………………………………… 88 2.......................2 Fractionation …………………………………………………………………………72 2......... 2011 ………………………............. 2011 …………58 Malaysian average FFB and palm oil yields..61 2.....74 2 Demand outlook ………………………………………………………………………… .4 Pricing ……………………………………………………………………………… 90 3............2 2..Exports..........74 1 Supply outlook .......... 65 Estimation of Malaysian average milling cost................... Major concerns ……………………………………………………………………………......3 Waste management in palm oil refining ……………………………………….....4............. 2007 – 2011 ……………………59 Current and potential utilisation of oil palm plantation and palm oil mill by-products and wastes ……………………………………….. palm kernels and palm kernel oil 2010/2011 ………………………………………………………..1 Biofuel policies …………………………………………………………………… 85 2......79 3.... 1997 …………………………………………………………………… 69 ECOWAS production of palm oil...........4......4......Malaysian mature plantation..............2 Conclusions and implications for developing countries ……………………… 94 LINKS ……………………………………………………………………………………………… 95 TABLES Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Eleven largest oil palm plantation companies.......91 4...65 Milling and crude palm oil production costs ................. .................... Processing .............. products utilisation . 66 4 . 81 Leading importers of palm oil in 2011 ………………………………………….mature area.. 55 Malaysia .mature area.mature area. 4 Palm oil industry – succinct view ………………………………………………. 75 Palm oil .16 Price correlation palm. 83 World production of biodiesel by types of feedstock ………………………… 86 Producers of palm biodiesel ……………………………………………………. 9 Primary. 82 World imports of palm kernel oil ……………………………………………… 82 Main palm kernel oil importers in 2006 ………………………………………… 82 Main palm kernel oil importers 2011 …………………………………………… 82 Annual price indexes for palm products ………………………………………. yields and PO production 2008-2011 ……………… 55 Nigeria . yields and PO production 2008-2011 …………… 55 Thailand . 3 Fig. soybean and crude petroleum oils ………………………….. 78 Leading users of palm kernel oil in 2011 ……………………………………… 79 World exports of palm oil ………………………………………………………… 80 Main exporters of palm oil in 2011 ……………………………………………… 80 World exports of palm kernel oil ………………………………………………. 55 Indonesia . 63 Recycling and use of by products and waste from oil palm plantations and crude palm oil mills ………………………………………………………….Table 9 Table 10 EU imports of biodiesel by type of feed stock and corresponding tariffs ad valorem.. 2008 to 2011 ………………………………………………… 89 USA imports of biodiesel by type of feed stock and corresponding tariffs ad valorem. secondary and further processing of palm oil.. yields and PO production 1960 . 56 Palm oil . 2 Fig. palm kernel..world production ………………………………………………………74 Palm kernel oil – world production ……………………………………………. 62 Production of crude palm oil . yields and PO production 2008-2011 ……………..unit operations.52 Commercial mature oil palm plantations in 1980 ………………………………53 Commercial mature oil palm plantations in 2011 ………………………………53 Palm oil yields …………………………………………………………………… 54 Malaysia.36 Correlation palm kernel.global supply and demand balances ………………………………. coconut and soybean oils ……………36 Correlation palm. 2006 to 2011 ……………………………………………… 90 CHARTS Chart 1 Chart 2: Chart 3: Chart 4: Chart 5 Chart 6 Chart 7 Chart 8 Chart 9 Chart 10 Chart 11 Chart 12 Chart 13 Chart 14 Chart 15 Chart 16 Chart 17 Chart 18 Chart 19 Chart 20 Chart 21 Chart 22 Chart 23 Chart 24 Chart 25 Chart 26 Chart 27 Chart 28 Chart 29 Chart 30 Chart 31 Chart 32 Chart 33 Chart 34 Chart 35 Chart 36 Chart 37 Chart 38 Chart 39 Chart 40 World production of vegetable oils ……………………………………………… 11 Share of palm oil in 2010/11 global output of vegetable oils ……………… 12 Consumption of vegetable oils for food.2011 …………….global supply and demand balance ………………………...mature area. 77 Leading users of palm oil in 2011 ……………………………………………… 77 Palm kernel oil .. 83 Prices of palm oils ……………………………………………………………….. 1 Fig.. yields and PO production 2008-2011 …………………55 Côte d’Ivoire .. coconut and crude petroleum oils ………………… 37 Evolution palm oil versus crude petroleum prices …………………………… 38 Palm oil physical and futures prices ……………………………………………. 81 World imports of palm oil ………………………………………………………. yields and PO production 2008-2011 …………. conventional process ……….mature area. 40 Palm kernel oil physical and futures prices ………………………………… . 87 Major producers of palm biodiesel in 2007 …………………………………… 88 Major producers of palm biodiesel in 2011 …………………………………… 88 Monthly biodiesel production viability ………………………………………… 91 FIGURES Fig. non-food and biofuel uses ………….mature area. 40 Oil palm commercial mature areas ……………………………………………. 6 Refining and fractionation of crude palm and palm kernel oils ……………. ……. 70 Physical and chemical refining of palm oil ……………………………………. 5 Fig. Liberia and Côte d'Ivoire …………………………. exporters and importers of palm products …………………………………… 109 Palm products: customs tariffs and taxes ………………………………....Fig. 143 Agreements in force in Côte d'Ivoire. Senegal and Ghana . 146 FOB and CIF contract terms ………………………………………………. … 149 5 . Nigeria. 104 Policies adopted in 2010-2011 in selected countries major producers... 71 ANNEXES Annex I Annex II Annex III Annex IV Annex V Annex VI Explicative glossary …………………………………………………………… 102 Financial involvment of foreign groups and corporations in palm sectors in Nigeria. Bleached.ACRONYMS AND ABBREVIATIONS AIFO-UEMOA AIPH BMD CET CIDA COMESA CPO ECOWAS EU FAO FDA FOSFA GAPKI Ha IFC ITC MEOMA MM MNS MPOA MPOB MPOC n. Deodorised palm oil Refined Palm Oil Roundtable on Sustainable Palm Oil Papua New Guinea West African Economic and Monetary Union US Department of Agriculture 6 . Seeds and Fats Associations Gabungan Pengusaha Kelapa Sawit Indonesia Hectare International Finance Corporation International Trade Centre Malaysian Edible Oil Manufacturers Association Million Market News Service Malaysian Palm Oil Association Malaysian Palm Oil Board Malaysian Palm Oil Council Non available Non-Governmental Organisation National Institute of Oilseed Products Malaysian ringgit Refined. NGO NIOP RM RBD RPO RSPO PNG UEMOA USDA Association des Industriels de la Filière Oléagineuse de l’Union Economique et Monétaire Ouest Africaine Association Interprofessionnelle de la filière Palmier à huile en Côte d’Ivoire Bursa Malaysia Derivatives Common External Tariff Canadian International Development Agency (The) Common Market for Eastern and Southern Africa Crude Palm Oil (The) Economic Community of West African States European Union Food and Agriculture Organisation of the United Nations Food and Drug Administration of USA (The) Federation of Oils.a. Objectives The present study is aiming to contribute to the development of palm industries in ECOWAS member countries by providing producers. One of the expected outcomes of the programme is the strengthening of trade support networks in the regional economic communities.PACT II. market linkages and export revenues of African enterprises. the Market News Service (MNS) programme of ITC Trade Information Services section is collaborating with the ECOWAS TEN Secretariat in the setting up of a regionally focused Market News Service in the ECOWAS region. However. 1 Member countries: Benin. Niger. Ghana. oils. supporting business information exchanges at national and regional level. Togo. The study could thus contribute to bestowing the improvement of profitability and competitiveness of West African exports of palm products and the increase of trade operations performance. and trade in oil seeds. The commodities selected for the initial phase of the programme are palm products. processors and exporters of palm products with global technical and market information. The programme aims at reinforcing the capacity of African regional and national institutions to enhance export supply and competitiveness. Gambia. Guinea-Bissau. fats and oil meals has exceedingly increased business opportunities for producers and exporters of palm products in developing countries in general. the insufficient knowledge of palm products and the inadequate information made available to palm sector stakeholders on markets. Sierra Leone.BACKGROUND. publication and dissemination of product studies and market bulletins on the selected commodities. The setup of a trade information system in the ECOWAS region and the strengthening of the information service of the ECOWAS Trade and Enterprise Experts Network (ECOWAS TEN) are key deliverables of this outcome. OBJECTIVES. TARGETED AUDIENCE. increasing national foreign exchange earnings and ultimately contributing to regional food security and the decline of poverty level in the palm sector. The trade information system will serve the business community needs for promotion. The MNS programme supports in particular the customisation. Burkina Faso. COMESA the trade-related technical assistance Programme for building African Capacity for Trade . This study on global issues and market developments for palm products is the first one in a series. mango and cashew. with a special focus on small and medium size and women-owned firms. Guinea. hereby boosting the regional and international trade. Mali. The International Trade Centre (ITC) is implementing. Cape Verde. products and business opportunities. Liberia. facilitation and increase of regional and international trade in selected commodities. ECCAS. In this framework. improving their knowledge on selected aspects of processing and trade. COVERAGE AND CONTENT OF THE STUDY ____________________________________________ Background The continuous growth of the international demand for. in close collaboration with the regional economic communities ECOWAS 1. facilitating linkages and building up exporters’ knowledge about markets. Nigeria. and for several ECOWAS member countries in particular. Senegal. Côte d'Ivoire. 7 . these opportunities remain only partly exploited due to investment and trade development constraints. funded by the Canadian International Development Agency (CIDA). & fractions thereof . crude Palm kernel/babassu oil. in particular SMEs. & fractions thereof . ECOWAS Commission. and vegetable oil substitutes. other than crude. as well as government bodies and ECOWAS Commission departments in charge of the elaboration of palm sector strategies and development programmes and product sector associations. awaited for the end 2011. is expected to result in financing a multi-million dollar oil palm development programme for policymakers and governments. petrol. processors and exporters of palm oil products. a new global strategy that could raise the African competitiveness in palm oil production is being developed by experts from the World Bank Group and the International Finance Corporation (IFC). and are generally insufficiently known and comprehended by farmers and SME processors. the status and importance of sustainability of oil palm cultivation and processing.The study is conceived as a basic tool for training events on palm products and markets. financing. is already ensuring its inputs in priority discussions with the Export Actors Platform on palm oil value chain development and are in the process of setting up strategic business partnerships with leading palm oil players such as the SIFCA Group. These topics may constitute the subjects of highly recommended series of national and regional workshops on palm oil development. Governmental policies. as well as infrastructure development from the farm to the port. focusing on access to land-use policies. the correlation between crude palm oil prices.Comtrade Topics developed include the factors influencing markets of palm products and the market access. technology transfer. Product description and content of the study The study covers the following palm products. as well as the market situation of palm products and its relation with palm biodiesel developments. which is necessary for the elaboration of palm sector development strategies. Meanwhile. 8 . which are of critical importance for the palm sector development. Target audience The study is written for a specific target audience comprising of producers. marketing. recommended to be organised for the benefit of palm business communities By providing the basic understanding of factors influencing the palm sector development. whether/not refined but not 151190 chemically modified 151321 Palm kernel or babassu oil. The strategy. whether or not broken Palm oil & its fractions Palm oil. the study is intended to facilitate the process and thereby contribute to the sustainable development of palm production and processing. through its EXPECT Advisory Committee. are also considered in the study. whether/not 151329 refined but not chemically modified Source: United Nations Commodity Trade Statistics Database. pricing mechanisms. certification. described according to their Harmonized System classification codes: HS codes Product description 120710 1511 151110 Palm nuts and kernels. crude Palm oil. other than crude. The multiple outputs of their processing are summarised in Figure 1.PART ONE: GLOBAL ISSUES _________________________________________________________________________ 1. Three main products and numerous derived ones are obtained by extraction and processing palm fruit bunches. and refined/bleached/deodorised –RBD 5 palm oils. its colour measured with the Lovibond tintometer with a 5.1% expressed as palmitic acid. together with its primary derivatives .1 Palm products Oil palms are at the base of the complex palm oil industry. 9 . bleached 3. Palm products and general considerations on palm sector 1. acidity) expressed as palmitic acid not exceeding 0.5 cell does not exceed 3 Redand the product is odourless and has a neutral taste.e. crude palm stearin and olein.neutralised 2. From the seed 2 Neutralised (refined) palm oil (palm olein and stearin) results from the neutralisation process and has a free fatty acids (FFA) content (i. From the fleshy portion of the oil palm fruit is extracted the crude palm oil.5 cell 4 Deodorised palm oil (olein and stearin) result from the deodorisation processs 5 RBD palm oil (olein and stearin) has undergone all these three processes.3% 3 Bleached palm oil (olein and stearin) has undergone bleaching up to its colour does not exceed 20 Red measured with the Lovibond tintometer with a 5. deodorised 4. until the FFA not exceed 0. cosmetics. cotton. 16% miristic acid. greases. candles. Crude. glues. often in competition with other vegetable oil substitutes. sunflower and other polyunsaturated vegetable oils. used as animal feed ingredient. A sap tapped from the palm flower is processed into palm wine 7 and is also a source of yeast.(kernel) of the palm fruit is extracted the palm kernel oil. margarines. ice creams. which is also an essential fatty acid (see glossary). baskets and mats. The two oils have very different fatty acid compositions 6 (see glossary for the explanation of the terms). etc. roofing and thatching. plasticizers. The bark of the palm frond is peeled and woven into baskets. milk and cocoa butter substitutes. Derived non-edible uses of palm oil include the manufacture of soaps and detergents. palm kernel oil contains a higher amount of oleic acid than coconut oil. the bleached. Its other valuable constituents are vitamin E fractions 8 which act as antioxidants and can reduce cell damage caused by toxic substances and environmental pollution. esters and glycerine derivatives. These fats are used in the production of 6 Palm oil contains equal amounts of saturated and unsaturated fatty acids. while the thicker leaf stalks are reinforcing the walls of village huts. hardness and end-uses. groundnut. However. The leaves of oil palm are used for making brooms. 8% palmitic acid and 10% others. The unsaturated part consists of about 40% monounsaturated oleic acid and 10% polyunsaturated linoleic acid. Palm oils have a multitude of food utilisations. Empty bunches remaining after the removal of oil palm fruits. They are interchangeable in many applications because of their similarities in properties. drilling mud for the petroleum industry. alcohols. Palm kernel oil meal is the by-product of palm kernels crushing. fatty esters and fatty alcohols. Palm oil is considered one of the best frying oils because of its great stability at high temperatures (it does not produce unpleasant smells) and its lower cost in comparison with other vegetable oils. palm kernel oil is over 80% saturated (48% lauric acid. Palm and palm kernel oils are also feed stocks for the manufacture of oleo chemicals including fatty acids. maize or coconut oils in the manufacture of shortenings. the oil is an excellent source of powerful anticarcinogenic 9 and anti-thrombosis substances. Leaf fibres and empty fruit bunches are used to produce chipboard and plywood. The saturated fatty acid portion consists of palmitic acid (44%) and stearic acid (5%). as well as palm kernel shells and fibre remaining after the crude palm kernel oil extraction. Only 18% of its composition is unsaturated: 15% mono unsaturated oleic acid and 3% poly unsaturated linoleic acid. printing inks. The tree itself can be split and used as supporting frames in buildings. After clearing out plantations. the two oils being interchangeable in many uses. confectionery products. 7 The palm wine can be fermented and distilled into a gin known as “Akpetesin” in Ghana and “Ogogoro” in Nigeria 8 tocopherols and tocotrienol 9 tocotrienols 10 . refined and fractionated palm oil is used in competition with hydrogenated soybean. Palm kernel oil and coconut oils are the two lauric oils of commercial importance. Its composition resembles that of coconut oil. further primary processed to refined palm kernel oil and palm fatty acids. in competition with substitutable soybean. Because of its plasticity and its emulsifying properties. trunks of old palms provide furniture wood. Palm oil-based environmentally friendly biodiesel fuel is increasingly used and economically more advantageous than other oilseed-based biofuels. The crude palm oil is one of the main and richest sources of carotene (which confer the bright red colour to the oil). In addition. are used as fertilisers and as fuel. lubricants. making it more suitable oil for hydrogenation (hardening) and the production of edible speciality fats with different melting points. bleached and refined palm oils are widely used as cooking and salad oils. Conversely. from 90. of their calorie requirements. Chart 1: World production of vegetable oils. million tons 60 50 40 30 20 10 0 PO SBO SFO PKO 10 RSO Other The expeller-pressed palm kernel cake contains 5 to 12% oil and the solvent extracted one only 0. Other non-edible applications of the oil include candles manufacture. Others include cottonseed. or a significant proportion.2 General considerations on palm oil position in the vegetable oils complex Vegetable oils are a group of staple 11 food of capital economic and social importance to all countries. mustard and castor oils. palm kernel (PKO) and rapeseed (RSO).5 to 3%.2 million tons in 2000/01 to 147. the range of applications can be however extended by modifying their properties by secondary processing (refining). which covered about eighty eight per cent of the world production of vegetable oils in 2010/11. According to USDA. more suitable for feeding ruminants. 12 The major vegetable oils include oils of palm (PO). the cake can be the sole ingredient in dairy cattle ration. washing powders and personal care products. 11 Staple food is that regularly consumed in a community/country as source of most. 1. the world output of the five major 12 vegetable oils over the ten past seasons increased by about 6 per cent per year. depending on the extraction method 10. The relatively high content of myristic and lauric fatty acids of the palm kernel oil makes it very suitable for the manufacture of soaps. coffee whiteners. as well as the pharmaceutical and perfume industries. More information on palm oil processing and uses are given in the second part of the study in chapter 2 (processing). Crude and primary processed palm and palm kernel oils have already a multitude of applications when utilised as such. Although the cake provides both protein and energy. whipped toppings.coffee and cocoa butter substitutes. sunflower (SFO). olive. Supplemented with minerals and vitamins. Palm kernel cake is used as a medium grade protein feed. it is looked upon more as a source of medium grade protein with high fibre content.3 million tons in 2010/11 (See Chart 1 and the definition of split years in the explicative glossary in Annex I). filler creams and other non-dairy products. groundnut. coconut. soybean (SBO). 11 . or can be mixed with other feedstuffs. containing about 15% crude proteins and up to 12% oil. toffees. Liberia and Côte d’Ivoire are summarised Annex II. the palm oil amounted to a third of the world output of major vegetable oils. The specificity of oil palm is that through processing its fruits yields three very distinct primary palm products: palm oil. In 2010/11. although many of the member countries cultivate oil palms and have the potential to increase their production of palm oil in order to meet both the domestic and the regional demand. Palm oil is of particular importance to West Africa.3 million tons in 2000/2001 to nearly 48 million tons in 2010/11. unlike the annual oilseed crops.5 per cent per year. in particular the needs of ECOWAS member countries with vulnerable economies and high rates of hunger. According to FAO. multinationals. becoming the most produced vegetable oil worldwide. the palm oil overtook in importance the soybean oil.Global production of palm oil increased at a higher rate than the world output of the five major vegetable oils. the oil is currently providing 8 per cent on the average of the daily energy intake 14 of the population. The ECOWAS deficit for edible oils which has to be covered by imports is estimated to reach nowadays 850 000 to 13 Laurics are vegetable oils containing 48 % to 57% of saturated lauric fatty acid. The ECOWAS region is a net importer of palm oil. palm kernel oil and palm kernel meal. West African development potential of oil palm plantations and processing industries attracts the keen interest of investors. fertilisers and pesticides. The stability of supply of this perennial tree crop is higher than that of annual oilseed crops such as soybean or rapeseed. palm industry is a highly profitable and evolved into a global agro-industry. oil palm production can hardly be adjusted to short term variations in world demand and prices of vegetable oils. The supply of palm products is determined by the demand for palm oil for edible and biodiesel uses. rising from 24. Some examples of the growing interest and considerable financial involvement of foreign groups and corporations in the palm sectors in Nigeria. The dominant position of palm oil in the global supplies of vegetable oils is due to its competitive position in comparison with the other of oils: the oil palm yield per hectare is 5 to 10 times higher than other oil bearing crops and its cultivation has the lowest requirements of fuel. However. occurring especially in coconut oil and palm-kernel oil. commodity traders and business developers.e. Since 2006/07 onwards. i. and influenced only to a limited extent by the demand for lauric oils 13 (palm kernel) or for animal feed (palm cake). 14 151 kcal/capita/day 12 . by 9. In addition. Chart 2: Share of palm oil in 2010/11 global output of vegetable oils (147.3 million tons) PKO 4% RSO 16% SFO 8% Other 11% SBO 28% PO 33% Although the palm oil markets are facing major challenges. oil palm is an investment crop. followed closely by soybean oil (Chart 2). soybean. Commonly. as well as the satisfaction of consumers’ needs.org/economic/est/publications/oilcrops-publications/monthly-price-and-policy-updates 16 Together they cover over 85% of world supplies of palm oil and derived products. and palm oil makes no exception. and the correlations between the consumption and prices of several oils due to their substitutability for major uses.950 000 tons per year and is foreseen to increase to some 1. Factors affecting market fundamentals 2. marketing and international trade in palm products are elaborated and continuously reappraised and adjusted under the influence of specific domestic and international market developments. recent development strategies and substantial investments into oil palm cultivation in the region should result in a large increase of palm oil supply in the medium term. but also by policies affecting the economy of palm oil substitutes. consumption. West African 15 The oilseeds desk of the Trade and Markets Division of FAO monitors policy measures and issue Monthly Price and Policy Update – MPPU reviews that can be downloaded at http://www. the lean public financing resources and important problems and disputes in regard to land allocation are however leading very often to uncertain investment climates. are the overwhelming weight of governmental policies on the sector development. rapeseed and sunflower oils.1 Supply Issues Given the economic benefits of the palm oil sector. processing. However. i. while importing countries tend to apply measures leading to border protection. the volatility of prices and the impact of speculation. In Annex III are summarised the selected policy measures applied from 2009 to 2011 by governments of major countries producing and trading in palm oil products. 13 .3. Various policy instruments are available and globally applied. with a view to achieving stability and balanced growth of the sector. Market distortions are induced not only by policies addressing straightforwardly oil palm cultivation. these are further considered in sub chapter 2. The major characteristics of the vegetable oils markets. these reflect their forceful impact on the markets. Given the overwhelming importance of government implications in palm oil markets and the wide range of measures employed. The cost of imports of palm oil or its substitutes. 2. Poor coordination between central and regional administrations. covering over 90% of the world supply.5 million tons by 2020.2. such as soybean or sunflower oils . the availability of relatively low-cost imported oils diminishes the competitiveness and development prospects of domestic oils and fats industries.fao. and in palm oil markets in particular. Governmental policies and interventions in production. Governmental policies 15.e. strategies and legal and regulatory frameworks are governing the development of the vegetable oils sectors worldwide. exert a very strong pressure on foreign exchange balances of ECOWAS member countries.generally supplied by countries where production and exports are subsidised. especially in the two leading producing and exporting countries 16. palm oil included. governments support its development and are generally supportive of the smallholding farmers and processors. Cultivation of oil palms is challenged by the decline in cropland availability due to human activities and the resulting competition for land use with cereals and other crops. The selected countries monitored are the major producers. importers and exporters of palm products. in an effort to shield domestic industries from international competition and high consumer prices. trade and prices. Meanwhile. Malaysia and Indonesia. policies of palm exporting countries tend to support domestic producers and exporters. although their intended purposes most often induce unintended side effects and create strong distortions within the domestic and international vegetable oils markets in general. edu/globalchange2/current/lectures/land_deg/land_deg. rapeseed and sunflower and replaced it with income stabilisation measures since the past ten years. Malaysian government uses land management measures to slow down the expansion of oil palm cultivation. Canada.arable land resources have shrunk and degraded at a greater than the world average. Support includes measures to help covering farm income declines and promotion of production insurance. overgrazing. In Mexico. the United States curtailed the former system of target prices. soybeans and rapeseed continue to benefit from PROCAMPO decoupled payments. to maintain/gain shares in the global vegetable oils market. By distorting palm oil competitiveness versus annual oilseeds and vegetable oils. expanding agricultural activities and urbanization 17. oil palm cultivation and replanting incentives are being granted in the form of preferential loans and land concessions for new. Policies supporting production of oilseeds and vegetable oils which are direct substitutes of palm oil 18 (namely soybeans. Strong public policies for settling land disputes and developing share-based. are often used together with price support schemes and input subsidies. Small and medium scale landowners are often reluctant to invest in joint ventures by handing over land. they allow major exporters of soybeans and rapeseed oils. set since 2008 a policy supporting a better response to changing market conditions. target incomes were raised in 2009 by 30 per cent for rapeseed and 40 per cent for soybeans and will remain valid until 2013. Holders of customary land rights in several countries are challenging the lack of recognition of their rights in the allocation of land for oil palm plantations and the unfair practices in allocating plots to smallholders. In nearly all ECOWAS countries where oil palm is cultivated. the European Union. and India since 2007. which are not dependent on production levels. planting decisions are now determined by market conditions. Revenue insurance programmes were also strengthened in the United States. production of palm oil is being increased mainly through replanting existing estates with high-yielding varieties. including restrictions on land use aiming at controlling oil palm supplies. deficiency payments and area set-aside requirements for soybeans. such as United States. In an attempt to control national palm oil output during periods of oversupply and excess stocks.umich. and security are the causes of the most persistent and tenacious conflicts preventing increased cultivation of oil palms. this is mainly due to desertification. flexible and affordable land management systems are critically needed in order to solve long-standing conflicts over land for oil palm cultivation in the region. enhancing risk management and reducing the government’s regulatory role in the rapeseed sector. Inadequate land policies. 17 See http://www. 18 14 . Practically all countries producing oilseeds.html For example. disagreements and uncertainty over land tenure. rapeseed and sunflower) and their international trade are directly influencing the position of palm oil in the international market. Income support is extended in the form of fixed producer payments decreasing over time. Land development policies. which they see as a right of inheritance. fats and oils apply production support and trade control measures. Subsidized palm crop insurance schemes are being reinforced in Brazil. Mexico. offering meanwhile incentives for using palm-based biodiesel and increase the domestic consumption of palm oil. rather than through the setup of new plantations.globalchange. In Indonesia. the legitimacy and security of land holdings are critical issues for large estates and smallholders alike. However. Canada or Argentina. The continuing concentration of palm oil production in Malaysia and Indonesia raised concerns regarding environmental sustainability of oil palm cultivation. The scarcity of land available in both countries and the need to maintain their leadership position on palm oil export markets has led the governments of the two countries to extend oil palm cultivation in environmentally sensitive areas. sustainably managed plantations. the largest single rapeseed producer. mainly taxes. India. Prominent multinational companies involved in palm industries. and of palm oil in particular. are granted concessions for oil palm estates and the production and marketing of palm oil. Very large palm conglomerates and multinationals are driven in the ECOWAS region by the opportunity to redevelop neglected West African plantations and establish new ones. with a view to increase domestic palm oil self-sufficiency and reduce their dependence on imported vegetable oils. etc. In other countries such as Colombia.). rather than by price or income support measures. FAO and UNIDO. as well as banks and commodity traders. Colombia. these developments contribute finally to poverty alleviation and the strengthening of the national industrial tissue.Countries supplying vegetable oils. particularly in countries constrained by resource limitations. including palm oil. are following the long term tendency to gradually substitute direct production support schemes with indirect policy measures intended to stabilize incomes and make production more responsive to market signals. Having to face increasing difficulties to match the domestic demand of edible oils in general. wherefrom the need to couple production support with import control measures . Incentives to increase domestic production remain however extremely vulnerable to low priced imports of palm oil from Asian countries. These strategies are generally underpinned by production support measures. Countries India. Indonesia. 15 . the government is imposing minimum purchase prices at which crushers have to buy oil palm fruit branches from farmers. Indirect production support schemes are applied in Thailand for example. In developing countries comprising ECOWAS member states the public financial resources for a steady expansion of oil palm cultivation are insufficient. producers are granted tax exemptions and/or receive subsidised seasonal credits and loans for various on-farm investments (purchase of fertilisers. In addition to providing low interest loans to oil palm farmers and palm oil producers and supporting the production and use of high-yielding seedlings. governments of ECOWAS countries with a potential to develop palm industries elaborated and reinforced development strategies and plans promoting a sustained growth of the sector. through the intensification of incentives extended for oil palm cultivation and palm oil production in an effort to meet the rising domestic demand for edible palm oil and biodiesel. provision of adequate storage facilities. in addition to expanding palm oil export availabilities. “Aid to developing countries” schemes are extended to palm oil development. as well as the high volatility of palm oil prices .which constitute a potential threats to national food supplies and security. Financial and technical support to oil palm developments in Africa are also extended by international organisations including the World Bank and the International Finance Corporation. the Philippines and Thailand are also supporting the development and use of high yielding oil palm seed and the improvement of cultural practices. provision are also made for public purchases of the oil at subsidized prices. Kenya. national foreign investment policies are encouraging and greatly facilitating foreign investment in palm plantations and upstream industries. Malaysia and Venezuela. Recent investments in oil palm cultivation and processing were estimated at 6 billion US$. Therefore. one of the numerous examples is the support provided by Australia for the cultivation of oil palm and the production of palm oil in Papua New Guinea. the price of a good or service increases as its demand increases and vice versa. even if the regional production of palm oil rises according to expectations. In the case of oils and fats. non-edible and biodiesel uses is driven by population increase. equivalent to some 4. Considering an annual average demographic increase in ECOWAS region of 2. the ECOWAS region accounts already for about 4. Imports will continue in the medium term in order to satisfy consumption requirements. small rises or falls in income bring about large rises or falls in consumption. consumption is calculated as: opening stocks plus production and imports minus exports and ending stocks. according to FAO and Oil World statistics. having reached 306 million people in 2011.47 million tons per year. by 2040 its population could attain some 612 million. including palm oil. 40 g/head/day. 16 . The current average consumption of fats and oils in the ECOWAS region averages. At low income levels. non-food and biofuel uses. In 2010/11. It is important noting that the region is a net importer of palm oil. At higher income 19 “Demand” is an economic principle that describes a consumer’s desire and willingness to pay a price for a specific good or service. while non-food and biofuel uses took in respectively 18 per cent and 15 per cent of the output. demand for edible fats and oils. non-food uses amounted to only 6 per cent. 72 per cent of the world production of vegetable oils was used in the food sector. of which at least a half consists of palm oil. “Consumption” is the amount of a specific good or service used in a particular time period. Very often the two notions are confounded.7% per year. The development of oleo chemical industries and of biofuel markets changed drastically the structure of consumption ten years after. million tons 200 150 100 50 0 Food Non-food Biofuels The fast increasing demand for palm oil for edible.2 Demand and consumption 19 According to USDA. World population attained 7 billion in 2010 and is expected to increase by 29% and exceed 9 billion by 2050. in 2000/01 about 94 per cent of the world output of vegetable oils was used as food.5% of the world’s population. According to PricewaterhouseCoopers estimation.2. Chart 3: Consumption of vegetable oils for food. economic growth and limited petroleum resources. the combined imports of the fifteen ECOWAS member countries rose from 65 million US dollars in 2001 to over 550 million in 2010. Palm oil availability must be ensured for at least meeting the fast growing demand fuelled by this rate of population increase. Holding all other factors constant. is highly elastic. the chemical composition of palm oil is conferring the product a neutral cholesterolaemic effect (induction of elevated levels of cholesterol in blood). consumption should also grow faster. demand is less responsive to changes in income until. the destruction of natural habitat of critically endangered species (such as the orang-utans and tigers). The bottom line of these campaigns stirred initially by the American Soybean Association was the replacement of edible palm oil by soy bean oil. rapeseed. the main dynamic factor determining the growth of palm oil consumption will remain the demand for biodiesel and oleo chemicals. Price competitiveness of different types of edible oils (palm. response ceases and the market reaches saturation. By contrast. while with the new refining technology over 90% of the natural carotenes content may be retained. the consumption of palm oil as a source of dietary fat does not pose any additional risks for coronary artery disease when consumed in realistic amounts. which are natural inhibitors of cholesterol synthesis. Consumers’ taste preferences. 20 Red palm oil gets its name from its characteristic red colour given by its natural content of at least ten types of carotenes (pro-Vitamin A). These campaigns proved potent in raising consumers’ concern about the sustainability of cultivation and processing of palm oil. i. as well as by the presence of vitamin E. The saturated palmitic fatty acid contained for about 50% in the palm oil has been proven to have a neutral cholesterolaemic effect. 100% of the natural carotenes are destroyed. The taste and odour of unrefined red palm oil 20 is being thought after in Africa. As incomes in these countries are expected to continue growing faster than in developed countries. cotton or coconut oils in food and biodiesel applications.levels. Yet. inappropriate land use and human-rights violations (from low pay and poor working conditions. sesame. rapeseed. Asian consumers use it for all edible purposes. Western consumers prefer the refined. and to the contribution to global increase in greenhouse gas emissions. Abundant supplies of substitute crops and oils depress demand and prices of palm products. During the conventional refining process. uncoloured and deodorized palm oil and use it extensively for deep frying. The negative campaigns aiming at discontinuing the food use of palm oil and replacing it with other vegetable oils on health grounds had adverse effects and hindered temporarily the raise in palm oil consumption.e. where it is traditionally used in cooking. the hypercholesterolemic effect caused by the less than 1. Therefore. 21 Changes in dietary intake of fats and oils which occurred over the past century comprised an increasing consumption of saturated and partially hydrogenated trans-fats which can increase the risk of coronary heart disease by raising levels of “bad” cholesterol and lowering levels of "good" cholesterol . jeopardising future raise in demand. etc. Other public campaigns initiated by NGOs and environmental activist groups at the beginning of this decade stated the possibility of irreversible harmful environmental effects of palm oil cultivation and processing because of the deforestation of tropical rain forests. the income elasticity of demand decreases. Demand for palm and palm kernel oils is also a function of their price compared to prices of oils and fats substitutes for specific end uses. In these countries. sunflower.) weighs heavily in determining the choice. cotton. Developing countries have lower incomes per capita and higher income elasticity of demand for edible oils and fats. soybean.5% of lauric and myristic saturated fatty acids contained in the oil are compensated by these of the moderate amounts of monounsaturated oleic acid and linoleic fatty acids which are hypocholesterolaemic. the per capita consumption of edible oils and fats will remain sluggish in many industrialised countries where incomes are high and population is not expected to attain significant rates of growth. at a certain level.wherefrom the claim that palm oil has harmful effects on public health. 17 . but their impact faded away following results of scientific research 21 and accurate public information campaigns financed mainly by the major palm oil producing countries. as part of a healthy diet. this is the case in its wide use in Asia and Africa. such as soybean. sunflower. dietary habits and knowledge of properties and mode of use of palm oil determine its choice between the other edible oils alternatives. to theft of land). for instance. Other policy measures aim at facilitating consumption and improving domestic market availabilities by setting-up food-based safety net programs. Biofuel mandates create a higher demand for soft oils. on imports and sales of the formal sector so as to bear differentially on the informal sector. crude palm oil price will not justify its use as biodiesel. such as RSPO . stocks are low and supplies are tight. rice. including palm oil. is maintained through price policy measures: retail prices for oils can be either set. the level of the domestic consumption of edible oils. and sometimes palm oil to households below the poverty line at heavily subsidized prices. or to increase consumption within nutrition policies. However. In India. its price falls so far that it becomes profitable to produce and use palm-made biodiesel. The challenge for policy makers is to apply the most adequate policy and consumption control methods for addressing the specific problems they are confronting. In some importing countries and circumstances. or by the imposition of restrictions on some types of sales and advertising practices. Petroleum price is one of the factors affection palm oil demand and prices. When supplies of crude palm oil are abundant and stocks are high. http://www. National policies in support of biofuel consumption include tax credits extended to blenders of palm-based biodiesel. sunflower. palm and palm kernel oils included. A commodity analyst of LMC International 22 estimated that every rise of 10 dollars per barrel of crude petroleum price may raise prices of the major vegetable oils by 70 dollars per ton. rapeseed and corn oils 24 Business community in many developing countries claim that VAT is not simply a tax on final consumption. Limited petroleum availability and the rise of its price above certain limits support a larger use of certain soft oils 23 and of palm oil for the manufacture of supplementing biodiesel. This issue is specifically considered in the second part of this study under the sub-chapter 1. which operates through a country-wide distribution network of government stores selling wheat. Some measures are intended to support directly the consumers. Both the United States and the European Union have set ambitious long term targets for the use of biofuels in transport. Indirect policy measures include the levy of Value Addition Tax (VAT) on the final consumption 24 of all goods.lmc. as well as for reducing carbon dioxide emissions in transport because they impact on global warming. by subsidising domestic palm oil consumer prices in order to reduce the cost of living.The Roundtable on Sustainable Palm Oil were formed since 2004. 18 . with the objective to promote the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders. the government operates an extensive and fiscally expensive set of food-based safety net programs. Other food-based safety net programs operated in India and several African countries are the food-for-work programs and mid-day school meals.uk/ 23 Soybean. The largest among these is the Targeted Public Distribution System.7. Several types of consumer policies and measures are currently in use and can prove highly effective in at least some situations.Voluntary organisations. Consumer protection measures can be either directed at companies supplying food palmbased products.co. or controlled closely by government. but is very commonly levied in addition to normal VAT and tariffs. government 22 Independent economic and business consultancy company for the agribusiness sector. which are required to provide certain information on product composition through labelling. improving meanwhile safety and the health of consumers by controlling more strictly the quality of vegetable oils imports. at often quite high rates. leaving a gap in vegetable oils supplies that could be met also by palm oil. In other cases. Many of them are aiming at raising consumption from domestic sources and/or reduce dependency on imports. with a view to decrease their dependence on petrol. palm oil included. there is a tight correlation between the price of crude petroleum and that of certain vegetable oils. when the demand for the oil is high. 2. operate in a free market. most often they are applied on a temporary basis. infrastructure conditions and facility of access to information (influencing the reliability and performance of trade operations). government purchasing bodies. from country to country. and their performance determines the efficiency and profitability of trade operations.3 Trade A number of factors have a decisive influence on trade in palm and palm kernel oils. The private sector plays an important role in marketing and trade 27 in palm products. However. natural phenomena. however. 19 .org/about/countryclassifications/country-and-lending-groups#Upper_middle_income 27 Marketing is the process of planning and executing the conception. shipping and storage. associated with all commercial activities and including farmers selling exfarm.1 Participants in trade Several types of actors intervene in palm trade. which encompass the majority of countries exporting and importing palm products. economic and political situation. the government fixed retail price of palm oil at the demand of importers. pests and disease. promotion and distribution of goods and services. seat holders at commodity exchanges dealing in palm products. Traders in physical markets.3. Tamil Nadu government is distributing palm oil at subsidised prices.worldbank. buyers at corporate head offices. namely: • Traders. They are therefore involved in logistics and assume responsibility for transport and shipping. brokers. More examples of policy measures supporting the consumption of palm products implemented during the 2009 – 2011 period are given in the Table in Annex III. the extent of its involvement differs. pricing. 2. exchange rates 25. generally called cash traders. etc.control agencies and public retail outlets are directed to sell the oils procured on the national or international market at prices below the market level. This type of trading allows offsetting some of the risks of price fluctuations inherent to physical trading. rather than value. in order to avoid the impact of exchange rate on the value of trade 26 See World Bank country classification at http://data. Each of them has definite functions and responsibilities. as well as the adequacy of trade and investment policies. in an attempt to limit the distorting effects of such measures. Two types of trading exist in palm and palm kernel oils: physical (cash) trading and trading in futures (commodity exchanges) 28. In Bangladesh.). Commodity brokers are the traders responsible for arranging the purchase or sale of palm and palm kernel oils in commodity exchanges. have specific quantities of palm products of particular grades and specifications to buy from merchandisers and to move on to customers. 25 Please note that nearly all trade figures throughout the study are expressed in quantity. crushing and refining plant managers purchasing the palm raw materials (FFBs). 28 Physical trading (also named cash trading) involves the actual movement of goods from origin to destination and is associated with cash contracts and documents on insurance. There are four basic types of participants in palm and palm kernel oil trade. starting with the farmers cultivating oil palm and ending with the end-users and consumers of palm products. Most of the high and middle income economies 26 . For example. These include the uncertainty over supply and export availabilities (volumes and prices depending on weather. commission agents. Trade is the proper exchange of goods and services. Trading in futures concerns transactions carried out under futures contracts. Multinational corporations dominate the bulk of the international trade. and even physical persons who may speculate from time to time. tariffs on imports protect it while it matures and develops). formula. The imposition of imports tariffs is commonly justified for three reasons: the protection of domestic industries (if foreign imports compete with a relatively young domestic industry that is not large enough to benefit from economies of scale. importing and exporting palm products are further summarised in the table in Annex IV. reducing the quantity of imports from abroad. selected trade policy developments and measures which have been applied between 2009 and 2011 in the main countries producing. Trade policies and instruments are frequently reappraised and adapted to changing market conditions. in developing countries where foreign exchange incomes depend significantly on the trade in vegetable oils including palm oil. governments are involved in their commercialisation to a larger extent.2 Governmental trade control Trade in palm products is heavily controlled by governments through trade policies implemented through various types of trade policy instruments. or ad valorem. 2. oleo chemicals. and national food security considerations (tariffs discourage imports and encourage domestic production of goods that are deemed critical to national food security). these instruments are chosen and prioritised in order to ensure maximum effectiveness in stimulating trade and domestic growth.3. the growing challenge of globalisation.2. They raise the demand price paid by domestic consumers.• Agents and brokers. who take title to palm products purchased with their own capital. The end users’ choice of function. More specifically. The term covers customs duties and charges on imports and exports. unfair trade (foreign imports might be sold at lower prices on importing markets because foreign producers engage in unfair trade practices. In general. assisted at times by external financial sources • End users including manufacturers of food products. personal care products. In each country. together with additional fiscal charges and internal taxes. 2. operating on behalf of buyers or sellers on the basis of a commission and expected to resolve contractual difficulties • Merchants and dealers.3. where and how the products are transported and stored. Import tariffs The primary goal of import tariffs is to reduce imports in order to increase domestic production. tariffs are taxes levied either per unit of product traded.. Tariffs are levied on trade in palm products in nearly all markets. taking into consideration specific factors such as the structure of the national economy. reflecting final consumers ‘demand which finally determine what is bought. quality requirements. The various types of trade policy measures considered below are largely used. as well as for implementing government policies relative to the development of domestic industries and national exports. etc. and reduce the supply price received by foreign producers. brand name. etc. and the respective roles in trade attributed to public and private sectors. who have an influential role to play. They are also levied for revenue generation.1 Tariff-based instruments Tariffs are foreign trade policies measures undertaken by government with the main intention to protect domestic production by restricting foreign competition. such as subsidisation of their production or dumping imports at prices below production cost. 20 . labelling and marketing strategies for their products affects significantly consumers’ choices. Import tariffs are then balancing the competitive playing field). b. Imports doubled over the past six years. from 400 000 tons in 2006. The country is the largest producer of palm products in West Africa.ng/Tariff/index.php 32 Nigeria Trade Policy Review 2011 . Imports of palm kernels are only subject to 5 per cent value added tax. palm olein and palm kernel oil not originating from ECOWAS countries.org/english/tratop_e/tpr_e/tp347_e. Nigeria levies a 35 per cent tax on imports of crude palm oil. the government appealed to policy measures aiming at increasing domestic cultivation and securing domestic supplies.5% to at least 15%. 30 Residual balance of visible opening stocks plus production and imports. soybean and cottonseed oils are increasingly consumed. such as financial support for establishment of plantations. Although locally produced groundnut.f.htm 21 . The country needs therefore to resort to imports. At the same time. The level of imports is largely controlled through taxation. Under the CET tariffs these products are subject to a 5 per cent ad valorem import tax of and a valueadded tax of 5 per cent.Import tariffs may be beneficial to the aggregate domestic economy they tend to protect.gov.i. and thus most commonly promoted by domestic companies facing competition from imports. According to Oil World. Under the Common External Tariff 31. an ECOWAS community levy of 0. and government taxation measures have a direct incidence of on the imports and domestic consumption of palm oil. with an average yield 2 tons per ha. especially in Africa and Latin America. for example. with a view to protecting the domestic refining industry. An example of crucial influence of the application of import tariffs in the palm oil sector: often India raised taxes on imports of crude palm oil and/or applied differential tariffs. in order to control the importation of crude palm oil over refined oil. making it unprofitable for importing India to buy crude palm oil for local processing. Domestic companies can thus benefit from higher sales. Nigeria.customs. Nigeria is the largest producer. with a view to decrease the dependency on palm oil imports. A duty of 10 per cent and a value added tax of 5 per cent are levied on imports of palm kernel cake. After the levy of all duties and taxes. has a national agricultural policy relying on trade control. greater profits and larger shareholders’ benefits. the current domestic disappearance 30 of palm oil exceeds the offer. VAT is applied at 5% and calculated on the dutyinclusive c.o.wto. However. to 700 000 tons in 2008 and 840 000 tons in 2011. with a view to counter the rising domestic consumer’ prices. Government sources estimate the total present production of crude palm oil at some 1. it is estimated that the domestic price of imported crude palm oil exceeds by over 40 per cent the world market 29 In response to Indonesia’s restructured export tax which will boost exports of refined versus crude palm oils.3 million tons.5 per cent and a Comprehensive Import Supervision Scheme charge of 1 per cent on the f. tariffs tend to disadvantage domestic consumers by increasing domestic prices by restricting access to imports. thus supporting the domestic refining industry (latest at the end of 2011 29). However. including smallholders ‘output extracted through traditional methods. minus exports and visible ending stocks 31 CET tariff at https://www.http://www. value of imports. Changes in taxation levels of specific vegetable oils are considerably affecting the composition of imports and the consumption and trade in vegetable oils from non-ECOWAS origins. ECOWAS member countries levy import taxes on a whole range of edible oils including palm oil originating from outside the region. Imports of refined palm oil are prohibited 32. or agreements with Indian agribusiness companies to negotiate land concession abroad for growing oil palms. value of imports. consumer and importer of palm oil in the ECOWAS region. Indian government is put under pressure by refiners and requested to raise the import taxes on refined palm oil from currently 7. the country produced some 900 000 tons of commercial crude palm oil in 2011 from a mature plantation area of 450 000 ha. including a port development levy of 7 per cent of the payable duties. Additional duties and taxes increase the price of imported palm products. being estimated by Oil World at about 2 million tons per year. At the same time Malaysia. governments lower the latter by reorienting domestic supply towards domestic supply. palm supply restrictions push up international prices. which are strategic food commodities. India . which together cover 86 per cent of the world supplies. were prohibited until 2008. Food industries are looking forward to the effective implementation of the CET flat rates of duty for imports into the region for the period 2012 – 2015. Prohibition removal after that date has led to an increase in noodle manufacturing. imports of crude palm oil . Export taxation and restrictions are bound to restrain the incentive for domestic suppliers to produce. together with the other cooking oils. while countries and producers who are net exporters would benefit from the application of export taxation. can raise palm oil international price. For instance. As far as the lower-taxed imposition of palm kernel is concerned. in line with ECOWAS recommendations.price. given the inelasticity of supplies. Other governments have used this rationale during the food crisis of 2006-2008 to justify the application of export taxes and other forms of restrictions in order to protect local consumers 33 Availability of domestically produced palm kernel oil is smaller than the refining needs . Several justifications are stated for the application of export taxation and other export trade restrictions.a basic ingredient in the production of noodles. This illustrates the fact that export restrictions imposed by a country may trigger a domino effect. in addition to causing some trade diversion.which is the largest importer of Indonesian palm oil. started diverting as much as possible of its procurement to other origins. Indonesia and Malaysia. In Annex IV are shown the European Union import tariffs levied on palm products of different origins. In the case of Nigeria for instance. with a processing sector that uses crude palm oil and competes with the Indonesian refining industry. A draft of the CET is expected to be to be submitted to the ECOWAS Council of Ministers for adoption by end of June 2012. in addition to supporting the domestic development of palm production and investments in palm cultivation and processing abroad. this is meant to facilitate the complementing 33 of available domestic supplies for processing. when Indonesia started imposing an export tax on crude palm oil with the objective of making larger supplies of the raw material available to domestic refiners. At the global level and in the short run. where the government imposes at times export taxes on palm crude oil. Changes to import legislation can also have a considerable impact on domestic manufacturing industries.6 000 tons in 20010/2011. but could also easily lead to trade diversion: other countries may increase their supplies and gain international market shares. This is the case in Indonesia. thereby improving their own terms of trade • Food security and domestic consumers’ protection: by creating a wedge between world prices and domestic prices. Countries or consumers who are net importers of taxed palm products would lose out. including: • Terms of trade: by restricting their exports. Export control measures Export taxes and quantitative export restrictions are commonly applied in the palm sector. is imposing its own export restrictions on crude palm oil to offset the additional pressure on its domestic refining caused by Indonesian export taxation. despite the imposition of a 35 per cent tariff on the oil. because a large amount of unprocessed palm kernels are exported as such 22 . The differential among the export tax rates levied on unprocessed and processed products constitutes an effective export subsidy for the processed products.5 per cent.5 per cent on crude palm oil in December 2011. while reducing the export revenue for refined oil by only 8.• Domestic consumption price: export taxation of crude palm oil constitutes an indirect subsidy to value-added domestic refining sector. The impact of this tax on palm oil economy is complex.5 per cent. for instance. the domestic consumption amounts to only a half of the production and the country is exporting the surplus to both the ECOWAS region and the European Union (50 per cent each). With a current output of about 310 000 tons of palm oil per year. as well as the taxes levied on crude palm oil exports outside quota in Malaysia.see Annex V). it can become an incentive for rampant smuggling of crude palm oil. a double-edged sword. in particular smallholders. For example. providing a built-in mechanism to improve responsiveness to international market fluctuations Malaysia and Indonesia are periodically facing periodically high levels of production and high stocks of palm oils. The Ivorian government applies several types of taxation on palm oil exports. the taxation hurts producers of crude palm oil. who have no incentives to invest in replanting and maintenance of their estates.DUS) is levied on crude palm oil exports . taxation on exports of palm oil and its incidence is best illustrated by the case of Côte d’Ivoire. In Annex V are shown the Indonesian and European export taxes levied on crude and refined palm oils and biodiesel. undertake aggressive promotional campaigns or support palm oil consumption abroad through joint ventures. exports of crude oil which is the input raw material for refining are taxed at a higher rate than the exports of refined oil. as a major ECOWAS producer and the largest West African exporter of palm oil.5 per cent on refined palm oil (the price of the crude palm oil at that time was 969 US$ per ton CIF Rotterdam . This differential export tax structure reduces the cost of crude palm oil raw material for Indonesian processors by 13. In the case of palm oils. the Indonesian export tax on crude palm oil is aiming to support the development of local refining (installed capacities are not fully used) and the local supply of lower priced palm cooking oil • Public receipts: export taxes provide revenues to developing countries with limited capacity to rely on other types of domestic taxation • Income redistribution: similar to import tariffs. combined with sluggish import demand.currently at 8. Moreover. Côte d’Ivoire is a much smaller producer than Nigeria. Indonesia. Taxing unprocessed palm oil provides an indirect subsidy to domestic refiners. improving therefore their price competitiveness. However. While encouraging the development of domestic palm oil processing industry. An export tax (Droit Unique de Sortie . As far as the ECOWAS region is concerned. levied an export tax of 13. The application of differential export taxation on different types of palm oil is. The apparently flat tax seems to not take into account the variations of international price and is not really effective in smoothing the transmission of world price shocks to the domestic economy. however.5 per cent ad valorem. benefitting domestic consumers and public revenues • Stabilization of domestic prices and better responsiveness to market fluctuations: exporting countries such as Indonesia and Malaysia have export tax regimes with sliding rates based on international prices. as it lowers the domestic price of crude palm oil feed stock relative to the international undistorted price. 23 . export taxes are measures that imply the redistribution of income at the detriment of domestic producers. The trade policy measures applied by the two countries in order to solve oversupply situations is very much the same: governments lower export taxes or apply temporary tax waivers. raise domestic consumption. and of only 8. concurrently applying differential export tax schemes to stimulate the domestic refining. However. They can thus dispose of domestic price of crude palm oil (which is not taxed) below world market price. this results in large supply surpluses. the value-added tax is levied at a rate of 18 per cent.75 per cent of the f. Pre shipment Inspection (PI) is the practice of employing specialized private companies to check shipment details. The inspections also prevent the import of products that are considered harmful to health and therefore could not be commercialised (in this respect.8 per cent in 2010. export tax revenues can be highly volatile. value of goods imported.2. Finally. For information on the WTO pre shipment inspection agreement please access: http://www. The physical inspection of goods is an integral part of the procedures adopted by pre shipment inspection companies to ensure that the prices invoiced by the exporter are reflecting the true value of the goods. thereby reducing possibilities for dispute after the arrival of the goods at destination. Developing countries apply pre-shipment inspections with the main objective of preventing capital flight through over-invoicing and the loss of customs revenue through under invoicing by traders. Moreover. TRIMs. regardless of the nationality of the shareholders or where they are managed and controlled. price. quantity. This might increase income inequality within the country and negatively affect the poorest smallholders’ population.or over-invoicing of imported goods and other unfair or improper practices. a lump sum is payable and this means much higher charges. Palm exports are additionally taxed through a profit tax (a percentage of the commercial profits). financial terms and customs classification of goods undertaken in the exporting country. the system is complex to administer and subject to numerous exceptions. in the country of origin.org/english/tratop_e/preship_e/preship_e. Branches of foreign companies are also subject to a remittance tax regardless of actual amounts transferred. In addition. it is worth recalling the unfortunate cases of commercialisation of adulterated edible oils). Moreover. the current taxation rate is 25 per cent. reported by World Bank at 8. the export taxation entails the redistribution of welfare from smallholders as primary commodity suppliers to downstream processors.o. several of them are largely applied in the palm sector. the scope of pre shipment inspections is to safeguard national financial interests (prevention of capital flight and commercial fraud. Inspections are conducted in most cases prior to shipment. exchange rates.wto.3.b. are subject to a corporate income tax on local profits. bringing in this way under control the under. for instance) and to compensate for inadequacies in the administrative practice. These inspections assure importers that the goods they have ordered meet contractual specifications and quality standards. subject to large fluctuations of international market prices and the variability of exchange rates.as regards income distribution. the rate of duty is ad valorem. profits realized in Côte d’Ivoire by branches of foreign companies are deemed to be distributed and therefore are subject to a branch withholding tax on onehalf of the before-tax profit at a rate of 12 per cent (a withholding tax of 18 per cent is levied if the profit is exempt from corporate tax). Inspection companies charge fees ranging from 0. customs valuation. at the request of the importing country. structure and/or direction of international trade in palm products. quantity.htm Customs valuation is the procedure applied to determine the customs value of imported goods. In general.6 to 0. In the case of countries trading in palm products. as well as customs duty evasion. 34 Set of activities aimed at the verification of quality. Fifty per cent of the branch's profits are treated as though they had been remitted as a dividend (subject to a 6 per cent rate). quantitative restrictions (quotas or bans) and government procurement. These include: pre-shipment inspections 34). However. In certain cases.2 Non-tariff trade control measures Non-tariff measures are instruments other than tariffs applied by governments to control trade. The non-tariff trade control measures influence prices. companies registered in Côte d’Ivoire. 24 . to be paid either by the government or by the importer. 2. provided the measures meet the conditions of specified derogation from the WTO provisions. For more information please access: http://www. Import quota measures are not customary in palm trade.wto. but developing countries involved in production and trade in palm products are permitted to apply them.org/english/tratop_e/cusval_e/cusval_info_e. or the compliance to export restraint agreements with importing countries. The significant increase in foreign investments in the palm sector leads governments receiving these investments (and foreign companies) to impose restrictions aiming to protect and foster domestic industries and prevent the outflow of foreign exchange reserves. For technical information on the WTO TRIM Agreement please access: http://www. Some of the investment control restrictions may distort trade in violation of WTO Agreement on Trade-Related Investment Measures. no more imports of the particular good are allowed. the total quota can be divided among foreign suppliers. They can be established as a simple aggregate. local equity. imported and sold domestically. In general.org/english/tratop_e/invest_e/invest_info_e. often as part of an industrial policy. gasoline and heating fuel. remittance. as well as employment conditions. as well as building materials used for homes/shelter construction. Examples of restrictions include local content requirements (i. they disadvantage domestic consumers. quotas cause the price of goods to rise above the world level. technology transfer. While import quotas benefit domestic producers.htm Trade-Related Investment Measures (TRIM) are domestic regulations a country applies to foreign investors. In general.e. The mode in 35 Essential goods are physical items required by consumers in order to sustain their health or life. Export quotas are quantitative restrictions imposed either voluntarily. the protection of local consumers from shortages of foodstuffs or other essential goods 35.therefore the declared value is essential for determining the customs duties to be paid. thus protecting domestic production and restricting foreign competition. or on the decision of importing countries. export performance (namely the export of a specified percentage of production volume). Import quotas are restrictions setting a physical limit on the quantity of goods produced abroad. often calculated on pro-rates based on past import levels.htm Quantitative restrictions Quotas are legal physical limitations on the quantity of goods that can be imported or exported in a given period of time. such as food. These measures can also be used in connection with fiscal incentives. 25 . Once the quota level is reached. increase the international price of the products and reduce the volume of trade. Alternatively. by virtue of the economic development needs of developing countries.wto. water. presumably satisfied on a first-come-first-serve basis. Export quotas implemented by large suppliers of palm products (with large shares in the international market and a certain power in setting world price) depress the domestic prices. The primary goal of import quotas is to increase the domestic part of total supplies by reducing imports. the use or purchase of locally-produced inputs) and requirements on trade balancing. Fewer imports of goods in a domestic market allow fewer choices to consumers. the maintenance of international commodity prices. The various justifications for their imposition may include the protection of domestic industries from shortages of raw materials. TRIM rules enable multinationals to operate more easily in foreign markets. the compliance with export restraint agreements (for instance the quotas imposed on members of the OPEC agreement). often at higher prices. level of domestic sales. Meanwhile. Sierra Leone. Bans (also called embargos or prohibitions) are absolute trade restrictions by which a country completely banishes trade with another country or forbids exporting its own products to it. in 2011 the government allocated 4. personal care products. causing a fall in the domestic price. the domestic output of palm kernels falls short of the domestic demand for crushing corresponding to national installed capacities and additional supplies have to be imported every year (26 000 tons in 2011) . 26 . At present. Malaysia produces at present 80 million tons of oil palm seedlings. Government procurement is often practiced by developing countries involved in trade in vegetable oils including palm oil. for instance the manufacture of detergents. the Malaysian government imposes a combination of high crude palm oil export taxation to protect the domestic refining industry. Palm kernel-based industry is regarded as a high-growth business by the private Nigerian sector. Colombia. including the WTO Government Procurement Agreement (http://www. mainly as raw material for a whole range of secondary processing industries. as well as 279 000 tons of palm kernel meal. as raw material for the domestic processing industries.wherefrom the ban on exports of the product for protecting the local processing industry. based on a tendering system. with an oligopolistic power in setting the world price. provided that the ban on their export is removed. it is more expensive for Malaysian exporters to export crude palm oil. In 2011. of which 50 million are supplied to local planters. African and Indonesian annual demand is estimated at 50 million and 130 million tons respectively.org) 36 According to trade sources.apec. oil palm seedings are supplied to Malaysian companies overseas. Thailand and Indonesia on the basis of government-togovernment agreements. The country is the second largest world exporter of crude palm oil. The total output of raw palm kernels (509 000 tons in 2011) is crushed locally. Higher prices will in turn reduce the demand for crude palm oil from the rest of the world and more crude palm oil will be shifted onto the local market. The country could become the world's largest supplier of germinated oil palm seedlings. as well as to Honduras. Least cost government purchases are facilitated by the centralisation of international and national procurement procedures. the government of Malaysia prohibits also the export of oil palm seedlings. Under these conditions. two consecutive things happen. The entire output of palm kernels is used locally.org/english/docs_e/legal_e/gpr94_01_e. wherefrom the ban on their exports.9 million tons of the national crude palm oil output under the tax free quotas given to holders of export licenses such as the state run plantation agency FELDA plantation.wto.which the Malaysian government employs the quota instruments in order to adjust to palm world market situation is eloquent. Malaysian palm kernels and oil palm seedling are prohibited from exportation. and tax free quotas 36 curtailing the quantities exported. or private plantations such as Sime Darby and IOI Corporation. processing of the domestic palm kernel production yielded 242 100 tons of palm kernel oil (consumed domestically.htm) and the Asia-Pacific Economic Cooperation APEC non-binding Principles governing government procurement (http://www. However. During periods of low peak world market prices. international oil supplies decrease and world price should rise. The major objective of government involvement in procurement is to secure sufficient domestic supplies in order to ensure acceptable consumer prices and cover the needs of local refiners. Various sources provide information on the topic. World import demand is large. confectionary fat and margarine). the only ban on palm products in force in ECOWAS member countries is the Nigerian prohibition of exports of palm kernels. Since the 1970s. as a result. In the first place. to ensure sufficient supply to domestic farmers and to protect the intellectual property rights from being copied by other oil palm producers. are administered in a consistent. subsidies become permanent and the supported industry becomes dependent on government aid.htm 27 . technological developments. 37 See Nigeria Trade Policy Review 2011 at http://www. Their importance is derived from the fact that import duties and restrictions in several cases depend upon the source of imports.wto. applied with a view to protect the domestic edible oil refining industries. distorting or disruptive effects on international trade. to domestic industries. as well as for statistical purposes. government procurement procedures. Safeguard measures consist of temporary restrictions on imports threatening. subsidies granted to Indonesian and Malaysian producers and exporters of crude palm oil are afflicting the competitiveness and export performance of the Indian refiners. impartial and reasonable manner. For more information on the issue please access http://www. subsidies and Rules of Origin. although intended as a temporary trade restriction.wto.2. A typical example is the Nigerian restriction on imports of refined vegetable oils and fats 37. the decision whether imported products shall receive or not most-favoured-nation (MFN) treatment or preferential treatment.3 Trade defence mechanisms The trade defence mechanisms most often applied by countries trading in palm products are safeguards measures. They represent a direct government support to a particular industry and consist of public financial contributions to producers and exporters in the form of grants. regulating the actions countries can take to counter their effects.2. a country can use the WTO’s dispute-settlement procedure to seek the withdrawal of the subsidy or the removal of its adverse effects. However.3. It often happens that.htm. or the development of palm cultivation on peat or other bad land. Subsidies are less direct forms of trade restriction conferring benefits to domestic producers and exporters and providing domestic industry an advantage over foreign competitors who are not subsidized. Subsidy programmes are granted by practically all governments in palm producing and exporting countries for research. The WTO Agreement on Subsidies and Countervailing Measures monitors and disciplines the use of subsidies. Under the agreement. For example. The Agreement requires WTO members to insure that their rules of origin are transparent. Subsidies are generally intended to increase and diversify production and exports. subsidies granted by an exporting country can hurt a domestic industry in an importing country and disadvantage exporters from another country when the two compete in third markets. is accessible at http://www.org/english/tratop_e/safeg_e/safeg_info_e. setting forth the rules for application of safeguard measures. adaptation of existing production facilities to new environmental requirements.wto. The WTO Agreement on Rules of Origin aims at harmonizing the non-preferential rules of origin and ensuring that such rules do not create unnecessary obstacles to trade.org/english/tratop_e/scm_e/subs_e. They are considered in: the implementation of safeguard measures.org/english/tratop_e/tpr_e/tp347_e. the application of labelling and marking requirements. soft loans or equity. or causing serious injury. uniform. promote technological development and enhance competitiveness both in the domestic and international markets. do not have restricting. Technical information on the WTO Agreement on Safeguards.htm Rules of origin are the criteria needed to determine the national origin of a product. and are based on a positive standard (in other words. they should state what does confer origin rather than what does not). national security or the environment protection. Non-transparent and discriminatory conformity assessment procedures can become effective protectionist tools. functions and performance. of these procedures. they often create difficulties to producers and exporters from developing countries. If an imported product does not fulfil the requirements of a technical regulation.wto.More information on the Agreement is accessible http://www.4 Technical barriers to trade (TBT) Technical barriers to trade include Standards and Sanitary and PhytoSanitary (SPS) trade control measures. Technical regulations and standards 39. 40 Conformity assessment procedures are technical procedures which confirm that products fulfil the requirements laid down in regulations and standards.php?id=ap051176def&lang=en Technical regulations and standards set out specific characteristics of a product. but then their market share may be affected if consumers prefer products that meet local standards. However. and tries to ensure that regulations.wto.ecowas. More information on this Agreement is accessible at http://www. The difference between a standard and a technical regulation lies in compliance: while conformity with standards is voluntary. The approved enterprises and palm products listed by member country are accessible at http://www. verification.2. foreseeing that national approvals committees in each member state are responsible for approving and listing the enterprises and products fulfilling the conditions of origin. rather than in terms of product characteristics. the lists should be forwarded to the ECOWAS Commission. it will not be allowed to be put on sale.php 2.htm. exporters bear the cost. inspection and certification. namely testing.org/english/res_e/booksp_e/analytic_index_e/roi_01_e. In case of standards. they can be used as an excuse for protectionism and become obstacles to trade. when set arbitrarily. In certain cases.etls. non-complying imported products will be allowed on the market. 39 28 . it may then prove more appropriate to draft technical regulations and standards in terms of the process and production methods used for producing the product.3. In general./3/4/02 of 23rd April 2002 established the procedure for approval of industrial products. requirements and regulations aiming at consumer protection. In the frame of the ECOWAS Trade Liberalization Scheme. shape. Standards justification includes the protection of consumers’ health and safety. if any.org/english/docs_e/legal_e/17-tbt_e. technical regulations are by nature mandatory. such as: its size.int/approved_products. ECOWAS regulation REG. testing and certification procedures do not create unnecessary obstacles to trade. the way a product is produced can affect these characteristics.htm at ECOWAS member countries have to conform to ECOWAS protocol and procedures for approval of products origin.comm. Generally. the evolution of international trade and the adoption by the World Trade Organization (which most ECOWAS Member States are members of) of the Agreement on rules of origin. The WTO Agreement on Technical Barriers to Trade recognizes countries’ rights to adopt the standards they consider appropriate for human. The ECOWAS Commission is responsible for the distribution of the lists of approved products sent by Member States. or the way it is labelled or packaged before it is put on sale. 38 accessible at http://www. Regulations and standards have different implications for international trade. ECOWAS and UEMOA adopted the same origin criteria.int/sec/index. for the protection of the environment or for meeting other consumer interests.ecowas. animal or plant life or health. quality standards and Sanitary and Phytosanitary measures are used as instruments for authenticating the conformity of quality and specifications of imports and exports with international safety standards. design. consumers’ information needs. standards. and conformity assessment procedures 40 vary from country to country. The ECOWAS protocol A/P1/1/03 38 of 31st January 2003 defined the concept of originating products and the origin criteria applicable for the free circulation of industrial goods. Compliance with existing quality standards and the regulations on edible palm oil production. palm kernel oils have to comply with quality standards related to their physical and chemical characteristics.htm 44 http://www. From 2012 onwards.htm.org/english/thewto_e/coher_e/wto_ippc_e. several voluntary certification schemes set up by industry and associations and recognised in importing countries will be in use simultaneously with the mandatory. Trade in palm products has to comply with a combination of mandatory and voluntary standards and technical regulation. More technical Information on Technical barriers to trade can be found at http://www. Some of them are aiming to protect human safety or health. The further alignment of mandatory Malaysian and Indonesian sustainability standards with the voluntary standards adopted by the majority of importers of palm oil for biodiesel and food products manufacture is a major challenge to be faced the soonest. on enquiry points. such as the repeated cases of palm oil adulteration with carcinogenic ‘Sudan’ red dyes which occurred in Ghana and Nigeria between 2004 and 2009. standards and conformity assessment procedures. the World Organisation for Animal Health 44 and the International Plant Protection Convention 45. The WTO Sanitary and Phytosanitary Measures Agreement sets out the basic rules for the application of their application.Manufacturers and exporters need to know what the latest standards are in their target markets.org/english/thewto_e/coher_e/wto_codex_e. and that they do not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail. and on publications providing information on technical regulations. 43 http://www. WTO member countries are encouraged therefore to use international standards. The agreement stipulates that SPS measures should be based on recognized international standards (particularly these issued by the FAO/WHO Codex Alimentarius Commission 43.wto.wto. Sanitary and Phytosanitary measures are designed with a view to ensuring food safety and animal and plant health. edible palm oil labelling requirements impose the indication of their trans-fatty acids 42 content. WTO member governments have therefore established national enquiry points 41 making this information available conveniently and keeping each other informed of notifications on new or changed regulations.wto. on standardizing bodies having accepted the Code of Good Practice.org/english/thewto_e/coher_e/wto_oie_e. processing and packaging in order to ensure its quality and consumers’ safety could have avoided adulteration cases. a TBT Information Management System has been set up as a "one-stop" system allowing users to track and obtain information on TBT measures notified to WTO by Member governments.htm 29 .htm 45 http://www. The temporary precautionary principle should be applied in the absence of international standards or scientific evidence. 42 Trans fatty acids may increase the risk of coronary heart disease by raising the levels of “bad” cholesterol and lowering levels of "good" cholesterol in blood.wto. guidelines and recommendations where they exist. Increased consumers’ concern about environmental preservation and sustainable palm oil production has led many governments and private groupings to adopt standards and regulations in this respect. 41 The list of enquiry points for each ECOWAS member country can be seen at http://www.org/english/tratop_e/tbt_e/tbt_enquiry_points_e.wto. or to adopt SPS measures provided that they are scientifically justified.htm. government-led and industry-controlled sustainable palm oil schemes of Indonesia and Malaysia. Moreover. They should also be based on science and the scientific assessment of risk. For instance.org/english/tratop_e/tbt_e/tbt_info_e. Countries are free to set their own standards and regulations provided that these are based on science and are applied only to the extent necessary to protect health and safety. prices. Trade facilitation is also encompassing technology infrastructure because of the fast integration of networked information technology into trade. increased efficiency of the logistics of moving goods through ports or the documentation requirements at a customs post at the border. in order to protect consumers’ health. namely the tentative of Senegal to prohibit imports of edible palm oil from Côte d’Ivoire. trade information provision. 30 . this is particularly true for trade in palm and palm kernel oils in West Africa. They are used for stimulating export development and can concern the entire supply chain including production. market access rules and regulations. They entail the provision of export support services including market research. In Malaysia and Indonesia for instance. This tentative aborted following the ECOWAS and WAEMU ruling on the issue. Trade facilitation measures include governmental support in simplification of trade procedures and the increase in product competitiveness through the facilitation of exports (export credit financing. government and the industry are joining efforts to foster the expansion of palm oil uses. knowing however that the Côte d’Ivoire manufacturer could produce and export only refined palm oil with a content of 50% saturated fatty acids. According to the definition of SPS Agreement. insurance and credit guarantee schemes.A recent (2009) case of utilisation of sanitary standards for discrediting a palm product had a happy resolution. Export promotion measures are generalised in countries producing and exporting palm products. they also entail the organisation of the sector. They are focused primarily on the demand side of the products and are best implemented for products with existing competitive supply capacities.2. more transparent legal rights and obligations for traders. and the harmonization of regulatory requirements constitute the core of trade facilitation reforms. processing. increase exports and improve the image of palm oil in Europe and the United States. The pretext used by the Senegalese producer was the necessity to impose a sanitary standard setting the acceptable maximum threshold of 30% saturated fatty acids in the refined edible palm oils consumed or imported into Senegal. quality requirements. The protectionist market access tentative was initially caused by the rough competition between the two major producers and exporters of edible palm oil in the two countries and the efforts of the major Senegalese palm oil manufacturer to maintain his monopoly on the domestic market. training of farmers and processors. etc. measures taken to protect human or animal life from food safety risks (biosafety) could be related in the future to genetically modified organisms (it is not yet decided).5 Trade development instruments These instruments comprise trade facilitation measures and export promotion measures. Market linkages complement export promotion measures by placing equal emphasis on both supply and demand side. Trade facilitation is essential for export development. marketing and delivery of goods. business opportunities and import and distribution channels in target markets. Promotion and facilitation of exports are key issues for increasing supply availabilities and trade expansion in developing countries. organisation of trade missions. In the case of palm products. 2. Malaysia is the only country undertaking experimental research on genetic modification of oil palm with the strong support and commitment from the government and the involvement of the Malaysian Palm Oil Board. Malaysian government provides also substantial incentives to plantation companies and processors for market linkages and supports strengthening of trade links with overseas buyers. The organisation and simplification of customs procedures and formalities. monitoring of demand. the provision of inputs and extension services and the facilitation of contractual linkage with commercial enterprises. access to better storage facilities.).3. ECOWAS Commission has adopted already a series of protocols aimed at facilitating trade and investment in the subregion. However. The Federation of West Africa Chambers of Commerce and Industry supports the lifting of all bottlenecks to the implementation of ECOWAS protocols aimed at facilitating cross-border trade and investments. Trade facilitation Agendas and arrangements are also pursued by the World Customs Organization. the Asia-Pacific Economic Cooperation (APEC) is committed to regional trade facilitation initiatives focusing mainly on the simplification and standardization of customs procedures. security measures and delays in clearance at national borders are very high in West Africa. trade facilitation measures were broadened to include the environment in which trade transactions take place and where national policies and institutional structures play an important role. for instance. including fees. customs valuation procedures. it centers on general trade principles that underpin an open trading system and include transparency. since the resolution of the Abuja Food Security Summit in December 2006 identified palm oil as one of the nine continental strategic commodities. Trade facilitation in the WTO definition has a more specific and limited focus than trade facilitation for development. and traders from different countries. Within the Asia and Pacific region. and the publication and administration of trade regulations (containing general commitments to assist in ensuring timely publication of regulations regarding imports. predictability. Increasing awareness of border trade-related transaction costs has called for multilateral regulations and regional and multilateral coordination regarding trade facilitation. nondiscrimination. both in transports and in the running and spread utilization of the ASYCUDA 47 customs software program). with a view to attaining full regional integration. firms. the ignorance of the protocols by the business community and the infringement practices of some implementing public officers. UNCTAD (actively involved in trade facilitation at a global level. transparent and incorrupt government regulatory agencies are considered to provide a favorable environment for trade transactions. 47 Automated System for Customs Data and Management 31 . The ability of ECOWAS member countries to deliver goods in time and at low costs is a key determinant of their competitive participation in the regional and international trade.More recently. Facilitation of border trade in palm products is particularly important. and the agreements on Technical Barriers to Trade and on Sanitary and Pytosanitary Measures. considering issues such as the freedom of transit (providing a basis for creating an environment in which the transit of goods is free from barriers to transport and discrimination between suppliers. and several regional integration initiatives. 46 Other WTO agreements that have an effect on trade facilitation agenda include the Agreement on Import Licensing Procedures. Trade costs associated with transportation charges. fees and formalities related to importation and exportation (related to customs clearance procedures and the nondiscrimination and transparency in fees and rules applied to goods crossing borders). and other rules). 46 A Trade Facilitation Agreement is in preparation in WTO. large scale processing plants. The trade facilitation measures adopted in this context are not implemented as enforceable agreements. the envisaged building of a Common African Market for palm products transcending national and sub-regional borders would offer an appropriate economic space for private investments justifying the setup of large estates and the implementation of profitable. but rather as action programs. due process. and simplification and avoidance of unnecessary restrictions to trade. documentation requirements. as an important pillar of its actions in serving the interests of ECOWAS companies and preparing them for international competition. the implementation of these protocols has not been totally effective for various reasons including insufficient political commitment. Senegal. Guinea Bissau. Indonesia. A coordinated action is undertaken in cooperation with WAEMU to facilitate trade procedures. Trade and transit transport corridors have been established in order to address their specific needs.int/Pages/Home. Singapore and Thailand). These corridors are accepted by custom authorities. 49 Benin. are leastdeveloped and landlocked. Their major objectives are to reduce trade imbalances and achieve harmonisation of policies with regional partners.aspx. the multilateral trading system and WTO agreements. In line with its mandate. Chad. Mali and Niger. Togo. promote diversification of exports.Mali (1200 km with multimodal transport options to Ouagadougou and road transport to Mali). These objectives should be attained through access to the larger markets resulting from regional economic co-operation. Burkina Faso. Abidjan -Burkina Faso . namely the Dakar-Njamena and Dakar-Lagos corridors. Côte d'Ivoire.2. to maintain and enhance economic stability.6 International and national trade policy instruments International trade policy instruments include regional and preferential trade arrangements (RTAs). and the Association of Southeast Asian Nations 50 (ASEAN). 32 . Lome – Burkina Faso – Mali (200 km by road). Cambodia. 37 on the 1100 km between Abidjan and Ouagadougou.org/UI/PublicMaintainRTAHome. For example. with a view to suppress the illegal and inefficient ones. in particular customs. and data on RTAs notified to the WTO is available in the RTA database: http://rtais. An on-going ECOWAS Transit Facilitation Programme undertakes the monitoring and the management of road blocks 48 existent in the sub-region. Myanmar. and to stop the unlawful harassment of travellers on regional key road corridors across the sub-region. six of them are already members of the WTO (Brunei. See (http://www. Niger. Malaysia. Regional trade arrangements are defined as reciprocal trade agreements between two or more partner countries. RTAs comprise free trade agreements and customs unions. the main corridors are Dakar . ECOWAS drives the development of and maintenance of Trans-African Highway network. and two others (Laos and Vietnam) are negotiating WTO membership. Cotonou – Niger – Burkina Faso – Mali (1000 km to Niger.Mali (1250 km by rail). according to ECA there are 25 checkpoints on the 960 km between Tema and Ouagadougou. lacking maritime access and resting until now isolated from world markets. Detailed information on RTAs is available at: http://www. 2.wto.3.htm.uemoa. ECOWAS is aiming to promote co-operation and integration. the Philippines.org/english/tratop_e/region_e/region_e. In addition. The Community is progressing in the process of harmonization and coordination of national 48 Nearly all ECOWAS member states have set up a multitude of check-points (road blocks) where drivers are subject to unnecessary administrative harassments and extortions. Tema/Takoradi -Burkina Faso – Mali (1100 km by road to Ouagadougou). RTAs in force notified to WTO include the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union 49 (WAEMU). Mali. linking their economic centres with neighbouring ports. foster relations among Member States and contribute to the progress and development of the African Continent. and create a competitive regional economy. leading to the establishment of an economic union in West Africa in order to raise the living standards of its peoples. these countries have to face additional high border crossing and transport costs. multimodal options) and Lagos – Niger (1500 km by road). 34 on the 1000 km between Cotonou and Niamey and 20 on the 500 km between Niamey and Ouagadougou.wto. In addition to their nearly total dependence on the neighbouring countries to access sea ports and engage in international trade. and bilateral cooperation initiatives.Four of the ECOWAS member countries. Burkina Faso.aspx#) 50 ASEAN has eight member countries. A few government to government barter trade agreements involving palm oil. Such preferential trading schemes include the GSP with global coverage. 33 . the West African Economic and Monetary Union (UEMOA) Commissions and the European Union. WTO coordinates the rules-based MTS. labour standards or environment provisions.policies and the establishment of a common market through liberalization of trade. of customs duties levied on imports and exports and the abolition of non-tariff barriers in order to establish a free trade area at the Community level. The basic premises on which MTS operates include fair competition and transparency in trade. The difficult resolution of the serious incident which led to the Senegalese import ban on refined palm oil imports from Côte d’Ivoire in September 2011 illustrates the necessity of establishing and enforcing standards and certification systems for palm products. the importance of the abolition of non-tariff barriers and the harmonization of trade policies in the Community.org/?lang=1. have a direct bearing on world supplies and prices of palm products. Information on PTAs notified to the WTO is available in the PTA database at http://ptadb.org/ptaHistoryExplorer. in particular Indonesia and Malaysia.wto. Brazil – Côte d’Ivoire agreements and Ghana – EU Interim Economic Partnership Agreement (I-EPA). export competitiveness and inbound investment. Preferential trade arrangements (PTAs) are unilateral trade preferences. The finalisation of the Common External Tariff (CET) is one of the major steps in the establishment of a Customs Union under the ECOWAS integration agenda and the conclusion of on-going Economic Partnership Agreement negotiations between ECOWAS. national treatment entailing equal consideration of nationals and foreigners in trade. Bilateral agreements between partner countries are concluded for a limited period of time and are usually very attractive to both politicians and business communities who are looking for quick results. Tariff policies of ASEAN member countries. They are often used as instruments for domestic reforms in areas where the multilateral system offers a weaker leverage. Palm industries in this zone experienced in the recent years the greatest changes in terms of economic integration. as over 95 per cent of the palm oil exported by the region is destined to non-ASEAN markets. Trade in palm products in the ECOWAS region will be facilitated by the adoption of the Common External Tariff (CET) and the implementation of accompanying safeguard measures.aspx). technical standards. Examples of bilateral agreements include Sweden – Côte d’Ivoire. among Member States. bilateral trade agreements cover areas such as investment. encouraging specialisation and the opening up of national economies through elimination of tariffs and NTBs. were reported from Indonesia and Malaysia. and the most favoured nation treatment (MFN) . ASEAN agreement is of particular relevance to trade in palm products.whereby the most favourable terms in trade are extended to all WTO members.wto. foreseen to take place by mid-2012. by the abolition. The granting of non-reciprocal trade preferences to developing countries by developed countries on a unilateral basis is a traditional mechanism for developed-developing country trade relationships. the duty-free treatment for African LDCs provided by Morocco and the ECOWASEU economic partnership agreement (http://ptadb. competition. Because of similarities in interests and similar common values. generally in periods of ample domestic supplies. The system includes a mechanism for dispute settlements amongst members and allowable trade defence mechanisms. the cross-regional Lomé Convention. Multilateral trading system (MTS) aims at stimulating the sustainable world economic growth through trade expansion. the African Growth and Opportunity Act (AGOA) provided by USA. etc. 2. transport. Palm oil border trade at a small scale is done by traders using informal transit services and paying only a token sum to customs in order to cut the cost of clearing. The buoyant crossborder trade is supporting incomes of oil palm and provides food access and security to a multitude of vulnerable rural households. volatile exchange rates which influence the direction of the cross-border trade flows. secure the distribution of food and consumer goods. although it is not recorded in national accounts. all currencies have declined in value compared to the US dollar. each characterised by well-defined roles and specific modes of trading. The assembly markets host transactions between wholesalers and function as an interface with the port (and the international market) and urban markets.11). the number of checkpoints on roads and the storage capacities of markets are critical in choosing a trade route. Although the currencies of choice for wholesalers are the CFA in WAEMU zone and the US dollar in Guinea. as well as trade information networks. In addition. in addition to meeting a part of the dynamic urban market demand in the region.3.prohibited or not. Once they have entered a country. The competiveness of informal markets and the direction of trade routes are reacting very fast to economic and political changes in member countries. Sierra Leone and Gambia. Palm oil is one of the staple foods regularly traded informally at borders. namely Côte d’Ivoire. and storage. when the devaluation of currency of one country versus currencies of neighbouring countries is higher. lack of credit. its list of major products for re-export in West Africa include palm oil and its fractions. they are localised in specific areas and coordinate their schedules. Since 2009. Nigeria. The purpose of the weekly markets is to concentrate supply and demand in order to reach a critical mass that can trigger trading activities. such as changes in government trade policies and measures. taxes and levies on these goods are paid to local administration. operating in relationship with assembly markets. Informal and the cross-border trade . often organized in national ‘syndicates’ and concentrate the consignments of palm oil collected from lumos and the imports received from the port. They gather traders from the sub region. Big transnational or national networks of traders organised by ethnic groupings are handling the important trade in palm oil originating from the region and from imports (mainly from Asia). A profusion of participants undertake cross-border trade in the ECOWAS region. The informal border markets response ability is adversely affected by poor transportation. whether or not refined (code 15. border security problems and administrative burdens. purchasing power. informal transactions are commonly made in the national currencies of cross-border markets. are shown in Annex IV. wherefrom the importance of trade facilitation measures to be undertaken by governments and ECOWAS in order to facilitate palm oil distribution in the region. the competitiveness of its exports increase and bear upon the direction of trade. assembly markets and urban consumer markets. Senegal and Ghana. trade security. Informal trade for reexport is considerably larger and highly organized in finance operations. ECOWAS acknowledges the importance of palm oil re-exports for the region.The agreements in force in the main ECOWAS countries producing palm oil. crop outputs. Bulk consignments are further 34 . but at different rates. goods informally traded across borders are openly sold in licensed shops by registered traders. Three main types of informal markets exist: weekly rural markets (lumos). Exchange rate movements can also constitute trade incentives and determine producers’ and exporters’ competitiveness. Liberia.3 Cross-border trade issues Informal trade between ECOWAS member countries has been and remains an obvious practical response of the population to economic crises and wars in the region. by definition. estimated to have attaint 780 000 tons in 2010.dispatched to urban markets and to the port for re-export.to seven-year cycles of oil-bearing crops 53. speculative. In Sierra Leone. Short selling is also. of which 60 per cent are exported to Guinea. groundnut. Ganta wholesale market is estimated to handle 80 to 100 tons of palm oil every week during the marketing season. such as Banjul. Chart 4 illustrates the tight correlation between the prices of palm. Some of this demand is met by formal imports. and the amount may well have been underestimated. Ganta (Nimba county. Supply on these markets is abundant and diversified. they can control wild price fluctuations in normal times. while price floors are minimum prices set above the equilibrium price. soybean. they handle daily large quantities of goods and can accommodate hundreds of retailers. 52 Speculation implies deliberate assumptions and anticipations of changes. Liberia) and Guéckédou (Guinea). as well as with fossil fuel prices. Some of Guinea’s palm oil imports are re-exported and make their way to Diaobé. coconut palm) 35 . Diaobé market was reportedly handling 5000 to 6000 tons of palm oil per year. the level of stocks and government intervention in markets by fixing restrictions on prices 51. Urban markets are ‘permanent’. etc. rapeseed. as well as tree-crops (oil palm. but also exacerbate price swings in times of economic or political crises. Guinea Bissau and Guinea). the coconut oil. 53 Annual oilseeds (soybean. Price issues Prices are determined by fundamental factors. where the commodity is passed on to Senegalese and Gambian traders. See further subchapter on futures trading. Price controls influence the market efficiencies. They are used economy-wide in an attempt to reduce inflation. but a large part is supplied as palm oil and packed palm olein passing through the porous borders of Nigeria with its neighbouring countries. Bissau. by definition. Conakry. Trades on assembly markets takes place between sellers. in particular its soybean oil substitute. a short distance from Gambia. Nigerian chronic shortage of edible oils and the ban imposed on imports of refined oils led to the regular increase of import needs. Supply and demand are particularly diversified on markets of capital cities that have a seaport and a large population. Freetown or Nouakchott. Mobile small traders active in weekly rural markets can also be buyers and sellers on nearby assembly markets.who are wholesalers or dispatchers. due to consumers’ relatively high purchasing power and the large volumes traded. and buyers . speculation. Palm kernel oil prices are correlated with its substitute. Cross-border trade in palm oil and palm olein is also covering a considerable part of Nigerian market requirements. 51 The two basic types of price controls are price ceilings and price floors.1 Correlation between prices of vegetable oils Prices of vegetable oils follow the specific three.who are producers or collectors. two-thirds of which are traded to Guinea. Prices of palm oil are strongly correlated with the prices of annual vegetable oils. Trading futures contracts in commodity markets is. Dakar. 3. 3. Before the period of instability in Guinea that began in 2007. Barmoi market handles some 25 to 30 tons of palm oil per week. Current trade is estimated to have dropped to a third due to poor road security. Their volatility and the amplitude of their fluctuations are influenced by speculation 52 and market “feelings”.). palm kernel and coconut oils over the past ten years. Price ceilings are maximum prices set below the equilibrium price. namely the balance between supply and demand (the change in price is in fact what keeps the supply and demand in balance). The largest wholesale markets for palm oil are Diaobé (in Senegalese territory. 11 Jul 2011 Apr 2011 janv. bulk. palm kernel and coconut oils.11 Apr 2011 nov. Chart 5: Correlation palm.05 Jul 2005 Apr 2005 janv.06 Apr 2006 nov.09 oct.05 300 .06 Jul 2006 Apr 2006 janv.04 oct. Philippines/Indonesia origins. coconut and soybean oils.Chart 4: Price corelation palm.05 Aug 2004 mars.03 May 2003 Dec 2002 Jul 2002 Feb 2002 0 Soybean oil Note Palm oil monthly price: US $/ton.09 Jul 2009 Apr 2009 janv. source World Bank Coconut oil monthly price: US $/ton. Rotterdam. Rotterdam.i.08 Jul 2008 Apr 2008 janv. and their milder correlation with crude petroleum prices during the period 2005 to 2011. Malaysia Palm Oil Futures (first contract forward).i.07 oct. c. approved grades. US$/ton 2500 2000 1500 1000 500 Palm oil Palm kernel oil Coconut oil sept. c. 4-5 per 54 cent FFA .10 Aug 2009 mars.07 Jul 2007 Apr 2007 janv. soybean and crude petroleum oils 1500 1300 1100 900 700 500 Palm oil 54 Soybean oil Free Fatty Acids content 36 Crude petroleum oil oct.06 oct. source IMF Soybean oil monthly price: US $/ton.f.11 oct.10 Jul 2010 Apr 2010 janv. source World Bank Charts 5 and 6 are showing the strong correlations between the prices of palm.10 oct.10 Jun 2010 janv. soybean. Malaysian origin.08 oct.08 May 2008 Dec 2007 Jul 2007 Feb 2007 sept. source IMF Palm kernel oil monthly price: US $/ton. Chicago Soybean Oil Futures (first contract forward) Exchange.f.05 Jun 2005 janv. palm kernel.09 oct. 6 per cent of the annual crude petroleum consumption. approved grades. Malaysia Palm Oil Futures (first contract forward). Rotterdam. source IMF Crude petroleum oil monthly price: US $/barrel. Producing biodiesel from cheaper palm. as the world envisages the increased use of cleaner alternative burning fuels.2 billion tons in 2011) is so large that the 154 million tonnes of vegetable oils and fats consumed worldwide 55 is equivalent to only 3. allowing earnings of up to 40 per cent of the vegetable oils prices. West Texas Intermediate and the Dubai Fateh. 4-5 per cent FFA.07 janv. bulk. 37 . This led several governments starting with the European Union and United States to promote the use of biodiesel for partial replacement of petroleum diesel.07 Apr 2007 Jul 2007 oct. from the annual average of 26 US$ per barrel (191 US$ per ton) in 2002.06 Apr 2006 Jul 2006 oct.05 Apr 2005 Jul 2005 oct.08 janv.11 500 Palm kernel oil Coconut oil Crude petroleum oil Note Palm kernel oil monthly price: US $/ton. Chicago Soybean Oil Futures (first contract forward) Exchange.09 Apr 2009 Jul 2009 oct. West Texas Intermediate and the Dubai Fateh.f.f. simple average of three spot prices . source IMF 3.06 janv.08 Apr 2008 Jul 2008 oct. rapeseed or soybean oils and selling it at the price of petroleum diesel was very lucrative. Rotterdam. petroleum prices overtook these of vegetable oils (see Chart 7). but the percentage is expected to rise.11 Apr 2011 Jul 2011 oct. Prices of crude petroleum oil skyrocketed over the past decade. to 104 US$ per barrel (762 US$ per ton) in 2011. simple average of three spot prices . From 2005 to the beginning of 2007. equivalent to 4. providing the incentive to convert vegetable oils into biodiesel for transportation.05 janv.Dated Brent.2 Correlation between crude petroleum and vegetable oils prices World demand for crude petroleum oil (estimated at 88 million barrels/day. coconut and crude petroleum oils 2000 1500 1000 0 janv. source IMF 2500 Chart 6: Correlation palm kernel.i. c. 55 Only 10% of palm oil is presently used for biodiesel manufacture. Malaysian origin.09 janv. source World Bank Crude petroleum oil price: US $/barrel.10 janv. source World Bank Coconut oil monthly price: US $/ton.Dated Brent. c.Note Palm oil monthly price: US $/ton. Philippines/Indonesia origins.10 Apr 2010 Jul 2010 oct. source IMF Soybean oil monthly price: US $/ton.i. 03 Feb 2004 Jun 2004 oct. West Texas Intermediate and the Dubai Fateh. the more unprofitable the conversion operation gets because of the consequent increase of the vegetable oil raw material prices.08 Feb 2009 Jun 2009 oct. Physical and futures trading Two principal types of trading activities are coexisting in oilseeds. However. Physical trading involves the actual movement of goods from origin to destination and is associated with cash contracts and documents on physical insurance.com/university/futures?partner=answers 38 . shipping and storage of the goods. Futures trading 56 consist in transactions “on paper”.04 Feb 2005 Jun 2005 oct. reducing profit margins. 56 More reading: see tutorial at http://www.07 Feb 2008 Jun 2008 oct. Malaysia Palm Oil Futures (first contract forward).Chart 7: Evolution palm oil versus crude petroleum prices 1400 1200 1000 800 600 400 200 Feb 2002 Jun 2002 oct. The vicious cycle of profit margin fluctuations is aggravated by the incomplete utilisation of the large biodiesel installed capacities. Futures trading allow offsetting some of the risks of price fluctuations inherent to trading on cash markets. which in turn re-stimulated the demand for biodiesel.10 Feb 2011 Jun 2011 oct. With subsidies. oils and meals: cash.investopedia. The reduced demand led to price decreases.09 Feb 2010 Jun 2010 oct.05 Feb 2006 Jun 2006 oct. simple average of three spot prices: Dated Brent. carried out under futures contracts. even if the price of vegetable oil is higher than that of petroleum diesel. Prices of vegetable oils and fats started increasing in an attempt to reduce demand and recreate market equilibrium. source IMF At that time. which was (and remain) part of the policy to decrease dependence on fossil fuels and to lower carbon dioxide emissions for reducing global warming.02 Feb 2003 Jun 2003 oct. 4-5 per cent FFA. biodiesel manufacturers are facing a no-win situation: the more advantageous the conversion of vegetable oils into biodiesel becomes. even after the subsidies are factored in. while the oils and fats market has been in some degree of balance between supply and demand for the traditional food and oleo chemical applications before 2004/2005. These cyclic changes are being tempered by market price distortions generated by subsidies on biodiesel. the new demand for bio-diesel drove to a major imbalance. biodiesel production appears to be viable. governments provided subsidies and incentives to encourage the use of biofuels.06 Feb 2007 Jun 2007 oct. and the price fluctuation cycle is repeating since.11 0 Crude petroleum Palm oil Note Palm oil monthly price: US $/ton. As a result. source IMF Crude petroleum oil: US $/ton. 4. or physical trading and trading in futures. 4. where futures markets exist. and at time costly. Normally. traders should have high standards of integrity. The two contract parties bear each other’s credit risk (the possibility that the partner may default by failing to pay credit and interest in a timely manner or by delivering goods not complying with the contract conditions and specifications). as reflected in Chart 8.worldbank. Investors use this strategy when they are unsure of market direction 58 Database accessible at http://databank. professional trading skills and the standing of partners in the trade (some traders forgo lengthy. Cash contracts are privately negotiated between individual buyers and sellers. including the palm-based products. The main objectives in cash trading are obtaining the best price. Even in the case of palm and palm kernel oils. investigations into the status of potential partner company before accepting its business standing).i. According to World Bank 58 and IndexMundi 59 data on cash prices. or buying at the lowest price in order to make reasonable trade profits are. their transportation to the port of destination and the marine insurance 61 Prices of first contract forward for crude palm oil basis with 5 per cent FFA on arrival 39 . Crude palm oil physical and futures markets tend to move together.1 Physical (cash) trading The largest part of the trade in oilseeds. Rotterdam (see Chart 9. which may be preferred at times to a futures hedge. and to Bursa Malaysia Derivatives on futures prices.do?Step=12&id=4&CNO=1175 59 IndexMundi at http://www. flexibility. They have to be familiar with their contractual obligations under the different types of cash contracts. cash contracts can be used for constructing hedges 57. Considerations of utmost importance are high standards of business practice.indexmundi. They are not standardised and their details are considered confidential and usually not disclosed to public. Insurance and Freight . such as a futures contract. oils and fats. a hedge consists of taking an offsetting position in a related security. is carried out under cash contracting.the seller pays for the goods. 57 Hedging is making an investment to reduce the risk of adverse price movements in a purchase. crude palm kernel oil futures prices (settlement price for next seven month contract) are higher than the cash prices of crude palm kernel oil of Malaysian origin. this may be due to the costs of storing and insuring the oil and/or to the design of the contract. cash contracts may foresee price premiums for counterparty credit risk. Since the launching of the crude palm kernel oil futures contract (FPKO) by Bursa Malaysia (2007).com/commodities/?commodity=palm-oil&months=120 60 Prices Cost. the cash CIF 60 prices of palm oil of Malaysian origin delivered to harbours in North-West Europe between 2005 and 2001 were slightly higher than the Malaysian palm oil futures prices 61.f. same sources). courtesy and maintenance of the confidentiality of transactions.org/ddp/home. However. On a personal level. c. Futures trading allow producers and buyers to offset the effects of adverse future price movements through transparent.08 nov. 4.07 mars.i.11 Apr 2011 Jul 2011 oct.08 May 2008 Jul 2008 sept.11 0 PO futures PO c. A commodity is fully or partially exchangeable: that is.10 Apr 2010 Jul 2010 oct. Prices of commodity goods are a function of the market as a whole.09 janv.09 May 2009 Jul 2009 sept. 40 .2 Futures trading Futures contracts are traded on Commodity 62 Exchanges (also called commodities futures markets).08 mars.07 nov.11 0 PKO futures PKO c.07 janv. for example.06 janv. US$/ton 8000 7000 6000 5000 4000 3000 2000 1000 janv.08 janv.1400 Chart 8: Palm oil physical and futures prices.09 janv.10 janv.09 nov.08 janv. the market treats it as equivalent (or nearly so) no matter who produces it (palm oil.f.05 Apr 2005 Jul 2005 oct.10 janv.10 nov.07 May 2007 Jul 2007 sept.10 May 2010 Jul 2010 sept.07 janv.05 janv.08 Apr 2008 Jul 2008 oct.11 mars.09 mars. US$/ton 1200 1000 800 600 400 200 janv.10 mars. is traded as a commodity independently of who produced it and where). standardised and efficient hedging of agricultural 62 The term commodity describes a class of goods for which the demand is met by supplies without qualitative product differentiation across a market.07 Apr 2007 Jul 2007 oct.11 nov.f Chart 9: Palm kernel oil physical and futures prices.09 Apr 2009 Jul 2009 oct.06 Apr 2006 Jul 2006 oct.11 May 2011 Jul 2011 sept.i. 64 The method of determining spot prices through basic supply and demand factors. Because of the laid-down rules and procedures. they needed a stable conversion to cash money. Thales let them out at any rate he pleased. and made large quantities of money. A Commodity Exchange 63 is usually an incorporated non-profit association that determines and enforces rules and procedures for the trading of commodities and related investments. then a margin call is made and the account owner must replenish the margin account. The first standardized futures contract has been established by the Chicago Board of Trade in grain trading in 1864.and vice versa. these aristocracy warriors were paid in rice and. to meet the needs of samurais. 41 . It is a market in which multiple buyers and sellers trade commoditylinked contracts on the basis of rules and procedures laid down by the Exchange. whether in the spot market for current deliveries or in the forwards/futures markets for deliveries at predetermined time and place. Trading on a commodity exchange offers numerous benefits. The first futures exchange market in today’s sense was established in 1730 in Japan as a rice exchange. cotton futures were being traded in Mumbai and within a few years this had expanded to futures on the edible oilseed complex. Since the futures price will generally change daily. for example. Further futures trading continued at the same period in Japan with silk and in Holland with tulip bulbs. dealers and consumers. after a series of bad harvests. and many presses were needed concurrently and suddenly. In 1875. in addition to price determination. offering a cost effective marketing system through transparent costing and pricing of transactions. the price will typically increase . enforcing contract performance. deals in a commodity exchange are transparent. The commodity exchange not only enables buyers and sellers of the commodity to insure themselves against the negative effects of price fluctuations. if the demand for a particular good is higher than its supply. raw jute and gold bullion. which ensures a guaranteed settlement system and reduces price risks. and because olive press owners were willing to protect themselves against the possibility of a poor yield. This process is known as marking to market. and addressing solvency and credit risks. the difference in the prior agreed-upon price and the daily futures price is settled daily also. Exchanges ensure also the maintenance of quality standards of commodities traded and the trading practices. The exchange will draw money out of one party's margin account and put it into the other party account. One of the primary functions of a commodity exchange is to provide an efficient price discovery mechanism 64 by bringing together a large number of buyers and sellers.no one knew whether the harvest would be plentiful or poor. The exchange requires both parties to put up an initial amount of cash. called the margin. so that each party has the appropriate daily loss or profit. are the provision of a means for disseminating information on price levels. it provides the most efficient mechanism for determining a market price. prices are published and market information is available to all players. The purpose of the futures exchange institution is to act as intermediary and minimize the risk of default by either contracting party. the amount exchanged is not the specified price on the contract but the spot value (since any gain or loss has already been previously settled by marking to market). If the margin account goes below a certain value. Thales successfully negotiated low prices because the olive harvest was in the future . Thus on the delivery date.commodity prices. but also performs the function of auctioneer. He used to made agreements with local olive press owners: he deposited his money with them in exchange of the guarantee that he will be granted the exclusive use of their olive presses when the harvest was ready. This price can then be used as a benchmark for cash transactions by producers. Other benefits of commodity exchanges and of future markets. The price levels established on the open market can therefore represent accurate depictions of the prevailing supply/demand situation. that is. 63 A tiny bit of history: the first equivalent of a commodity exchange is said to have been developed around year 580 BC by the Greek philosopher Thales of Miletus. When the harvest time came. Through its price risk management function. futures trading reduce the intra-seasonal spot price volatility and farmers’ returns. a clearing house for the futures and options exchange. Moreover. a futures market requires a turnover high enough to make it possible to open or close out a contract or a number of contracts at a moment's notice without distorting the price. provides and disseminates 67 In Arabic it means commodities market 42 .dce. and crude palm kernel oil futures (FPKO) in the world. settlement and depository services.bursamalaysia. The following commodity exchanges offer futures trading in palm-products • Dalian Commodity Exchange (DCE) Dalian Commodity Exchange (http://www.com. a clearing house for the securities exchange. It also acts as a nominee for the central depository and receives securities on deposit for safe-custody or management. as the true level of demand is reflected in the price signals.bursamalaysia. an offshore financial exchange. • Bursa Malaysia Derivatives Berhad (BMD) Bursa Malaysia Derivatives Berhad (http://www. initially as a part of the Singapore Stockbrokers' Association dealing in securities in the British Malaya. specifically designed to facilitate Islamic finance. Large-volume trading provides flexibility over time. self-regulating and membership legal entity established in 1993. as farmers can better appreciate the comparative prices of different crops. Exchanges monitor and ensure the integrity of their member companies and brokers and provide dispute settlement systems through rules of arbitration offering a faster alternative to the court system. futures and options exchange. Futures products offered are refined palm oil and RBD palm (as well as. 65 Previously known as Kuala Lumpur Stock Exchange (KLSE). Oil palm farmers have a direct advantage to be informed on price levels via commodity exchanges: they are more accurately informed about market. non-GMO and GMO soybeans. Market and price information provided by Bursa Malaysia can be accessed at: http://www. and ultimately income differentials. Cropping based on futures rather than on spot prices increases the likely returns and facilitates crop diversification. Today 65 BMD is one of the largest bourses in Asia 66.com/website/bm/about_us/) is an exchange holding company operating a fully-integrated exchange and offering the complete range of exchange-related services including trading. soybean oil and meal). a central depository. Bursa Malaysia launched Bursa Suq Al-Sila 67'. operating the most successful crude palm oil futures contract (FCPO). amongst others. an exchange helps farmers to avoid large losses when prices fall and offers them an increased bargaining power and better income predictability. USD crude palm oil futures (FUPO). clearing. the first sharia-compliant 68 commodity trading platform in the world.com/website/bm/market_information/market_statistics/ By mid.To be successful. enabling futures traders to select a particular month from among an assortment of delivery months and thus provide a hedge against the risks involved in their physical transactions. a registered electronic facility for secondary bond market.2009. It is one of the four futures exchanges in China. in other words they can take more marketing decisions themselves. the Exchange was set up in1930.cn/portal/cate?cid=1114585896100) is a non-profit. namely operation and maintenance of: a securities exchange. as they are in a position to hold on the product until price level is good. 66 The ten wholly-owned subsidiaries of Bursa Malaysia own and operate the various businesses. pricing and the reference prices and are more likely to find a market for their crop. At the end of 2009.bbj-jfx.com/company/history/ and on crude palm oil futures contract at http://www.sgx. • Singapore Exchange (SGX) Singapore Exchange is the Asian gateway connecting investors in search of Asian growth to corporate issuers in search of global capital.com/). the American Stock Exchange. It also has alliances or significant relationships with the Chicago Mercantile Exchange. Bursa Berjangka Jakarta JFX. dollar-denominated contract. At present it operates a crude palm oil futures contract. • Indonesia Commodity & Derivative Exchange (ICDX) The Indonesia Commodities and Derivatives Exchange (http://www.id/). Formed in 1999. more information can be accessed at: http://www. Under the Bursa Suq Al-Sila concept. The exchange is operating a crude palm oil futures contract (CPOTR) and a RBD olein futures contract (OLEINTR). with the safety and liquidity of the CME Group. 43 . This allowed CME Group to develop a US dollar-denominated.icdx. the Exchange is the result of merging two exchanges: Stock Exchange of Singapore and Singapore Intl Monetary Exchange. The expansion of the palm oil also creates opportunities for cross-trading with soybean oil. at http://www. Bursa Malaysia Berhad entered into a strategic partnership with Chicago Mercantile Exchange (CME). can pay the difference between its spot price and the futures price without being delivered.cmegroup. CME Group customers are able to trade the palm oil in a cash-settled. most notably Bursa Malaysia.html • Jakarta Futures Exchange Jakarta Futures Exchange was set up in 2009 (PT. the bank buys crude palm oil from a producer and sells it to a customer at a profit. launched in 2010. the Australian Stock Exchange and the National Stock Exchange of India.com/trading/agricultural/crude-palm-oil-futures. The Exchange was a founding member of the GLOBEX Alliance. with a view to improve global accessibility to its derivatives. More info on CME at http://www. is attempting to win business from the South East Asian region. based on the historically strong correlation between these products. This multi-commodity futures exchange started by launching crude palm oil physical trading contracts. whereby the seller of a commodity who does not wish to take ownership of the physical commodity traded (palm or palm kernel oils in our case). at its Globex electronic platform 69 in Chicago.This fully electronic commodity trading platform used crude palm oil the launch commodity. The customer then sells back the commodity to the spot market for cash. With the launch of futures on crude palm oil. 69 The CME Globex trading system was introduced in 1992 as the first fully electronic trading platform for futures contracts 70 Cash settlement is a more convenient method of transacting futures contracts.cmegroup.com/wps/portal/sgxweb/home/about_us/!ut/p/c5/DcrbDoIgAADQL2ogltijiqGW hWXLeGneYiRCZSvz62vn9QAO_nT5lqJ8SaNLBQrAnQvyvHkEA7h0LYphfEQx8_OMHrAN 68 Sharia-compliant means “in accordance with Islamic law” and implies financial activities and investments that comply with Islamic law which prohibits the charging of interest and involvement in any enterprise associated with activities or products forbidden by the Islamic law. previous to establishing its first futures trading contract in palm olein. The final cash settlement prices 70 are based on the Bursa Malaysia Derivatives Berhad Crude Palm Oil futures contract (FCPO). This is the global benchmark for crude palm oil that is physically delivered and traded in Malaysian ringgits. together with some other leading derivatives exchanges. cash-settled contract using Bursa Malaysia settlements as its reference.co. • Pro forma contracts Pro forma contracts are issued by various trade associations.mcxindia. 4. The considerable variety cash and futures contracts in use reflect the complexity of oilseeds.3 Contracts Contracts are legal trade documents.e. the international rules for the interpretation of trade terms. oils and meals trade because of the complexity of trading operations. The exchange operates future contracts on crude palm oil and RBD palm olein. and widely accepted by. The exchange offers a crude palm oil futures contract. pro forma and informal cash contracts are extensively used in palm products trade. The exchange facilitates online trading.1 Physical (cash) contracts A considerable number of cash contracts are used in oilseeds. the Multi Commodity Exchange of India Ltd (http://www. When traders use a pro forma contract. • National Commodity & Derivatives Exchange Limited – NCDEX This Indian multi commodity exchange was incorporated as a private limited company in 2003. the trade. Although trading parties can contract with each other on any terms they desire. This is because the organizations negotiating contractual clauses do so in close cooperation with all sections of 44 . oils and fats trade.htm) is an independent electronic commodity exchange having received the permanent recognition from the Government of India. facilitate the transaction. they need only to refer to the nonstandard parts of the commodity. particularly those containing agreed standard and semi-standard clauses (such as those of FOSFA). published by the International Chamber of Commerce. the trader can accomplish the entire trade procedure under the same contractual terms. clearing and settlement operations for commodity futures markets across the country.ncdex. i.e. FOB. 4. the rest of the contract is covered by pre-existing terms that have been agreed to. its position and price. • FOB and CIF contracts These contracts are established in accordance with the internationally accepted INCOTERMS. • Multi Commodity Exchange of India Ltd – MCX Established in 2003 and located in Mumbai. i. Pro forma contracts enable trade to be undertaken on a "string" basis. Information and links on INCOTERMS and on the obligations of buyers and sellers and the main documentary requirements for FOB and CIF contracts are detailed in Annex V. the National Commodity & Derivatives Exchange Limited (http://www.EsCFMtV_nkjdjcR4goRkP0w-VFGFkl1MZZgcjBemkZr1GnZ38E6s8_CkF7ncvEsJpYprGBMtXWS7Xxzo3BYB-hcaKvhXxdRPo0WGRqeDTukQRM7R1xxamxV2Abmb4F9676_AB4AThP/dl3/d3/L2dBISEvZ0FBIS9nQSEh/ • National Commodity & Derivatives Exchange Limited (NCDEX) Headquartered in Mumbai. the use of pro forma contracts. CIF.com/Index.3.com/aboutus/aboutus.aspx) is a private limited on-line multi commodity exchange incorporated in 2003. transportation operators. superintendents. Pro forma contracts are issued under FOB or CIF terms. testing laboratories. brokers. These rules and contracts are updated on a regular basis to reflect changing practices in the trade. terms and conditions in the form of pro forma contracts. are consistent with other contracts and fit the purpose for which they are intended. insurance. processing. Internationally.fosfa.org 72 FOSFA is a professional international contract issuing and arbitral body concerned exclusively with the world trade in oilseeds. oils. fats including FOSFA contracts. vegetable and marine oils and fats. two main international trade associations have formulated various rules and standard contractual specifications.B. analysts. commodity banking and technical matters. FOSFA has an extensive range of standard forms of contracts covering goods shipped either CIF. soap and cosmetic firms and coconut and palm plantation operators.. refined oils and fats. and the Federation of Oils. traders. brokers and agents. C&F or FOB. F. insurance companies. The main pro forma contracts in use in palm and palm kernel oils international trade are the followings: FOSFA 4 FOSFA 29 Oil seeds in bulk. and others. Seeds and Fats Associations Ltd. Codes of practice for the handling and shipment of palm oil have been formulated by the international trade associations to ensure the quality of the oil is protected. based in Washington D. A week-long basic course. storage and use of vegetable oils and raw materials. palm and palm kernel oils and palm meal). food manufacturers. firms and corporations engaged in the buying. C. shipping. selling. contract referred documents. is an international trade association with the principal objective of promoting and supporting the general business interest of persons. middlemen.. See http://www. for instance. for different methods of transportation and different terms of trade. 73 For more information please access http://www. These are the National Institute of Oil Seed Processors NIOP71.C. samplers. For the international physical or cash trade in oilseeds. for soybeans.F basis. See http://www.niop.the trade (for example shippers. sunflower seeds. It’s about 120 members in 15 countries include importers and exporters. ship-owners. the trading contracts such as FOSFA and NIOP stipulate that the previous cargoes of the ship carrying palm oil must not be any from the list of banned substances.C.FOSFA International 72 based in London.O. FOSFA provides a range of arbitration services (dispute resolution) to meet the needs of the international trade. China etc. The Federation holds also training programmes for the trade which offer unique training facilities for all aspects of the oilseeds and oils and fats trades. processors.I. Trade is facilitated by the existence of bulking installations at the major ports of loading for the export of the palm oil products. refiners. modified to suit local conditions. Some major traders in countries such as India. . from all origins worldwide. arbitration and appeal. is aimed at junior members of the trade/industry with little or no knowledge or experience in a trading environment The training course 73 covers elementary aspects relating to the international trade in oilseeds. The Federation's contracts incorporate a dispute procedure involving arbitration by experienced individuals from within the trade.org/?pgc=114&mod=5&mnu 45 . have their own trading specifications. rapeseed.org. and others providing services to traders. shippers and dealers. The members include producers and processors. stowed and trimmed terms Palm kernels. based in Washington D. Pakistan. buyers and consumers) and thus ensure that the standard clauses are in harmony with trade practice. 49% oil content (test by petroleum ether or hexane) 71 NIPO. oils and fats with over 950 members in 79 countries. 85% of the global trade in oils and fats is traded under FOSFA contracts. shipping. storage tank operators. oils and meals (including palm kernels. For example. often based on FOSFA International or NIOP contracts.fosfa. which is a set of protocols and documents referring to contracts. net shipping weight basis. terms FOSFA 54 Vegetable and marine oils in bulk. in packages. FOSFA publishes its own document referred to as the Carriage of Oils and Fats.F.FOSFA 29 A Nigerian palm kernels.I. but are likely to be issued by bodies less formal than trade associations. C. The contract is issued jointly with the Malaysian Palm Oil Association FOSFA 81 Palm and palm kernel oil products in bulk. Inland trade in palm products may obey to national contracts.B.3. C.org/?pgc=103&mod=5&mnu=. delivered weights.fosfa. NIOP has issued and updates regularly its own Trading Rules and a list of acceptable prior cargoes (accessible at http://www. for deliveries by road tankers and barges FOB contract for processed palm oil and palm kernel oil products in bulk Domestic contract for Malaysian processed palm oil in bulk. • Informal cash contracts These contracts may be based on international contract forms. in bulk.B.I. tallow and greases.I.I. contained in a loose-leaf manual.F terms FOSFA 61 Vegetable oils. the following contracts are used in Malaysia: • PORAM 1 • PORAM 2 • PORAM 3 • • • PORAM 4 PORAM 5 PORAM 6 Domestic contract for Malaysian crude unbleached palm oil in bulk. C. 49% oil content (test by petroleum ether) FOSFA 53 Vegetable oil (in bulk) F. Likewise. for sales between East and Peninsular Malaysia The Shipping/carriage of oils and fats is a complex matter. oils and oil meals constitute the physical side of the business./C&F FOSFA 80 Crude.com/doc/54318189/NIOP-Prior-Cargo-Lists-1). basis. 46 . under special clauses specifying terms of shipment and related operations. for instance.F.O.I. For more information and ordering access please http://www. unbleached palm oil. 49% oil content (test by petroleum ether or hexane) FOSFA 31 Nigerian palm kernels F.F. 4. These documents include the FOSFA Qualifications and Operational Procedures for Ships Engaged in the Carriage of Oils and Fats in Bulk for Edible and Oleo-Chemical Use. issued jointly with the Palm Oil Refiners’ Association of Malaysia and the Malayan Edible Oil Manufacturers Association ASEAN common contract for crude and processed palm oil/palm kernel oil/coconut oil in bulk. These are covered by supply contracts.2 Shipping contracts Shipping. for delivery/collection within Malaysia including Singapore FOB contract for processed palm oil products in drums CIF contract for processed palm oil products in drums Domestic sales contract for Malaysian crude unbleached palm oil in bulk CIF delivered weights. transport and storage of oilseeds. Previous Cargo lists and Certificates linked to carriage conditions.F terms.O. C. C. handling. FOB Printed copies of these contracts and trading rules can be ordered from NIOP and FOSFA headquarters.scribd. storage. Loading. travel and pumping temperatures must be precisely complied with. summarised by the Transport Information Service (TIS) from the German Insurance Association (GDV . which causes the oil to turn sour.htm#container) as follows: Items Mode of transport Quality PO PKO Heatable tank containers. Palm kernels are occasionally bagged. manipulation. railroad Heatable tank containers (only rarely in barrels and Jerri cans) by ship. Thus.Palm kernels and palm kernel meals are transported as dry bulk in conventional. it cannot be liquefied again even by forced heating. Palm kernel oil should have an acid value not exceeding 7. truck. which cannot be pumped out and prevent the still liquid cargo from reaching the suction valve. transport conditions. Damaged barrels quickly lead to oil leakage and thus to loss of volume or to damage to other parts of the cargo. In the vicinity of the heating coils. loading. storage and shipping conditions.http://www. including: • • • • • The international code of practice for storage and transport of edible oils and fats in bulk Operational procedures for ocean carriers of oils and fats for edible and oleo chemical use Qualifications of non-dedicated ocean carriers of oils and fats Qualifications for trans-shipment vessels List of banned goods for immediate previous cargo shipments and of preferred previous cargoes. This problem can be solved by appropriate heating or insulation of the lines. If the oil solidifies in the tanks. since any change in consistency which occurs during transport may prove irreversible. the tanks and barrels must be filled as full as possible.de/tis_e/ware/oele/palmoel/palmoel. Where the oil is packaged in barrels. 47 . Loading palm oil contaminated by ferrous and rust particles or by seawater is inacceptable. by ship. discolours and becomes rancid. scorches. The oil may cool too rapidly in the long lines and solid deposits form on the outer walls. railroad Palm oil should have an acid value not exceeding 5%. truck. Rancidity of the oil is promoted by light. the oil melts. discoloration may also occur. but the procedure is expensive. Palm and palm kernel oils require special handling. if the oil has been kept liquid during the voyage (above a minimum temperature). Do not load rancid oil. since it does not meet quality requirements. Six month at 24°C Several FOSFA International documents provide specifications on requested sampling. the latter have to be handled with appropriate care. atmospheric oxygen and moisture and leads to changes in odour and taste.5%. so that as little haulage space as possible is left above the cargo. Pumping out may be difficult in cold weather. usually medium size ships. A too high acid value denotes an excessively high content of free fatty acids. Acid value of the oil is used as a measure of quality.tis-gdv. Duration of storage Six month at 300C Cargo handling Pumping the oil out of the tanks is only possible. 4.3. It is mainly used for palm products. one part was delivered to each of the parties and produced when required. Commodity Exchange Dalian Commodity Exchange Bursa Malaysia Futures contracts Palm olein contract at http://www. Commodity futures contracts are legally binding. in which A agrees to buy a certain quantity of crude palm oil in October 2012 at 3473. The contract of affreightment is a trade agreement between charterer and the ship-owner for hiring the vessel or part of the vessel to carry a specific cargo for a limited number of shipments over a period of time. transferable. cash settled palm oil contract which does not involve physical delivery of the underlying 74 The name is derived from the fact that this contract was formerly written on a card. giving rise to these two main types of charter agreements.3 Futures contracts Futures contracts specify a trade taking place in the future. quality. Commodity exchange contracts are signed by both parties and are legally binding hence there is security.html FUPO . delivery and weight. payment terms.com/website/bm/derivatives/pro ducts/Commodity_Derivatives/fcpo2. standardized contract between two parties.00 ringgit per ton.bursamalaysia.crude palm oil contract.cn/portal/cate?cid=1192000529100 FCPO . interest and arbitration. The charterer takes over the vessel for either a certain amount of time (a time charter) or for a certain point-to-point voyage (a voyage charter). Below are listed the types of palm and palm kernel oils futures contracts according to the commodity exchanges which operates them. quantity. transport. This contract must be honoured whether the price of the crude palm oil in October 2012 may fall to 1500 ringgit per ton or if it rises to 4000 ringgit per ton (these prices are just examples). price. certainty and transparency. 48 . on a particular voyage. passing of ownership and risk.Two types of shipping contracts are most often available to shippers in vegetable oils and oilseeds: the charter party and the contract of affreightment. thus preventing counterfeits. The card was cut into two parts from top to bottom. The Vegoilvoy charter party contract is the most often used for the shipment of vegetable oils products in tank vessels. A commodity futures contract is a transferable.USD denominated. The contract contains many specific clauses relative to this specific type of cargo. The contracts will cover. in consideration of the payment of freight. for trading in a standardized quantity and quality of a given commodity for a price agreed today (called the futures price) with delivery occurring at a predetermined date in the future (the delivery date). at http://www. inspection. as well as the Internet addresses where their specifications can be accessed on line. or a part of her. demurrage. to a merchant or other person for the conveyance of goods. force majeure. at fixed rates. packaging.com. For instance: a company A may establish a contract with a crude palm oil producer. standardised agreements to buy or sell a commodity (in our case palm oils and palm kernel oil) at a designated date in the future (the delivery date) and at a certain price agreed upon at the signature of the contract by the buyer and seller (called futures price).dce. A charter party 74 is the written contract by which the owner of a vessel lets the whole. at http://www.bursamalaysia.htm 49 . at http://www. RBD palm olein contract at http://www.cmlinks.co.html FPKO .mcxindia.html “Olein 10”.icdx.com/website/bm/derivatives/pro ducts/Commodity_Derivatives/fupo2.php?option=com_content&view=article &id=181 • Indonesia Commodity & Derivative Exchange (ICDX) ICDX CPOTR.pdf NCDEX India Crude palm oil contract at http://www.com/trading/agricultural/files/CPO_S pecs_030210.html Bursa Suq Al-Sila’ Crude palm oil contract.id/en/component/content/article/116.com/wps/portal/sgxweb/home/products/co mmodities/agriculture MCX India Crude palm oil contract at http://www.com/website/bm/derivatives/pro ducts/Commodity_Derivatives/fpko2.sgx.crude palm kernel oil contract at http://www.cmegroup.com/Uploads/Products/16/Crude_Pal m_Oil_Jan_2011.co.co. at http://jfx.clients. specification on page 3 at Crude palm oil futures http://bursa.id/product/748 Singapore Exchange (SGX) Crude palm oil futures (CPO) at http://www.listedcompany.icdx.co. at http://jfx.pdf Chicago Mercantile Exchange (CME) Crude palm oil futures contract.id/product/1 ICDX OLEINTR.com/pub/commodity/ProductSp ecific/Crude_Palm_Oil_ContractSpec_Latest_ncdex.bursamalaysia.Commodity Exchange Futures contracts crude palm oil.com/newsroom/Media_Release _17Aug2009.pdf Jakarta futures exchange “Olein”. crude palm oil contract at http://www.id/index. with smaller nuts. Heavy clay soils with poor drainage properties may pose problems of aeration during rainy seasons. Growth of oil palm trees and their fruit output (the fresh fruit bunches 75) are very sensitive to weather variations. South America. a deep soil with high water holding capacity and a shallow water table augmented with copious irrigation will satisfy the water requirement of the palm. Temperature can be a limiting factor for oil palm production efficiency. yielded palm oil by traditional extraction methods which supplied population dietary needs of oil and vitamin A. following the establishment of government. Pisifera (with no shell. The first large commercial plantations established in 1911 in Sumatra were in full bearing by 1917. These are: Dura (the main variety found in natural stands. 1. and on a small scale in other tropical areas. 50 .1 Varieties Until the end of the nineteen century the existence of oil palm has been confined mainly to West and Central Africa. These were followed in the 1920s by plantations in Zaire and further in other parts of West Africa. which results in a successive declines in the production of fresh fruit bunches of up to 25%. Three main varieties of Elaeis guineensis palms are producing the palm oil consumed worldwide. deep and well drained medium textured soils rich in humus content are considered ideal. best yields are obtained in locations with maximum average temperatures of 29. Calculations of oil yield and losses in the oil mill are often referred to the fresh fruit bunch. in areas with dry spells. Cultivation and harvesting 1. All commercial planting material consists nowadays of Tenera palms and hybrid varieties. Ideal cultivation conditions require evenly distributed annual rainfall of 2000 mm without a defined dry season. Gravelly and sandy soils. with a thick shell separating the pulp from the kernel). and higher oil-yielding Tenera (crossing of Dura and Pisifera. There are two species of oil palms used in the commercial production of palm oil: the African Elaeis guineensis oil palm native between Angola and Gambia. a thin shell between pulp and kernel and a fibrous layer around the nut).330C and minimum 75 Fresh Fruit Bunch (FFB) refers to the bunch harvested from the oil palm. as well as private foreign and national estates and nucleus estates. Southeast Asia. Each bunch weighs 5kg 50kg and may contain 1500 or more individual fruits. At present the oil palm is grown commercially in Africa. the trees are affected by El Niño and La Niña cyclical phenomenon (see explanatory glossary) and develop a biological stress practically every two years. In Indonesia. and the American Elaeis oleifera is native to tropical Central and South America. The industry grew rapidly in Sumatra. frequently female sterile and not used for commercial planting). the South Pacific. as this is the material taken in for processing. particularly the coastal sands are not ideal for oil palm cultivation.2 Soil and climatic requirements Oil palm grows well in the tropical climate within 5 degrees North and South of the equator.PART TWO: PALM OIL _________________________________________________ 1. Moist. oil palm cultivation has expanded rapidly especially during the 1980s. but did not gain its full momentum in the Far East until the 1930s. Wild palm groves sometimes developed into small peasant plantations by deliberate planting of seedlings. The wild oil palm groves of West and Central Africa consist mainly of Dura variety with lower oil content. However. this taste is a preference. resulting in the increase in the FFA of the oil through hydrolysis. most bunches are conveyed to the processing site in baskets carried on the head and the dumping of baskets on the ground to dismount the load results in more bruising. over ripped fruits contain more free fatty acids (FFAs) 76.85%. the outside skin layer of ripped fruits becomes soft and is more easily attacked by lipolytic enzymes. they are removed. labour availability and skill of the workers. One of the many ways to minimise damages of fruits in the process of harvesting. un-bruised fruits. care should be taken as a bunch which is almost ripe . and constant sunlight of at least 5 hours per day for better oil palm yield. the oil content is about 50 per cent of mesocarp weigh and the content of free fatty acids (FFAs) is below 0. As the average 25 kg bunch falls to the ground. regular harvesting for commercial production of oil palms commence after the third year of planting.average temperatures of 22-24oC.3 per cent. As oil palm bunches produced during the first three years have low oil content. 1. their frequency being also determined by the extraction capacity of the mill. Fruits may be damaged in the process of pruning palm fronds to expose the bunch base to facilitate bunch cutting. red palm oil flavours. Free fatty acids content in bruised fruits increase up to 60 per cent in one hour. say within 48 hours. Milling extraction rates are significantly affected by the ripeness of fruits. but in the ripening process the oil content in the fruit increase to 80 . transportation and handling of bunches is to process them as soon as possible after harvest to the mill. oil refiners have a cost problem with the neutralization of high FFA content palm oil. not a quality issue for those who consume the crude oil directly. Harvesting involves the cutting of the bunch from the tree and allowing it to fall to the ground by gravity. Countries not having the ideal conditions for growing oil palms are reported to have high cost of production to the extent that exporting of the product would not be viable. Harvesting has a critical influence on the yield and quality of palm oil extracted from oil palm fruits. they have a higher acidity due to decomposition. The methods of fruit collection and the means by which the fruit is transported to the mill determine the quality of oil to a great extent. transportation facilities.e. Bunches usually ripen in six months after the full opening of flowers. Harvesting rounds of 7 . 76 Increased FFAs ad a ‘bite’ to crude.14 days are generally practiced. Harvesting turns should be made as frequent as possible to avoid over ripening of bunches. Unripe fruits contain very little oil.but not ready for harvest at a given harvesting round could become over-ripped by next round. In Africa. 51 . ripped. However. Ripeness of the fruit is determined by the degree of detachment of the fruit from bunches and their change in colour and texture. i. The crop requires 1800-2000 sunlight hours annually. the fruit is bruised by the impact. In fresh. as well as during careless loading and unloading of bunches into and out of transport containers. higher diurnal temperature variations causes floral abortion in regions with a dry season. Large plantations operate for this reason their own mills.3 Harvesting Oil palm is pollinated by weevils which carry maximum pollen during the third day of flowering. the composition and quality of bunches is therefore dependent on how much they have been bruised. from about 1. the commercial surfaces harvested in Malaysia (mature plantations) increased by 10 per cent per year on the average over the period considered (chart 10). 1000 ha 6000 4000 2000 0 1980 1990 2008 2011 Malaysia Indonesia Nigeria Côte d'Ivoire Colombia PNG According to FAOSTAT and ISTA Mielke Oil World. over a half of the mature commercial plantations in the world (54%) was Malaysian (chart 11). Indonesian shares rose to 45 per cent in 2011 (charts 11 and 12). This plant disease is most often controlled by using biological control agents such as endophytic bacteria for the treatment of oil palm roots.9 million hectares in 1980. driven by the remarkable growth of planed areas in Malaysia and Indonesia. which produces lesion in the stem. the rate of growth of Indonesian mature surfaces under oil palm grew much faster than in Malaysia (20 per cent per year on the average) and the country has overtaken in Importance Malaysia since the year 2000. From 1990 onwards.4 Commercially cultivated areas Commercial plantations developed rapidly over the past thirty years. This fatal disease can lead to losses as much as 80% after repeated planting cycles. caused by the fungus Ganoderma. 1. to 13.4 million hectares in 2011. Total mature areas under oil palm increased more than seven times. In 1980.The most serious disease of oil palm (mainly in Malaysia and Indonesia) is the basal stem rot. 52 . 8000 Chart 10: Oil palm commercial mature areas. From 16 per cent of the global mature commercial plantations in the world in 1980. In non-seasonal climates. smallholders’ productivity is generally lower because of inadequate inputs. the mesocarp/palm fruit ratio. In the ECOWAS region. Oil palms reach maturity and give a first output three years after plantation. Fruit bunches yield is determined by the number of bunches produced by the tree and the mean bunch weight. Both the number of bunches and their average weight increase usually until palms reach nine years of age and decrease afterwards. the efficiency of cultural methods and of the plantation management. to 30 tonnes/ ha/ year at oil palm age of 13. cultural practices and crop management skills. 16% Indones. The yield can be considered in terms two major factors: the yield of fruit bunches and the palm oil/bunch weight ratio (or extraction ratio). at about 20 years of age. 1980 (World total 1. At country level. Yield of oil palms is expressed either in kg of fruit per hectare per year. palm oil yields are directly dependent on the ratio between smallholders and large plantations. 2% Malaysia 54% Nigeria 3% Indon. On commercial plantations. namely the ratio palm fruits/bunch. and the oil content/mesocarp ratio.4 MM ha) Chart 11: Commercial mature oil palm plantations. 1. small farm holdings up to three hectares are estimated to account for 6570% of the total oil palm area cultivated and up to 60% of the palm oil output.Chart 12: Commercial mature oil palm plantations. productivity depends on agro-climatic conditions . The FFB yield increases gradually from about eight tonnes/ ha/ year after the third year. Large oil palm estates and the industrial crude palm oil mills are generally owned by large conglomerates and multinationals. they are integrated upwards and use a large part of smallholders’ production as input raw material for processing. higher yielding oil crop processed to vegetable oils.5 Yields Oil palm is the most efficient. Palm oil/ bunch ratio is a result of a number of components. the time of the peak depending on the age of trees. 2011 (World total 13. varying however considerably in response to climatic conditions. 5% Others 10% Malay. 32% Côte d'Iv. 2% Thai. 53 . This peak production continues for about four years.in particular the climatic conditions and eventual tree stress intervened two and a half years before fruit ripening. or as the amount of crude palm oil obtained per hectare per year. oil palms have often two peaks. 5% Nigeria 12% Colomb. then decreases slowly and remains around 16 tonnes/ ha/ year until the end of oil palm economic life. 45% Smallholders account for the largest part of the area cultivated and traditional and smallscale processing units provide a significant part of the palm oil production worldwide. as well as on the yield potential of the genetic material planted.9 MM ha) PNG 1% Others 13% Côte d'Iv. Yields and the corresponding annual production of oil palms reach generally a single peak in seasonal climates. one of them being much higher than the other one. with palm oil content of 25 per cent in the bunch. yields of plantations are hampered by costly inputs of imported fertilizers. However.gov. this is equivalent to a yield of 5 tonnes oil/ha/year. since oil is only synthesized during the later stages of fruit development. Chart 13: Palm oil yields (tons/ha) 4.mpob.5 3 2. excluding the palm kernel oil. 77 Accessible at http://bepi. The oil/mesocarp ratio varies considerably with the times of annual harvests and the amounts and types of fertilisers used. followed by Indonesia and Malaysia with similar yields of 3.4 tons/ha/year of palm oil. such high yields are rarely achieved in Central and West Africa because varieties under cultivation are generally low-yielding and the climatic conditions are less than ideal.6 tons of crude palm oil per hectare and year (Chart 13). world yields of palm oil over the past four years averaged 3. Yields of oil palm in Nigeria and Côte d’Ivoire averaged respectively 2 and 1.5 0 2008 2009 2010 2011 Four major producers of palm oil recorded average annual yields above the world level during the period. pesticides and harvesting machinery and sometimes by high labour costs. It is usually estimated that an oil/bunch ratio of over 28 per cent may be reached as early as 40 months after field planting of Tenera palms • The mesocarp/palm fruit ratio is largely genetically determined and is little affected by environmental factors • Oil content/mesocarp ratio depends in part on the ripeness of the fruit. According to FAOSTAT and MPOB 77 data.5 1 0.my/ 54 . Moreover.8 tons /ha/year.• Palm fruit/bunch ratio depends mainly on the efficiency of pollination • The oil content of the fruit of young palms is low. tree suffer water-related stress due to erratic rainfalls and prolonged draughts. High-yielding oil palm varieties developed by breeding programs are currently producing under ideal climatic conditions and good management over 20 tonnes of bunches/ha/year.9 tons/ha/year and Papua New Guinea with 3.2 tons/ha/year on the average.5 4 3. Costa Rica attained the highest yield of 4. but it increases steadily until the fourth or fifth year of bearing.5 2 1. resulting in a production step-up (Chart 17).5 0. The situation has been similar in Nigeria (Chart 18). 20 Area 10 Yield 5 0 Chart 15: Malaysia . yield improvements did not have a significant contribution to rising outputs.mature area (MM ha).5 1. production yields (tons/ha/year) and PO production increases in Malaysia and Indonesia were (MM tons) 1960 .mature area (MM ha).The remarkable increase of world palm oil production over the past fifty years was mainly due to the fast expansion of commercial plantations. This is illustrated by the evolution of the commercial mature surfaces under oil palm. yields (tons/ha) and PO production (MM tons) 2008-2011 Mature area 1. yields (tons/ha) and PO production (MM tons) 2008-2011 10 Mature area 20 Yield Productio n 10 5 0 0 2008 3 25 15 Production 5 Chart 16: Indonesia . yields (tons/ha) and PO production (MM tons) 2008-2011 2. while in Côte d’Ivoire both yields and harvested surfaces stagnated and the palm oil production remained at the same level since 2008 (Chart 19). During the past five years.5 2011 Chart 18 Nigeria mature area (MM ha). Chart 14: Malaysia. yields (tons/ha) and PO production (MM tons) 2008-2011 30 Mature area Yield 15 Production 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 The decrease of yields in Thailand during the period were more than compensated by the rise in harvested surfaces.5 0 0 2008 2009 2010 2008 2011 55 2009 2010 2011 .5 Yield 1 Production 1 2010 2 Mature area Yield 2 2009 Production 0. 15 2009 2010 2008 2011 Chart 17: Thailand .2011 due to sole the augmentation of mature cultivated areas (Charts 15 and 16).mature area (MM ha). the annual average yields and the levels of production of palm oil since 1960 (Chart 14).mature area (MM ha).5 2. leaving the productivity dependent on agronomic inputs. Malaysia.com. good soils have been already used up and the rapid expansion of oil palm area has to take place to a large extent on low-yielding poor to marginal soils.com/business/busi_millsestates. Malaysian and Indonesian palm oil yields remained lower than should have been expected. has embarked on the ambitious Government Transformation Programme (GTP).ioigroup. to increase the national palm oil yields from the current annual average of 4 tons/ha. their planted area and the crude palm oil output in 2010 are listed in Table 1.com/plant.indofoodagri. http://www.Eleven largest oil palm growers 78. One of the reasons is the fact that most often advances made in varietal improvements.id/.klk. The eleven largest oil palm growers. in other words. compared to current plantation yields of about 4 tons/ha). http://www.first-resources.kulim. http://www.my/html/ http://www.php. to over 6 tons/ha. http://www.25 policy” foreseen in the palm oil sector envisages the increase of palm oil production through research and development by attaining yields of 25 tonnes FFB per hectare per year and 25% oil extraction rates from FFBs by 2020.php?h=61&lang=EN¸ http://www. which is a broad based initiative aimed at addressing key areas of concern to support Malaysia’s transformation into a developed and high-income nation as per Vision 2020.my/TPB/op-plantreview. http://www.com/business.cfm.com/business_plantations.htm 56 . as well as in agronomic practices.feldaholdings.wilmarinternational. Both countries are nevertheless providing incentives and implementing short and medium term strategies eventually leading to increase in yields and subsequently in the profitability of palm industries. plant protection techniques or estate management failed to be properly implemented. Table 1 .com. The “25 .com/content. Although significant improvements were obtained in oil palm breeding (new planting material attaining now potential oil yields of 15 17 tons/ha.my/plantation_overview. Twelve national key economic areas that were jointly identified by the private and public sectors to kick start the national economic transformation programme.com/Core_Businesses.php.tpb.co. http://www.aspx#sdpla. and palm oil is one of them. Moreover.astra-agro. at: http://www. for example.htm. http://www.simedarby.com. 2010 Company Planted area (ha) 78 Crude palm oil output (MM tons) More information on the sites of these companies.html. agronomic practices.Market analysts estimate that most Asian and West African oil palm industries may face soon a structural slowdown in output due to the ageing of oil palm trees and corresponding yield declines. The cost of establishment of a new plantation would be 20–30% higher than that for replanting. because new plantings would require more intensive land preparations. FFB production costs are depending as well on the types of farming and management systems.3 91 110 (79% mature) 0.3 Wilmar** 244 970 0. Estimates of FFB production cost rendered at the mill can only be general.3 Tradewinds Plantation Bhd Source: Company annual reports * Plantations and production 60% in Malaysia and 40% in Indonesia ** Nucleus (own) estates only *** 44% plantations in Malaysia and 56% in Indonesia **** 33% plantations in Malaysia.8 Kuala Lumpur Kepong Bhd (KLK)*** 180 560 (79% mature) 0.6 Costing Fresh Fruit Bunches Costs involved in the production of FFB differ according to the type of plantation. Table 2 presents an estimation of average FFB production cost for a Malaysian 57 .7 PT Astra Agro Lestari Tbk ** 206 550 1. as well as in the methods of cultivation and maintenance of palm trees.7 Kulim 112 000**** 0. 63% in PNG and 4% in Solomon Islands 1. the lowest costs are attained by private limited companies. bridges and drains up keeping and in-field transportation of fresh fruit bunches. followed by sole proprietorship. when the palms became mature and fresh fruit bunches could be harvested monthly and economically for the following 16 to 25 years.7 IOI Corporation 155 000 0. the cost of FFBs from plantations of 2000-2500 hectares is about 45 per cent lower than from smallholdings up to 100 hectares. In general. The unit FFB cost declines fast with the size of plantations: in Malaysia. roads and pathways. and about 20% lower than from estates of 500 to 1000 hectares. The topography of oil palm estates affects its operation cost: a high percentage of hilliness involves higher costs of roads. different types of estate ownership and resultant management styles influence also the FFB production costs. including the setup of new terraces.1 Indofood Agri** 205 064 (76% mature) 0. that is whether the area is undergoing replanting (the use of land that was formerly developed with other crops) or new planting (establishing a cultivation area formerly under jungle).Sime Darby* 522 000 (90% mature) 2. Costs incurred during the first three years of oil palms development are different from these after this period. Cooperatives and public agencies realise the highest FFB costs.4 Felda Global Ventures Holdings Bhd 323 590 (53% trees over 21 years) 3. In addition. organised groups of smallholdings or unorganized small holders. drainage systems. annual yields and the accounting systems adopted. namely estates.3 Golden Agri** 352 120 1. as individual plantations costs vary widely with the type and age of estates.4 First Resources** 107 664 (64% mature) 0. in-field transport of FFBs. The establishment cost is considered depreciated over 25 years and the amortisation for the first type of replanting would average 180 $/ha.) and miscellaneous issues. collection.Malaysian mature plantation. 2011 Items US $/ha % 96 8 Harvest and collection 264 180 22 15 Depreciation (plantation. harvesting paths. weeds. Table 2: FFB production cost estimate . as the Malaysian Agricultural Producers Association augmented the guaranteed minimum wage of plantation estate workers at 850 ringgit/month (280 $/month). and agricultural equipment.com/ 81 The typical N:P:K ratio for oil palm plantations is 2 :1 :2 82 The conversion of FFB production cost from $/ha into $/ton is based on FFB average yield 20 tons/ha.maybank-ke. Fertiliser 81 costs have increased by about 30% in 2011 in comparison to 2010. insurances. communication. and 30 . agricultural inputs (fertilisers. labour (oil palms pruning. products for controlling pests. the average cost of establishing a hectare of replanted oil palm mature area could attain about 4500 $ for the first three years. maintenance. infrastructure maintenance) Fertilisers and application Total 1200 100 Source: Interviews Current average FFB production costs of a mature Malaysian plantation are estimated at 1200 US$/ton. pollination. 79 Trees under no particular climatic stress and pest or disease attacks http://www. the cost of establishing a new plantation on jungle area would be 20 – 30% higher). communication. administration. etc. pruning. Direct production costs comprise expenses for plantation up keep (roads. in normal 79 climate and cultivating conditions. pollination. Labour costs have increased significantly in 2011. etc. The full impact of minimum wage increase should be felt in 2012. equivalent 82 to 60 $/ton of FFB. other services. weeding. bridges. reaching FFB yields of 22-24 t/ha/year). and diseases). security. According to Maybank Kim Eng 80. machinery/equipment) 180 15 Labour (workers and management) 300 25 Transport FFB to milling 96 8 Overheads (utilities. other services. pest/disease control. The major cost components are labour (25% of total). FFB production costs of may be 10-20% lower than the general estimation for plantations with a high percentage of oil palm trees in full production capacity (8 to 12 years of age. security. 80 58 . overheads (utilities.) 60 5 Miscellaneous 24 2 Plantation upkeep and cultivation (palm seedlings.50% higher for old plantations (FFB yields of 17 – 18 t/ha/year). management and office staff). due to supply shortages and rising feedstock cost. harvesting. Indirect costs comprise the depreciation of plantation and equipment. insurances.mature plantation in 2011. fertilisers (22%) and depreciation (15%). According to the presentation of an expert of Tradewinds Plantation Bhd at the International Palm Oil Conference 2011. administration. drainage). 08 3.7 Sustainability of oil palm cultivation Production of palm oil is more competitive in comparison with other vegetable oils.mpob. labour relations on plantations.69 4. global warming and the contribution to the global increase in greenhouse gas emissions.03 20. governments and private sector industrialists in 83 At http://bepi. more or less balanced points of view. Environmental NGOs lobbying in anti-palm oil campaigns may link directly oil palm cultivation to deforestation. and preserve environment for sustainable development. Fearing the loss of markets. plantation companies are making all efforts to reduce the impact of the major cost components.2011 Items FFB yield. traders. 2007 . the cost per ton of FFB can vary considerably based on yield performance. tons/ha Oil yield ton/ha 2007 2008 2009 2010 2011 Average period 19.For comparison. uses less land and generates more oil per hectare than leading vegetable oils such as soybeans and rapeseed. Table 3: Malaysian average FFB and palm oil yields.83 4. 1.20 18. In order to protect their margins from declining crude palm oil prices. The reasons for concern related to increased oil palm cultivation are deforestation and destruction of rain forests. by raising workers’ efficiency and productivity through increased mechanisation and the optimisation of fertiliser use. albeit each having different. oil palm planters.91 It is important to note that for mature plantations. ensure food security. environmentalist NGOs and the civil society alike. They therefore supported the set-up of voluntary certification schemes and publicised the rapid and voluntary increase of sustainable palm oil in their global vegetable oil purchases. did not make their positions well heard.my/index. consuming and trading in palm oil. namely labour and fertiliser inputs.93 3. food industrialists. major food and palm-based biodiesel producers based on imported palm oil were obliged to face the situation and consider the environmental aspects of their complete supply chains. palm oil producers. over the past five years are shown in Table 3.gov. However. the rapid growth of palm oil demand and the palm oil industry implied the expansion of oil palm planted areas and raised challenges and wide concern by its future sustainability. violation of human rights of indigenous people. in particular in Africa. or palm oil consumption to health damage. Although partly contradicted by producing countries stakeholders in oil palm cultivation. Meanwhile. developing countries producing. The on-going sustainability debate involves governments. end-users.69 19. inappropriate land use.01 3. the Malaysian palm oil board (MPOB) statistics 83 on average national yields of FFB and palm per hectare.php/statistics/price/monthly. wild life preservation. reasons and means of action. these allegations aggravate conflicts instead of providing cooperative solutions to real environmental problems which may not be directly correlated with palm oil developments.html 59 . Until recently.22 3. although they bear the responsibility of ensuring a fair balance between the need to develop their economies. from 75 $/ ton for yields of 16 tons /ha to 48 $/ton for yields of 25 tons/ha. eradicate poverty. it consumes considerably less energy in production.03 19. agricultural development and health issues.18 19. seven years ago has been set up the Roundtable on Sustainable Palm Oil – RSPO (http://www. pest control. 30 growers and 147 millers were certified and produced some 6 million tons of sustainable palm oil and 1. from cultural techniques (fertilization.EU. elaborated and adopted. consumer goods manufacturers.org/en/how_to_be_rspo_certified).rspo. palm oil processors. to waste management. Indonesia had already initiated a memorandum providing assurance that the palm oil cultivation does not cause deforestation and has issued the mandatory Indonesian Sustainable Palm Oil Standard . of strategic national importance. nature conservation and developmental NGOs. consumed mostly in developed countries. and processors using the certified palm oil as input can prove the environmental. may be traded.org). and government permission is required before proceeding. in particular Indonesia and Malaysia. the “certified sustainable” palm oil (RSPO oil) should come from certified production. Another reason is that the RSPO certified sustainable palm oil could not be used for biodiesel manufacture into the European Union because the RSPO standard does not yet meet the requirements of the EU Renewable Energy directive.rspo. or are in the process of adopting. The right to use the system has to be purchased from RSPO. a nonprofit association of oil palm growers.GAPKI withdrew officially its membership from RSPO during the 9th Annual Roundtable Meeting on Sustainable Palm Oil in November 2011. lower their import tariffs for certified sustainable palm oil in order to sustain the demand. The organisation defined eight principles and thirty nine criteria for the certification of sustainable palm oil (see http://www. Both Malaysia and Indonesia could not accept private bodies lobbying and influencing on how palm oil. In theory. The challenge remains in the harmonisation of these schemes and standards. Certified palm oil was supposed to be marketed at a premium and expected to be searched after in the European Union and the USA. National palm growers are already increasingly using environmentally sound practices in oil palm cultivation.org/en/principles_and_criteria_for_sustainable_palm_oil) and established the rules of a certification system (see at http://www. the Indonesian palm oil association .friendly quality of their products to consumers. voluntary certification system designed to create a market for certified sustainable palm oil. At the end of 2011. Palm oil producers are thus able to prove buyers that their product is sustainable.rspo. remained unsold reportedly because of the lack of willingness of importers to pay a premium to offset the cost of certification. In response to the global concern for sustainability. RSPO has issued a private.ISPO in autumn 2011. about twelve per cent of the world output.MPSO designed at a macro level: the entire country is viewed as a single production unit for sustainable palm oil. banks and investors. Malaysia is expected to introduce very soon a national sustainability scheme and certification . However. the RSPO certified palm oil has received a limited acceptance to date. 174 companies had received supply chain certification for their 336 facilities. Germany and the United Kingdom have also introduced their national compulsory sustainability schemes and standards controlling the supply of sustainable raw materials including palm oil for biodiesel manufacture. policies supporting the sustainable development of their palm oil sector. traders. 60 . as well as environmental. through the verification of the production process by accredited certifying agencies. land and crop management). An array of previous strict environmental regulations and policy support measures were already imposing the undertaking of environmental impact assessment studies prior to clearing or the extension of plantations. China and India. Likewise. The RSPO certification is a seal of approval that is given to palm oil grown on a plantation that has been proven. Representatives of NGOs and industry bodies in Europe suggested recently that governments of the largest importing markets -.4 million tons of sustainable palm kernel oil. processing and end-use facilities along the chain. retailers. On these grounds.palm oil producing countries. The traditional method of extraction is still used in villages. at http://vimeo.curtin. This type of capital intensive mills is generally handling from 3 to 60 tonnes of FFB/h. The threshed fruits are cooked in water by most small-scale processors do not have the capacity to generate steam for sterilization. Large scale.2. Throughputs of traditional processing vary from a few hundred kilograms FFB/day for domestic use. 3. The shift of refining to producing countries is one of the major developments in the palm oil industry. secondary and further processing of palm oil. Institiut Penyelidikan Minyak Kelapa Sawit Malaysia. alcohols and palm mid-fractions. Processing84 Before 1975. while high-pressure sterilization threshes bunches after heating to loosen the fruits. School of industrial technology.24 per cent palm oil per bunch of good palm varieties. 3). (2) secondary processing for the refining of crude palm oil and the production of palm olein. 2. it is essential that damage to fruits is minimal and the handling of bunches from the field to sterilizers is done with utmost care.Palm oil factory process handbook. large scale mills reach extraction rates of 23 . the near totality of palm oil traded on world markets was in crude form.html Distance Education. 2 illustrates the primary. Conversion of oil palm fresh fruit bunches to palm products involves three major steps. The operations undertaken for the extraction of crude palm oil and palm kernels from FFBs. Fruit reception and transport to sterilisers: in order to obtain crude palm oil of good quality. namely: (1) primary processing for the extraction of palm kernels and crude palm oil. with a focus on the extraction process to get the crude palm oil. depending on the availability of FFB. each taking place in different types of processing plants. usually by children and village elders. 84 More information at: . High-pressure steam is more effective in heating bunches without losing much water. and the main utilisations of derived products. Professor Abd Karim Alias.“Palm Oil and Oleochemical Process”. 1985 . Most small-scale operations thresh bunches before the fruits are cooked. Kementerian Perusahaan Utama.1 Crude palm oil and palm kernels extraction Crude palm oil is extracted from oil-bearing FFB tissue either by traditional method. in particular in Africa. Efforts to mechanise and upscale traditional processing are being extensively undertaken. or by modern extraction processes.au.au/units/30/308442. online 2012 course run through the Curtin Bentley-based http://handbook. as well as derived food and non-food products. 61 . Boilers fuelled by palm fibre and shell produce superheated steam for electricity generation and heating purposes throughout the factory.“Extraction and Refining of Crude Palm Oil”. presentation of processing of palm oil from oil palm fruit. and (3) tertiary processing for the manufacture of fatty acids.edu.curtin. Universiti Sains Malaysia. When steam is available. Most processing operations are automatically controlled and sampling and analysis are routine operations. such as schematised in Fig. Fig. pumps and pipelines) and operate continuously. fully mechanised oil palm mills use a sequence of processing steps designed to extract high yields of crude palm oil and palm kernels of acceptable quality for the international trade (see Fig.edu. stearin glycerol and fatty acids. up to 8 tonnes FFB/day and supply of crude oil to the domestic market. handbook. FFBs are threshed manually with an axe or machete and fruits are separated the spikelets.com/33820190 . thresh bunches after heating to loosen the fruits. are summarised below. Installations comprise mechanical handling systems (bucket and screw conveyers. 63 Sterilization - FFBs are generally discharged at the mill from trucks or trailers on a loading ramp for the filling of sterilizer cages with a nominal capacity of 2.5 tons. Sterilization is carried out by placing sterilizer cages in vessels under steam (3 kg/cm2 and 1430 C) for about an hour. The scope is to prevent further rises in the free fatty acid content due enzymatic reactions, facilitate the mechanical stripping and prepare the pericarp for subsequent processing and precondition the nuts to minimize kernel breakage. Stripping operation realises the separation of the sterilized fruit from the bunch stalks through two basic: a small vigorous shaking and the beating of bunches. Digestion process involves the reheating of sterilized fruits, the loosening of the pericarp from the nuts and the breaking of oil cells before passing to the oil extraction unit. The best digestion conditions are obtained by mixing the fruits at a temperature between 95 and 1000 C for approximately 20 min. Oil extraction is generally carried out using continuous screw presses. Pressing pressure is regulated as to ensure a minimum of residue oil in the press cake and an acceptable amount of broken nuts. Screw presses produce a mixture of oil, water and solids, and a press cake containing fibres and nuts. Clarification – The mixture of oil, water and solids from the press has an average composition of 66% oil, 24% water, and 10% nonoil solids; because of the high proportion of solids, it has to be diluted with water to reach its satisfactory settling. After dilution, the mixture is screened to remove fibrous materials and then pumped to a continuous settling tank where it separates into two parts, i.e. crude palm oil and sludge. The oil is skimmed off and passed to a centrifugal purifier followed by a vacuum dryer and a cooler before being pumped to the storage tanks. The sludge has an oil content of approximately 10%. The oil is reclaimed and fed back to the main settling tank. Crude palm oil sent to storage tanks has a moisture content of 0.1 to 0.12% and impurities less than 0.02%. Oil storage – In large-scale mills, the crude palm oil is transferred to storage tanks internally coated with epoxy materials to prevent iron pickup prior to dispatch from the mill. Since the rate of oxidation of the oil increases with the temperature of storage, the oil is normally maintained around 50°C, using hot water or low-pressure steam-heating coils, to prevent solidification and fractionation. Small-scale mills pack the dried oil directly in used petroleum oil drums or plastic drums and store the drums at ambient temperature. Palm kernel recovery - The residue from the press consists of a mixture of fibre and palm kernel nuts. The nuts are separated from the fibre by hand in the small-scale operations, covered and allowed to heat for 2-3 days through their own internal exothermic reactions. They are further dried and sold to other operators who process them into palm kernel oil. The fibre is pressed in spindle presses to recover second grade (technical) oil that is used in soap-making. Large-scale mills use recovered fibre and nutshells to fire the steam boilers. The superheated steam is then used to drive turbines to generate electricity for the mill. For this reason it makes economic sense to recover the fibre and to shell the palm nuts. In the large-scale kernel recovery units, kernel nuts contained in the press cake are separated from the fibre in a de-pericarper and then dried and cracked in centrifugal crackers to release the kernels. During the nut cracking process some of the kernels are broken. The rate of FFA increase is much faster in broken kernels than in whole kernels. Breakage of kernels should therefore be kept as low as possible, given other processing considerations. 64 Kernels are usually separated from the shells in two operations: a winnowing system is firstly used to remove the small pieces of shell and dirt, followed by hydro cyclones or clay baths. Moisture content of fresh kernels is about 20 per cent; if bagged or stored in this condition, they would become mouldy and their FFA content would rapidly increase (the oil content of dried kernels can be over 50 per cent). Therefore, they are dried to a moisture content of about 7 per cent, before being stored in bulk in sheds, waiting to be transported to the kernel crushing plant, or bagged directly (about twelve bags per ton of kernels). 2.2 Recycling and waste management in crude palm oil production With the growing awareness of consumers and under the pressure of regulatory bodies for environment protection, oil palm planters and palm oil producers are increasingly reducing the negative impact of palm industry on environment through recycling and waste management throughout the life cycle of the main palm products. Succinct information on the current recycling and use of by products and waste from oil palm plantations and mills is given in Table 4 and Fig.4. Table 4: Current and potential utilisation of oil palm plantation and palm oil mill by-products and wastes By-products and wastes Average quantity Use Level of utilisation Potential new uses Plantation Pruned fronds 10 tons/ha Palm trunks and fronds at 80 – 90 replanting tons/ha Recycled in plantation as biomass Recycled in plantation as biomass and furniture Very high Very high Extraction vitamin E, fibreboard Very low Pulp, paper, palm heart, glucose, cellulose, fuel Palm oil mill Empty fruit bunches 20-23% of FFB 12-13% of FFB Mulching in plantation Very high Fibreboard Fuel to boiler Very high Fibreboard Shell 6-8% of FFB Fuel to boiler Very high Activated carbon, potting medium Decanter solid 2-3% of FFB Moderate to high Animal feed Boiler ash 0.4-0.6 of FFB Low Fertiliser and soil improver Steriliser concentrate Centrifuge waste Decanter effluent Hydro cyclone and clay bath 12-20% of FFB 40-50% of FFB 30-40% of FFB 5-11% of FFB Land application as fertiliser Surface landfill and fertiliser in plantation Feed to effluent treatment plant Feed to effluent treatment plant Feed to effluent treatment plant Feed to effluent treatment plant Fibre 85 Very high Very high Very high _ Very high Recycling to spare water consumption Extract used as substitute for protein-rich foods in human and animal feeds 65 Cellulase, single cell-protein 85 Oil recovery for acid oil production 4: Recycling and use of by products and waste from oil palm plantations and crude palm oil mills FFB Oil palm trunks and fronds at replanting pruned fronds Oil palm plantation Empty fruit Shell fibre steriliser condensate bunches Oil palm mill Boiler ash Excess shell Digest palm oil mill effluent Animal feed Palm oil mill effluent Effluent treatment plant Final discharge Waterways Biogas Source: ITC The main residues that must be disposed of in oil palm plantations are the regularly pruned fronds (about 0.By-products and wastes water Factory washing Sludge cake Average quantity 4-8% of FFB _ Use Feed to effluent High treatment plant Effluent treatment plant Land application as Moderate to fertiliser and high animal feed Very low Land application as Very high fertiliser Land application as High fertiliser 5-10% of FFB Less than Aerobic solids 5% of FFB 28m3/ton empty fruit Biogas Biogas engine bunches Source: Bailey’s Industrial Oil and Fat Products Anaerobic solid Level of utilisation Potential new uses Oil recovery for acid oil production _ _ _ Heat and power generation Very low Fig. old oil palms that should be replaced produce over 14 tons/ha fronds and 74 tons/ha of palm trunks).4 tons/ha of palm fronds are produced through routine maintenance pruning and harvesting) and the biomass comprising palm trunks and fronds at the end of the oil palm economic cycle (after about twenty five years. 66 . In commercial practice. 000 m3 of biogas with a calorific value of about 5300 kcal/m3. 0. 2. biomass can also be utilized as fertiliser on the plantation.pdf. its systematic utilization as plantation fertiliser.monash. World Applied Sciences Journal 11 (1): 70-81. and 0. “Review of Current Palm Oil Mill Effluent Treatment Methods: Vermicomposting as a Sustainable Practice”. enhancing soil fertility (both Malaysia and Indonesia practice the zero burning technique for replanting). depending on the local environment created by the mill.fronds are replanted in the field and the biomass with a high plant nutrient content is recycled. at http://idosi. The sterilisation condensate and the separator sludge are segregated into separate oil pits for residual oil recovery before they are mixed again for treatment. These include the complete treatment and disposal of the effluent. Fibre and shell alone can supply more than enough electricity to meet the energy demand of a palm oil mill. or its use for the generation of biogas .blogspot. the separation and winnowing operations produce residual fibre and shell which are commonly used as boiler fuel to produce steam for electricity generation and palm oil and kernel production processes. it is therefore common to locate palm oil mills near rivers with readily available free water. As shown in Table 5.6 tons of palm press fibres. The hydro cyclone waste containing very little residual oil is discharged directly into the treatment plant.com.7 ton of dry mill effluent. namely palm kernels and palm kernel oil.edu.9 ton of palm kernel shell. Several options are available for reducing the pollution problems.pdf. ISSN 1818-4952. As shown in Fig.5 tons of palm oil mill effluent are estimated to be generated for every ton of palm oil produced./pub_532. oil clarification and hydro cyclone 86 operations. The poor quality residual oil recovered from the oil pits is drummed and sold as technical oil for nonedible applications.my/adminpanel/publication/. “Effective Operation Effluent Treatment Palm Oil Mill”. Oil palm biomass and palm kernel shells which are/can be used as complementary energy sources in the milling units.5 tons of empty fruit bunches (EFB). Palm oil processing has the advantage of yielding marketable by products.. the major cost components are the depreciation of equipment and plant buildings (30% of total). 2. which can be used for supplementing heat or electricity and realising substantial energy savings. discharged untreated into the watercourse. 2010. A 60 ton/hour FFB mill operating 20 hours/day may provide some 20. Palm oil milling requires large quantities of water (about 1 ton of water per ton of FFB). Some 2.. to order at http://effluenttreatmentpom. coming mainly from sterilization.eng. Palm oil mill effluent is treated in a separate plant 87. Each hectare of oil palm generates annually about 1. 1. 2. the effluent undergoes biological oxidation.further used for heat and electricity generation. their maintenance (15%) and the management and qualified process staff 86 Where a mixture of water and clay or salt is used as a medium to separate shell and kernel More information: “Pollution control technologies for the treatment of palm oil mill effluent” at www. it will deplete the dissolved oxygen and destroy aquatic life and the surrounding environment. Industry estimates the average Malaysian milling cost in 2011 at 13 $/ton of FFB. Palm oil industries worldwide have therefore acknowledged both the social and ethical obligations to reduce the environmental impact caused by the palm oil mill effluent. “ 87 67 .4 tons sterilizer condensate.3 Milling and crude palm oil production costs The economic key to profitability and competitiveness in the palm oil market is to have the lowest production costs per ton of output. A great part of water intake for processing is discharged as palm oil mill effluent. sparing on fuel costs.org/wasj/wasj11%281%2910/12. Due to its high organic content. but water consumption and waste water generation can be minimized through good process control. pdf 68 . of which: 13 100 Depreciation 4 30 Maintenance equipment.000 tonnes of cooking oil (palm olein) a month.org/publications/pdf_files/casson. Malaysian Palm Oil Board estimated the average yield performance of oil palm plantations over the past five years at 3. head office. CPO cost components 5 tons FFB at 60 $/ton Milling cost Total $/ton 300 13 313 Maybank Kim Eng 90 Co. The Ministry of plantation industries and commodities estimated at $ 257 MM the amount of cess collected during the period June 2007 to May 2008. when crude palm oil prices varied between 645 $/ton and 800 $/ton. utilities. 2011 Items US $/ton FFB % Total. Anne Casson. For information. Indonesia. or exported from the country. The scheme is meant to subsidise the cost of producing 60.see Table 6. Table 5: Estimation of Malaysian average milling cost.(11%). a study 91 of the Centre for International Forestry Research (CIFOR) made in 2009 compared the average crude palm oil production costs in the major producing countries . the average production cost of crude palm oil would be 313 $/ton. estimates that Indonesian producers may benefit of 50-90 $/ton cost advantage because of lower input costs. November 1999.5 4 Miscellaneous 1 8 Management and qualified process staff Palm oil cess 88 Source: Interviews Considering an input of 5 tons FFB per hectare.91 tons/ha – see Table 2 90 Group of securities and investment banking companies 91 “The hesitant boom: Indonesia’s oil palm sub-sector in an era of economic crisis and political change”. The new cess levied since June 2011 was meant to compensate losses suffered by cooking oil producers and packagers. Centre for International Forestry Research.000 estate plantations.6 $/ton FFB for every 30 $ market price increment of crude palm oil. and the palm oil cess account each for 8% of the total milling cost. at http://www. The Malaysian crude palm oil production cost is estimated to have been only 88 The Malaysian Federal Government imposes a cess on oil palm products manufactured in. who were short of $ 260 MM needed to stabilise the ceiling price of cooking oil. Costs of unqualified labour. Collected at a rate of 0. under the Cooking Oil Stabilisation Scheme. is applicable only when the crude palm oil price surpasses 450 $/ton level. imposed only on plantation companies owning planting acreage of 100 acres or more. corresponding to an average yield of 4 tons of crude palm oil per hectare 89. 89 For comparison. Bogor. buildings 2 15 1. while bagging of palm kernels contributes with 4%. The cess.cifor.5 11 Unqualified labour 1 8 Head office cost 1 8 Utilities 1 8 1 8 Kernel bagging 0. The Malaysian Palm Oil Board derives a part of its funding from this cess imposed on the industry. the cess affect more than 3. and 16 per cent superior for a plant of 30 tons FFB/hour. the break-even capacity 92 of mills is considered 50 tons FFB/hour. via tolled refining. This advantage is being taken into account by the Malaysian Government in the elaboration of strategies and policy reforms aiming at countering the Indonesian low palm oil export duty regime which makes the Malaysian independent palm oil refiners' business uncompetitive. 2. the highest costs are recorded by public agencies and cooperatives. allowing refineries to be fully-utilised and operate viably.7 96.7 347. Mills. Second lowest costs are usually obtained by private limited companies and partnerships. the slight variations in production costs over time are due mainly to small changes in oil palm productivity and the reaction of estate managers to market prices.3 105.2 113. could be linked with local independent producers of crude palm oil in a consortium.7 79.3 82.3 Cultivation Harvesting and transport FFB milling Total The cost of FFB processing decreases with the increase in the capacity of palm oil mills.6 259. Toll refinery return could be on refining cost plus margin.1 130.6 98. especially those without upstream activities. which are delivered usually to the processing mill located relatively closely.6 295.7 Côte d'Ivoire 69. Vertical integration offers the advantage of reducing production and processing costs. in turn.8 78.5 World average 72.6 278. In this context.5 75.4. 1997 (US $/ton) Cost factors Colombia Nigeria 60.1 33.9 90. well-managed corporations disposing of financial resources. Compared with the processing cost of a mill with a capacity of 50 tons FFB/hour. In general.7 47. disposing of adequate supplies of FFBs both in quantity and quality.2 45.3 106. This is compatible with the fact that costs of production of FFB and crude palm oil show a relatively horizontal trend despite the strong fluctuations of palm oil market price.5 71. are more efficient. crude palm oil processing costs are dependent on the type of palm oil mill ownership: they are the lowest for large. Table 6: Comparison of crude palm oil production costs in selected countries.1 91.3 Indonesia Malaysia Establishment 64. As in the case of FFB production costs. Vertically integrated estates enjoy a secured market for their FFBs. This would imply that over 51 refineries. independent local palm refiners.7 136.2 224. milling cost is about 11 per cent higher for a plant with a capacity of 40 tons FFB/hour.4 559.7% below the cost rated for 2011.1 92 Refining The ratio of output to capacity which is just sufficient to allow a business to cover its costs 69 . a proposal to set up a consortium of independent palm oil producers and refiners is being considered. mostly members of the Palm Oil Refiners Association of Malaysia (PORAM) and local independent palm oil producers with three million to five million tonnes of CPO feedstock could join forces via pool marketing and have the quantum to compete in the world market with the vertically integrated plantation companies. as well as with Indonesian large oil palm players.1 72.4 Refining and fractionation 2.3 40.9 344. trace metals. moisture and insolubles. particularly preferred for its taste and odour. In Africa.Crude palm oil extracted from the fresh fruit bunches contains undesirable components and impurities. The unit operations involved in these two processes and the products obtained are illustrated in Fig. Two types of processes are used for refining the crude palm oil. such as mesocarp fibres. 5 and Fig. crude palm oil is often consumed in the crude form. phospholipids. oxidation products and odoriferous substances. Both processes yield refined. 70 . differing mainly in the manner in which the free fatty acids are removed. bleached. 6. free fatty acids. stable product before its direct use as edible oil or for formulation of other edible product. namely physical refining and chemical refining. and deodorized palm oil of quality and stability suitable for direct consumption or further use in food industries. The oil is commonly refined to a bland. 71 . Different filtration systems are used for the separation of palm olein and stearin. bland refined. the stearin 72 . or fully refined palm oil without the use of any chemicals or additives. and deodorization.2 Fractionation Palm oil consists of a combination of fatty acids with different chain length and degrees of unsaturation. and crude palm kernel stearin can also be realised by either chemical or physical processes mentioned above. residual carotenoids are also thermally decomposed and the resulting product is the light-coloured. The oil is subsequently bleached with clay and deodorised as in physical refining. crude kernel oil. as well as the phospholipids precipitated by the phosphoric acid and any excess phosphoric acid present in the oil after degumming. and solvent processes. bleached. yields a low-melting liquid phase – olein.05%. by wetting the stearin crystals. is then cooled down to 60 C and passed through polishing filter bags before pumping to the storage tanks. The reaction between caustic soda and the free fatty acids in the degummed oil results in the formation of sodium soap. The purpose of the phosphoric acid is to precipitate the non hydratable phosphatides (up to 10 per cent of the crude palm oil contains these modified triglycerides similar to oil molecules).In physical refining. The final product. crude palm kernel olein. washed with hot water to remove excess detergent and vacuum dried before storage. The neutralized palm oil is then washed with hot water to remove traces of soap still present and dried under vacuum to a moisture level below 0. Olein is discharged by centrifugation as the lighter phase. At the same time. which is removed by a centrifugal separator.4. they can be separated out into a suspension in the aqueous phase. The spent clay from the filter. crude palm oil is initially pre-treated with concentrated phosphoric acid for degumming and subsequently cleansed with adsorptive bleaching clay and filtered. Gum conditioning and neutralization is realised by heating the crude palm oil with concentrated phosphoric acid and further treatment with a caustic soda solution. the free fatty acids still present in the pre-treated oil are distilled together with the more volatile odoriferous and oxidation products. Refining of other palm products. is further treated for oil recovery. part of the carotenoids and other pigments. Dry fractionation is usually carried out semi continuously using neutralized. crude palm stearin.and high-melting triglycerides. followed by separation. Chemical refining. insoluble. containing normally 20 to 40 per cent oil. The aqueous phase containing stearin is heated to 1000 C to break the emulsion. Crystallization of the oil under controlled cooling conditions. Crystallisation occurs as the oil is agitated and cooled by chilled-water circulation. deodorised (RBD) palm oil. at 2400 to 2700 C and under vacuum. namely crude palm olein. light orange colour pre-treated oil. neutralized and bleached. Bleaching clay is used for cleansing by adsorbing the undesirable impurities such as trace metals. There are three commercial methods for fractionating palm oil: the dry. detergent. moisture. which otherwise would impart undesirable odour and taste to the oil. and deodorized (NBD) palm oil. Detergent fractionation is usually carried out on crude palm oil. also called caustic soda refining. 2. bleached. The slurry containing palm oil and clay is then filtered to recover the clear. involves three stages: gum conditioning and neutralization. called neutralized. The pre-treated palm oil is now ready for de-acidification and deodorization with superheated high-pressure steam. The oil is first cooled in the crystallizer with chilled water to allow the crystallization. bleaching and filtration. Under such conditions. The crystallized mass is mixed with an aqueous detergent solution. and a high-melting solid phase -stearin. in other words in substantial quantities of both low. recovered is also washed with hot water and dried under vacuum before storage. Yield of olein is about 80 per cent. Solvent fractionation is the most expensive process because of solvent losses, solvent recovery equipment necessary and the stringent safety measures to be respected. The process involves the use of solvents such as hexane or acetone. It is only viable for the production of high value products such as cocoa butter equivalent or other specialty fats. Palm kernel oil can also be fractionated via the dry, detergent, and solvent processes in a similar manner. 2.4.3 Waste management in palm oil refining The characteristics of palm oil refinery effluents vary according to the type of refinery operations (chemical or physical refining and fractionation processes), as well as with the process monitoring and control systems used. The choice of treatments depends very much on the characteristics and flowing conditions of the raw effluents. Over the past two decades, refiners managed to reduce considerably effluent and other forms of pollution by shifting from chemical refining to physical refining; automation of processes and their strict control to prevent spillage and product losses; and the installation of new equipment designed for low energy and water consumption. One alternative is to locate the effluent treatment unit near the refinery, treat effluents to an acceptable level and discharge them directly to rivers or other public water courses. A second, cheaper and space-saving alternative is to discharge the untreated or partially treated effluent to public or private specialised sewers providing wastewater conveyance and treatment services and/or treatment units. 73 PART THREE: RECENT MARKET DEVELOPMENTS __________________________________________________ 1. Supply outlook - palm oil, kernels and palm kernel oil Palm oil sector is an important factor for economic expansion in South East Asia, Central and West Africa, Papua New Guinea and Latin America to a smaller extent. The key reasons for the continuous increase in importance of the palm oil in the global vegetable oils market are the inherent high productivity of the crop and its potential to meet the fast rising demand for oil with the lowest requirement for new land. World production of palm oil more than doubled over the past decade, from about 22 million tons in year 2000, to 50.3 million Chart 20: Palm oil - world production tons in 2011 /Chart 20). million tons 60 According to USDA (www.fas.usda.gov/psdo 50 Malaysia and 40 Indonesia covered about 90 per cent of the 30 world palm oil output. 20 Production in Indonesia rose twice as fast as the 10 Malaysian output over 0 the period. In 2006, 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 each of the two countries reached a World Malaysia Indonesia Others production level of about 16 million tons of crude palm oil; ever since Indonesia overtook Malaysia in importance and its production exceeded 25 million tons in 2011, while the Malaysian production levelled off at about 18 million tons since 2009 - mainly because of the limited availability of arable land. nline), Production outside Indonesia and Malaysia increased from four million tons in year 2000 to 6.6 million tons in 2011, out of which about 2.5 million tons in Latin America (Columbia, Ecuador, Honduras, Guatemala, Costa Rica and Brazil), 1.5 million tons in Thailand and 1.8 million tons in West Africa. ISTA Mielke estimated the annual growth of world production of palm kernels for further processing to palm kernel oil and derived products at 4 per cent, from 4.8 million tons in 2006 to 5.6 million tons in 2010. Production is concentrated in the two leading producers of oil palm and palm oil Indonesia and Malaysia (83 per cent of world output), followed far behind by Nigeria (4 per cent). Global production of palm kernel oil increased by 4 per cent per year, from 4.8 million tons in 2006 to 5.8 million tons in 2011 (see Chart 21). Indonesia and Malaysia covered together well over the three quarters of the world output. As in the case of palm oil, in 2008 Indonesia overtook Malaysia and became the world leading producer of palm kernel oil, with an output of 2.5 million tons in 2011. Malaysian production levelled off at around 2 million tons per year since 2008. 74 Chart 21: Palm kernel oil - world production, million tons 6 5 4 3 2 1 0 2006 2007 World 2008 2009 Indonesia 2010 Malaysia 2011 e Others Source: ISTA Mielke November 2011 and USDA The estimated production of palm oil, palm kernels and palm kernel oil in the ECOWAS region in 2010/2011 is shown in Table 7. Nigeria is the largest manufacturer of palm products, having produced 63 per cent of the regional output of palm oil (just over one million tons), as well as 79 per cent of the total palm kernels (1.1 million tons) and 84 per cent of the palm kernel oil (0.5 million tons). Table 7: ECOWAS production of palm oil, palm kernels and palm kernel oil 2010/2011, thousand tons Benin Côte d'Ivoire Gambia Ghana Guinea Guinea Bissau Liberia Niger Nigeria Senegal Sierra Leone Togo ECOWAS Palm oil 46 300 3 120 50 6 42 1 1086.6 12.4 52 7.4 1726.4 Palm kernels 36 79 2.5 36 53 6.2 11 Palm kernel oil 13.2 29.4 16 1126.4 6.6 36 36.3 1429 526 3 10.2 16.3 627 4.9 3 5 Source: ISTA Mielke November 2011 and USDA In the near future, palm industry is expected to remain centred in Southeast Asia, where large areas of new plantings are still to come into production, governments are supportive of palm sector development and the domestic and export supply chains are well established. Sustainable development policies and the adoption of eco standards and certification systems will gradually shift away oil palm cultivation from forested land to other existing agricultural land or degraded areas. 75 At 2011 average market price. market analysts in LMC International (http://www. To achieve the objective of doubling its output until 2020. based on increased investment in production by multinationals and investment groups keen to ensure their longterm sources of supply. 2. Nigeria and Thailand covered together 45 per cent of the entire world consumption in 2006 and 51 per cent in 2011. the Chinese consumption decreased from 15 per cent to 13 per cent in 2011. India. total consumption of palm oil is valued at about $54 billion.3 million tons by 2015 and 11. As far as the medium term developments are concerned. Indonesian consumption raised from 10 per cent of world total use in 2006 to 13 per cent in 2011.1 million tons by 2020. Cameroon and the Democratic Republic of Congo. these include the ECOWAS countries already mentioned previously (see Annex II). driven by the very rapid increase of Indian consumption (8 per cent of world total in 2006 and 14 per cent in 2011).co. Plantations in West Africa and Latin America are expected to expand to meet the fast rising local. The importance of the eight largest users of palm oil in the global intake increased. Indonesia. 8 per cent for the manufacture of oleo chemicals and 5 per cent for other uses.uk/) estimate that palm oil production outside Indonesia and Malaysia would reach 8. half used for food and the other half for energy. the country would need annually up to 300 000 ha of new land devoted to oil palm cultivation.Indonesia is expected to remain the leading supplier of crude palm oil. with an output of 40 million tons by 2020. Agrimoney.lmc. Malaysia. out of which 26% (2. poverty reduction and decreased dependence on imported edible oils are attracting Asian and European investments in the palm sector.6 million tons) produced in Thailand and 20% (2. Pakistan. Demand outlook 93 Global palm oil disappearance doubled in the past decade from about 34 million tons in year 2000 to 50 million tons in 2011 (see Chart 22). The government foresees the country as the best sustainable palm oil producer in the world. EU.com) estimate that the palm oil industry is at the dawn of a new period of expansion. 93 Defined by ISTA Mielke as the residual of the balance (production + imports + opening stocks exports .agrimoney. Several of these countries in pursuit of economic growth.2 million tons) in Columbia. 10 per cent as biodiesel. although the Sarawak state government is opening large tracts of land for palm cultivation. which surpassed China and the European Union as leading global user in 2009. The limited land availability will reduce the expansion of oil palm estates in Malaysia. while palm oil utilisation in the European Union stagnated at 12 per cent of the world total over the period considered.com analysts (http://www. Some 77 per cent of palm oil is estimated to be consumed as food. regional and global demand. China.ending stocks) 76 . In addition to Brazil. Columbia. 54 6. and Thailand and Bangladesh each 2 per cent.53 47.2 7.76 38.54 6.FAO “Agricultural Outlook 2008-2017”.97 32.03 44.Chart 22: Palm oil global supply and demand balance.11 Exports 29. given its highest productivity per hectare.usda.88 38.19 Ending Stocks 5.87 Disappearance 34. 77 .93 35.19 7. million tons 50 40 30 20 10 0 2006 2007 2008 2009 2010 2011 e Beginning Stocks 5. Indonesia 14 per cent.2 7.org/es/esc/common/ecg/550/en/AgOut2017E. as follows (see Chart 23): India 15 per cent.46 34.95 50.17 Production 37. Chart 23: Leading users of palm oil in 2011 (World total 49 million tons) India 15% Others 29% China 13% Bangladesh 2% Thailand 2% EU 10% Nigeria 4% Pakistan Malaysia 7% 4% Indonesia 14% Source: USDA. China and the European Union do not produce crude palm oil and the Indian production is marginal.32 35.pdf).14 45.29 5.fao.87 47.11 7.52 42.49 Source: ISTA Mielke and USDA The four largest consumers of palm oil covered over a half of the global usage in 2011.gov/psdonline According to OECD .19 7.08 49.27 38.02 45. Pakistan and Nigeria 4 per cent each.32 34. Palm oil is best placed to meet a very large part of this demand.15 30.06 35. The following large consumers were Malaysia (/ per cent).34 41.75 36.1 7. with biofuels accounting for one-third of the increase (http://www.27 Imports 27.11 7. the demand of these three largest users is met almost entirely by imports. worldwide demand for vegetable oils is expected to increase by 36 per cent.fas. www. China 13 per cent and the European Union 10 per cent. 5 0. As one would expect.8 5 5. Chart 24: Palm kernel oil global supply and demand balance. condition.1 5.6 0. million tons 6 5 4 3 2 1 0 2006 2007 2008 2009 2010 2011 e Beginning Stocks 0.6 2.2 2.8 Imports 2.4 4. increased per capita consumption and the shift away from the use of saturated animal fats in developed countries.1 5.4 2.6 2.1 Disappearance 4. World stocks are projected to fall to below 8% of global consumption by the end of 2012 for the first time in 40 years. from 4.5 5.6 Source: ISTA Mielke and USDA With a different composition compared to palm oil (mainly a higher content of lauric fatty acids).7 5.4 2. countries have set biodiesel blending targets ranging.6 Production 4.6 0. the leading consumers are the countries producing and processing palm kernels and/or having well-developed oleo chemicals and food industries. the use of palm kernel oil in the food sector is much lower.3 5.6 0.9 2.6 0.4 0. moisturise and restore lustre and shine to hair and skin. Soaps and detergents produced from palm kernel oil and stearin have superior cleansing power.4 2. In the biofuels sector.1 2. If these national mandates would materialise. Likewise. it is estimated that an additional four million hectares of agricultural land should be planted with oil palm to meet EU palm biodiesel requirements and another one million hectares to meet the Chinese demand.7 5. in particular in hard water areas.3 million tons in 2011.3 Ending Stocks 0.6 0. 78 . non-renewable and less environmentally friendly petroleum oils.4 million tons in 2006 to 5. they are used in the manufacture of “green” personal care and beauty products because of their good ability to lather.6 0. largely driven by biofuels policies.Demand of palm oil for edible uses is foreseen to further rise. World disappearance of palm kernel oil is estimated to have increased by about 3 per cent over the past six years. and have a lesser impact on the environment. Palm kernel oil products make economical effective alternatives to petroleum-based chemical products derived from depleting.5 0. Chart 25 illustrates the shares of the major palm kernel oil consuming countries in 2011. determined by population growth.6 5.6 0.4 2. for example.9 3. Demand growth for palm oil is currently exceeding supply growth.6 Exports 2. from 1 per cent in the Philippines to 10 per cent in the European Union by 2020. palm kernels and palm kernel oil 2010/2011 (‘000 tons) 94 Both oils contain a total of 77% lauric. They differ by the respective content of caprylic and capric fatty acids (7% in palm kernel oil and 15% in the coconut oil) and of oleic acid (15% in palm kernel oil and 7% in coconut oil). stearic and miristic fatty acids in very similar ratios. Palm kernel and coconut oil are highly substitutable because of their similar 94 fatty acids composition.5 million tons) Malaysia 26% Others 21% CIS 3% India 4% Brazil 4% Nigeria 4% USA 5% China 9% Indonesia 12% EU 12% International trade Palm and palm kernel oils evolved into highly traded international commodities.9 million tons in 2011. Indonesia and the European Union – the three largest users of palm kernel oil.7 million tons in 2006 to 8. About two thirds of the palm oil and a half of the palm kernel oil produced worldwide enter international trade circuits. current shipments of the two oils exceed 42 million tons per year.Exports. with Nigeria accounting for about 80 per cent of the regional palm oil deficit (Table 8). imports and trade balances of palm oil. which covers now about 60 per cent of the global consumption of lauric oils. have covered a half of the world consumption in 2011.Malaysia. The ECOWAS region is a net importer of palm and palm kernel oils. 3. palmitic. The combined use of the two oils has risen from 4. 79 . with the increase coming mainly from palm kernel oil 95. Table 8: ECOWAS region . Palm oil constitutes around 45 per cent of the global edible oil trade in volume. 95 This is linked with the increase in the area under palm cultivation yielding larger amounts of palm kernels and palm kernel oils produced. Chart 25: : Leading users of palm kernel oil in 2011 (Total 5. 23 0.5 0.36 0.6 reaching 18 million tons in 2011. Global exports of palm oil are estimated to have increased with 1.49 0.5 Malaysian palm oil UAE 0.47 0. Indonesia and Malaysia covered 89 per cent of the total export trade. Far behind in the third and fourth places come Papua New Guinea and Benin.3 million tons in 2006 to 0. 2011 (Total 38.31 0.4 exported (Chart 26.4 million tons in 2006 to 3. million tons The two leading producers of palm oil 20 Indonesia and 16 Malaysia.33 million tons of palm oil per year on the average. are also the 12 largest exporters.5 2. Indonesia and Malaysia reported.3.4 14.6 16.5 million tons per.54 2. the United Arab Emirates re-exported about 0.3 16.36 0.34 0.1 million tons in 2011 (Chart 28).29 2.35 0. Others USDA and ISTA 2.5 million tons in 2011.35 0.73 2.1 Exports The palm oil sector is a major contributor to export earnings in producing countries. The share of palm oil suppliers in the export trade in 2011 is illustrated in Chart 27.5 16.6 15.46 0.9 million tons) Malaysia 43% PNG 1% Benin 1% Indonesia 46% UAE 1% Others 8% Source: ISTA Mielke November 2011 and USDA According to ISTA Mielke estimates. Chart 26: World exports of palm oil. for instance.05 2. with similar export levels which increased from 0. Indonesian exports 8 increased faster than 4 the Malaysian ones over the past six year 0 period (7 per cent and 2006 2007 2008 2009 2010 2011 2 per cent per year Indonesia 12.4 18 respectively).51 16.45 0. Malaysia 14.36 0. from nearly 30 million tons in 2006 to 39 million tons in 2011. exports increased from 2.5 14 16 16. During the same period. Chart 27: Main exporters of palm oil. 27 billion US dollars in combined sales of palm oil and palm kernel oil products.86 Mielke data).34 0.6 million tons of Benin 0.5 15. against PNG 0. 80 .45 0. 2 Imports Imports of palm oil nearly doubled over the past six years. EU 6 Pakistan These three 5 Malaysia countries covered 4 Egypt the three quarters of Bangladesh the global import 3 USA trade in palm oil in 2 Nigeria 2011 (see Chart 30). Costa Rica. 3.5 0 2006 2007 2008 2009 2010 2011 Indonesia covered that year 61 per cent of the global exports and Malaysia 36 per cent. Papua New Guinea 37 000 tons. European Union was a leading importer of palm oil. surpassed only by China. Côte d’Ivoire 18 000 tons. Honduras. Latin America 88 000 tons (Colombia.6 million tons in 2006 8 India to 7. India overtook them following the stagnant level of imports in Europe and the slowing growth of Chart 29: World imports of palm oil. Benin 8 000 tons and Nigeria 3 000 tons. Iran 1 0 2006 2007 2008 81 2009 2010 2011 . Since 2007. according to USDA and ISTA Mielke data. from about 27 million tons in 2006 to 38 million tons in 2011 (see Chart 29).5 3 Indonesia 2.Chart 28: World exports of palm kernel oil.5 2 Malaysia 1. million tons imports in China. and Ecuador). Previous to year 2004. from 3. Indian imports 9 doubled. Guatemala.3 million tons in 7 China 2011.5 Others 1 Total 0. million tons 3. The other producing countries small exporters of palm kernel oil and the quantities exported in 2011 are Thailand 55 000 tons. China.2 2. source ISTA Mielke).2 2006 2007 2008 2009 2010 2011 The four leading importers having large oleo chemical industries using palm kernel oil as feedstock. million tons 3. 5% Egypt 2% Malaysia 3% EU 27% Pakistan 9% Annual palm kernel oil imports progressed by about 6 per cent. USA and Malaysia.Chart 30: Leading importers of palm oil in 2011 (Total 38 million tons) India 19% China 29% Nigeria 2% USA 4% Bangla. China.3 million tons) Others 29% CIS 3% Brazil 3% India 6% Chart 33: Main palm kernel oil importers 2011 (Total 3.7 2. European Union has lost shares in palm kernel oil import market during the period considered in favour of Malaysia.3 million tons in 2006 to 3. Chart 32: Main palm kernel oil importers in 2006 (Total 2. CIS and India to a lesser extent (Charts 32 and 33). 3. namely the European Union. from about 2.3 million tons) Others 22% EU 27% EU 20% CIS 5% USA 11% China 12% Brazil 6% Malaysi a 9% Malaysia 15% India 7% USA 10% 82 China 15% . covered nearly 60 per cent of the trade over the period. and Brazil.7 Chart 31: World imports of palm kernel oil.3 million tons in 2011 (Chart 31. This trend is reflected in both Charts 34 and 35 covering the period 2005 to 2011. cif Rott. 600 Palm stearin RBD. 0 Chart 35 shows the progression of 2005 2006 2007 2008 prices of CPO all origins in North Crude palm oil Western European ports (cif). Indon. Chart 34: Annual price indexes for palm products (1990 = 100) 350 300 250 200 Chart 34 illustrates the comparative 150 evolution of annual price indexes of 100 crude palm oil. crude palm oil prices may loosen at least at the beginning of 2012. based on data 50 provided by ISTA Mielke. palm olein RBD and palm kernel oil. and of palm RDB stearin and olein of Malaysian origin cif Rotterdam. palm oil prices have followed an upward trend since year 2000. Mal. 83 . 2009 2010 2011 Palm olein RBD After the high peak reached at the beginning of 2008. US $ per ton 1100 1000 CPO. prices fell sharply by the end of that year. cif Rott. cif N. Afterwards they are however likely to trend upward due to bullish demand fundamentals and a rising demand from the biofuel industry. and a good soybean season in view. when CPO exceeded 950 $/ton and RBD olein 1000 $/ton in Rotterdam. sustained by a strong demand and the increased use for biodiesel manufacture. in particular if sugar prices may increase and soybean and rapeseed crops may be affected by adverse climatic conditions. 500 400 2006 2007 2008 2009 2010 With several importing countries recording a slowdown in consumption caused by the persistent global macro-economic uncertainties and recession fears.W Europe 900 CPO. They regained afterwards the uptrend to high levels until 2011. Mal. lower petroleum prices. Indonesian CPO (fob). fob 800 700 Palm olein RBD. Chart 35: Prices of palm oils.3 Price outlook Despite their high short-term volatility.3. all. Definition and key issues Biofuels are defined as fuels composed of. soybean (550-800) and sunflower (750). followed by processing to liquid biodiesel. cosmetics and chemical industries and as fodder (palm.euractiv. propyl or ethyl) and are obtained by processing vegetable oils or animal fat. biological raw materials (as opposed to petroleum fossil fuel). soybean. Biodiesels are fuels similar to the heavy mineral oil used as fuel in diesel engines. including vegetable oils which are already major cash crops used in food. Camelina sativa belongs to Brassicaceae family (similar to mustard and rapeseed). palm oil is by far the most advantageous feedstock (yielding 4752 litres of biodiesel /ha).BASED BIODIESEL __________________________________________________ 1. jatropha. have important implications for the biofuels industry in Europe. Following are the policy arguments most often presented for the promotion of biodiesels:  Mitigation of climate change – although growing concern and doubts are expressed on both the greenhouse gas emissions and the effectiveness of large-scale use of land to cultivate oilseed for biodiesel. camelina 96. Biodiesels consist of long-chain alkyl esters (methyl. plant – based biodiesels lie at the interface between agriculture and energy sectors. or produced from. they can be used in standard diesel engines alone. Emissions estimates. Yield efficiency is one of the factors determining the competitiveness of various biodiesel feed stocks and their commercialisation potential over the next decade. Biodiesels manufacture encompasses the production of feed stocks. Government policies. which haven't been officially released.com/climate-environment/biodiesels-pollute-crude-oil-lea-news-510437 84 . According to calculations by the European Commission 97. recycled oils and greases or animal fats (tallow or by-products of the production of omega-3 fatty acids from fish oil). This means that palm oil-based biodiesel producers would be unable to break into US markets and compete with soybean and 96 Jatropha curcasis is a plant from the Euphorbiaceae family that can grow in marginal lands (similar to castor beans). or blended with fossil diesel. Likewise. rice bran. being therefore considerably more regulated than the input commodities. 97 http://www. The two terms are often used alternately. A variety of feed stocks can be used for biodiesels manufacture. greenhouse gas emissions from palm oil-based biodiesel are the highest among major biofuels when the effects of deforestation and peat lands degradation are considered. Chinese tallow (910). From this point of view. followed by coconut oil and far behind by rapeseed oil (955). As products. Several economic and environmental factors led to the growing interest in alternative sources of energy including biodiesels. mandatory targets and financial incentives provided to private sector (subsidies and tax breaks) for the use of biodiesels are creating an artificial demand on the corresponding crop feed stocks. corn.PART FOUR: BIOFUELS AND PALM OIL. rapeseed.). etc. the USA Environmental Protection Agency considers that palm oil-based biodiesel does not meet the requirements of its renewable fuels program because its greenhouse-gas emissions are too high. the most important being the decreasing reserves and rising costs of petroleum.    rapeseed oil-based biodiesels. could provide better incomes and food security for farmers. standards and certification is available at European Biofuels Technology Platform (see http://www.html). but the situation is similar in many countries and several other examples are found in the table in Annex II.CAP is a system of EU agricultural subsidies and programmes with an annual budget amounting to about 53 billion Euros. 85 . some 20% is spent on rural development measures and the remaining is given out to food companies as export subsidies. at least 85% of passenger cars purchased or leased by the State are targeted to be eco-friendly. export of palm biodiesel may prevail over the export of crude palm oil. the European Commission proposed overhauling the CAP and suggested shifting a greater part of the funding to the Eastern European member states.eu/legislation. Specific policy measures used according to country’s specific conditions include support to purchasing and maintain cars able to utilize biodiesels. 99 See “Global Biodiesel Production and Market Report” at www. 2. In September 2011.biofuelstp. detailed information about EU biofuels policy. 98 Palm oil produced in Indonesia and Malaysia is partly processed locally to biodiesel. namely the land set-aside scheme launched in 1992 with a view to limit rising production and stabilize decreasing prices of food products.1 Biofuels policies Government policies are the key drivers of expanding biodiesel markets and.000 Euro. notably. inducing pressure on food supply and prices Energy security – with fossil fuel prices around or above 100 US $/barrel and uncertainty of supplies in the long term.com/articles/4447/global-biodiesel-production-and-market report 100 The Common Agricultural Policy . along with value addition when processing facilities are neighbouring farms areas 98 Export development – biodiesels are an opportunity to diversify export markets for countries with favourable land endowments and labour and trade conditions. The new policy directions are now being debated between the European Parliament and the EU's 27 member states in view of an expected approval by end 2013. individuals who buy new eco-friendly cars receive a subsidy of nearly 10. legislation. Over 70% of CAP of the CAP budget goes to direct payments for farmers. Biofuel production in European Union was triggered by two policy instruments used in the frame of the Common Agricultural Policy (CAP) 100. cultivation of oilseeds for biodiesel manufacture may compete with their food use. As transport costs become prohibitive. These policy instruments are now abandoned and replaced by tax reliefs and the obligations to blend. implicitly. The largest part is however shipped as crude palm oil to Dutch and German refineries for biodiesel manufacture. A wealth of up-to-date. The decisive impact of governmental policies is best illustrated by the evolution of biodiesel production and demand in the European Union. The annual budgets after the 2013 reform are expected to fall by some 36%. the demand for feed stocks including palm oil. biodiesels could be alternative or complementary fuel sources contributing to increased energy security and the reduction of petroleum import bills Rural development – land use for the cultivation of biodiesel feed stocks. In addition. and were paid 45 Euros per ha if the crops were used for energy. Farmers were required to set aside 10 per cent of the land on which they were allowed to grow crops as long as they were solely destined to non-food uses. and the energy crop scheme linked to the creation and deployment of the biofuel industry.biodieselmagazine. although involving public subsidies. In Sweden. Current market situation 99 2. some 245 biodiesel plants existed in the EU. 101 Over the same period.3 million tons in 2007. millions tons 25 20 15 10 5 0 2007 2008 Palm oil 2009 2010 Other feedstocks 2011 Total Sources: F. Thailand. 16 per cent palm stearin and 9 per cent other palm oil derivatives. 14 per cent in the North and Central America and 12 per cent in Asia. According to the European Biodiesel Board. In July 2010.European biodiesel policies for green fuels are currently questioned following studies claiming that the cultivation of rapeseed.9 million tons. Germany. the total vegetable oils production rose from about 155 to 184 million tons. located mainly in the Netherlands.) increased during the same period from 8 million tons to 14. 31 per cent in South America (mostly Argentina and Brazil). ISTA Mielke Palm biodiesel. biomass. other vegetable oils. sugar. Chart 36: World production of biodiesel by types of feedstock. European Union is world leading biodiesel producer. Global palm biodiesel output rose trebled from 1. France and Spain. Colombia and Malaysia (see Chart 37). USDA.World Ethanol and Biofuels Report 103 Palm biodiesel feedstock mix in Malaysia consists of 26 per cent CPO. Production of biodiesels manufactured from all other feed stocks (corn. to 18. Indonesia. It accounted for 14 per cent of the total biofuels produced in 2007 and for 21 per cent in 2011.3 million tons in 2007 to 3. 2. is obtained by esterification of palm oil feed stocks 103 with methanol. 49 per cent RBD palm oil.9 million tons in 2011. Licht 102. which is a palm oil methyl ester. F.O. EU produced approximately 9 million metric tons of biodiesel in 2009.2 Production and consumption World biodiesel production is estimated to have doubled from 9. palm and soybeans as feedstock for biodiesel is worse for climate than the use of regular diesel and the economics of the production of biodiesel could only be supported by subsidies. Licht .O.8 million tons in 2011 101 (see Chart 36). Oil World estimates that 41 per cent of the global biodiesel production in 2011 was obtained in the European Union. The producers of palm biodiesel are European Union. etc. 102 86 . The European Biodiesel Board estimated the European Union biodiesel production capacity in 2011 at 22. Rising imports.1 million tonnes. biodiesel imports. million tons 2.S. and stiff competition from Indonesian supplies in export markets 106 . palm and soybeans as feedstock for biodiesel has worse effects on climate than the use of regular diesel and the economics of the production of biodiesel could only be supported by subsidies.based biodiesel is sold in the domestic Indonesian market at prices higher than the price of exports to Europe 105 Recent studies claim that the cultivation of rapeseed. from 15 per cent in 2007 to a third of the world output in 2011. A majority of the plants are idle.999 tons. is being hammered by limited and stagnant domestic demand. However. The performance of Malaysian biodiesel industry. palm biodiesel from Indonesia and Malaysia became more price-attractive. based in near totality on palm oil feed stock. compared to 89. Chart 37: Producers of palm biodiesel. ISTA Mielke The excessive under utilisation rate is due to lack of price competitiveness of production based on locally available feed stocks. unfair trade practices 104 . strong crude palm oil prices versus of subsidised petroleum-based fuels. coming mainly from Argentina. many plants are closed or idle.609 tons the previous year and with Indonesia's exports at 1. and the recent questioning of the green biofuels policies 105 . Indonesian shares more than doubled. Licht. As a result. 106 In 2011. while Thailand’s incipient production in 2007 rose to 15 per cent of that last year. European Union share dropped from 69 per cent of the world palm biodiesel output in 2007. 87 . anti-dumping and countervailing measures were taken by the European Commission in 2009 to address this problem. The lack of price competitiveness of imported palm oil conversion to biodiesel in Europe has resulted in increased quantities of palm biodiesel from Asia – mostly Indonesia.5 Thailand Colombia 1 EU 0. poor rapeseed crops. USDA. the profitability of EU biodiesel producers was negatively affected by U. Spain's Association of Renewable Energy Producers issued recently a report stating that 60 per cent of the biodiesel utilized in Spain during the first quarter of 2010 was comprised of imports. especially from Indonesia. while the Malaysian production decreased from 8 per cent to 3 per cent. not being fully economically 104 In 2007.37 million tonnes. A recent flood of soybean oil-based biodiesel imports from Argentina is now causing economic profitability prejudices to EU biodiesel producers. with allegations of unfair prices – as palm oil and palm oil .5 Indonesia 2 Malaysia 1. to only 39 per cent in 2011 (see Charts 38 and 39). also threaten to create trade friction. the total rate of utilisation of installed capacities averaging only 44 per cent.O. Malaysian biodiesel exports declined to 49.5 0 2007 2008 2009 2010 2011 Sources: F. Chart 39: Major producers of palm biodiesel in 2011 (World total 3. and the introduction of a differenced export tax for crude palm oil to palm oil derived biodiesel 107. Malaysia 3% Colomb. although having been previously an OPEC member country. from 86 000 tons in 2010 to 50 000 tons in 2011. The Brazilian mining conglomerate Vale S. It is interesting to note that palm biodiesel is also penetrating into Latin America where. which have drastically affected the exports. 8% Thail. 10% Thailand 15% Indonesia turned into a net petroleum importer and adopted policies for large-scale biodiesel manufacture.viable. and palm oil producers. Malaysian local palm biodiesel is facing duty differential disadvantages when compared with Indonesia and Argentina. Export-wise. Major export markets were EU. the establishment of contract farming schemes between industry and smallholders. 23 companies with an installed capacity of about 4 million produced palm biodiesel. with the exception of Colombia.3 million tons produced bioethanol from molasses and cassava. while other companies with a combined capacity of about . 15% EU 69% Indones. is implementing a 500 million dollars project for the set . facilitated conditions for investment.9 million tons) Chart 38: Major producers of palm biodiesel in 2007 (World total 1. to encourage local palm biodiesel production and 107 In 2011. instead of exporting CPO for conversion in Europe. The price difference of 90 – 100 Euros per ton of palm methyl ester compared to crude palm oil price promotes the local conversion to biodiesel. 108 See http://www. most often also biodiesel manufacturers. operating already a palm oil plant supplying the food sector.com/en-us/sustentabilidade/mudancas-climaticas/emissoes-de-gee/projetobiodiesel/Pages/default.. adding a biodiesel component to industrial plantations of oil palm. 2.up of forest-cleared oil palm estate and the building of processing plant 108 and the conversion of palm oil to biodiesel by 2015. Taiwan and South Korea. Indonesia has been incentivising its biodiesel sector through a lower differential duty structure on its crude palm oil feedstock..vale. the traditional biofuel feed stocks are sugar and soybeans.aspx 88 .3 million tons) Indon. The country adopted since 2010 the set-up of “food and energy estates”.A.3 Trade Malaysian exports of palm biodiesel dropped by 42 per cent. the main reason is the lack of competitiveness. obtain now higher returns selling CPO rather than refining the oil for biodiesel. With domestic production not increasing in the near future. the introduction of blending mandates which create a captive market for biofuels. 8% Colomb. The steady growth of the Indonesian production was made possible by a large array of strong incentives including tax exemptions. exports should continue falling.. 33% EU 39% Malay. direct subsidies to manufacturers. Thailand.50% n. The Association of biofuel production Indonesia (APROBI) estimated that in 2012 production of palm biodiesel may reach 2.a 0% 0% 6. import tariffs and taxes and producer subsidies protect domestic production at the expense of foreign-produced biofuels.CVD1 0% n. Australia and Korea.6 0.50% n.2 to 237 Euro/ton depending on company ADD2: Anti-dumping duties of 172. Tables 9 and 10 show the recent evolution of biodiesel imports into the European Union and the USA by types of feed stocks. The remaining was shipped to China.blending.a Total 1780 1711 1927 2270 Sources: Eurostat data bases.a .5 million tons (71 per cent) could be exported. 2008 to 2011 (1000 tons) Feed stocks 2008 2009 2010 Tariff 2008 2011 Tariffs as of July 2009 Tariffs as of May 2011 ADD1.50% 155 38 0 193 22 158 123 20 301 10 496 78 12 586 33 895 10 0 905 67 0% 0% 6. correlated with the level of tariffs.a ADD2.a ADD1. If support policies such as mandatory blending tend to not distort trade.1 million tons. border protection through high tariffs and quota restrictions is an inexpensive way of protecting domestic producers liberally used by governments.3.50% 0% n. The country produced 1. not distinguishing between domestic and imported biofuels.6 1179 1179.a: not applicable 89 0% 0% 6.a n. Import and export taxes on palm biodiesel applied in the European Union and Indonesia respectively are shown in Annex IV. They reflect the incidence of import tariffs on both the global volume of trade. of which 1.6 to 198 Euro/ton depending on company CVD1: Countervailing duties of 211.a ADD1: Anti-dumping duties of 68.1 6. CVD2 Mainly soybean oil USA Argentina S/total Mainly rapeseed oil Canada Mainly palm oil Indonesia Malaysia Singapore S/total Others 1488 77 1565 381 854 1235 0. Table 9: EU imports of biodiesel by type of feed stock and corresponding tariffs ad valorem. and the type of feed stocks used in the production of biodiesels.2 Euro/ton CVD2: Countervailing duties of 237 Euro/ton n.50% 6. USDA/ FAS 2011 n.a 0 140 90 2 6.1 1245 1245. Peru.3 million tons of palm biodiesel in 2011. out of which one million tons (77 per cent) were exported to the European Union. other policies such as fuel tax reductions.2. Trade in biofuels is heavily influenced by policies.CVD1 0% n.50% n. As already mentioned in subchapter 2. 5 45. take advantage of forward pricing – when favourable.8 77.1 4. Regulation of prices following the international market prices and subsidies helped the industries to regain positive margins since 2010. feed stocks represent 70 to 80 per cent of the cost of biodiesel production. In general.3 9.1 447. and for a long term enhancement of viability adopt a vertical integration approach.a Sources: USDA/FAS 2011.4 35 4.6 24.6% EU 10.7 4.2 3. some of them have no choice but to run the plants at no profit margins to honour old export contracts.6% Malaysia 54. such as RBD palm stearin. for example.9 487 1093.9 68. Palm biodiesel manufacturers can mitigate the situation by seeking a cheaper alternative feed stocks. United States International Trade Commission.5 4.8 0 4.2 268. The following Chart 40.3 17. the European rapeseed-based biodiesel being the most expensive.2 n.3 72.6% Mainly rapeseed oil Canada 8. companies have to cut production and wait for feedstock price to moderate 109.5 0. 90 .1 36.1 12.8 0.6% S/total 18.6% Singapore 3. started manufacturing value added products from palm oil 109 It is estimated that in 2011 the lowest conversion cost of RBD palm oil into palm biodiesel averaged 130 $ per ton.6 83.7 Mainly palm oil Indonesia 25. sourced from the Malaysian Palm Oil Board documentation.6 10.8 74. during high crude palm oil prices.6 Others 54. which should keep pace with target blending mandates.3 59 67.6 186 280. access to inexpensive feed stocks and financing hurdles are challenging barriers to its production. for example.9 n.9 540.4 Pricing Biodiesel developments depend on their price parity with petroleum-based fuels. 2011 n. illustrates this remark.8 7 5. 2006 to 2011 (1000 tons) Feed stocks 2006 2007 2008 2009 2010 Current tariffs Mainly soybean oil Argentina 0 40.5 3. However. production costs of biodiesels from various feed stocks remained higher.2 99. Despite the important and growing demand for biodiesel for transportation.6 9.4 40. due to negative margins.a: not applicable 2.8 0 0% S/total 83 349.3 130.Table 10: USA imports of biodiesel by type of feed stock and corresponding tariffs ad valorem. both Malaysian and Indonesian palm biodiesel industries suffered.5 64. a palm-based biodiesel industry is beforehand a viable option for Indonesia and Malaysia.6 102. The 2007/2008 petroleum crisis set into light the fact that even when petroleum prices soared over 130 $/barrel.3 7. and almost collapsed. In 2009. Malaysia.1 32.a Total 155. At times. N. driven by the accelerated increase in demand energy crops may divert too much of cropland to fuel feed stock production. ERIA workshop. such as phytonutrients (carotenoids). At present. pharmaceutical or cosmetic ingredients) or phospholipids. the manufacture of palm biodiesel is economically a marginal activity at the best. Japan. Chart 40 Source: MPOB – Dr Choo Yuen May and Dr Harrison L.methyl esters. Palm biodiesel manufacturers who also own large plantations have well integrated supply chains and are vertically integrated are better off. Lau. October 2009 3. phytosterols (used as food additives. Threatening of environmental advantages and positive greenhouse benefits of using biofuels entrained by increasing biofuels demand is expressed by the environmentally unfriendly increase in water and pesticides use for their manufacture The significant costs related to sustainability certification will probably be higher for smallholders in developing countries as opposed to industrial countries Ability to effectively participate in standard development processes and the risk of domestic producers playing an overlarge role in the establishment of sustainability requirements are a major concern for developing countries Evaluation of macro effects of biofuels production and the balance between the comprehensiveness of sustainability certification criteria included in multiple schemes and the technical and administrative feasibility of their application will involve lengthy and subjective processes which may disturb trade 91 . unless it is subsidised. IEA Bioenergy Task 40. Major concerns ⇒ Food security and possible detrimental increases in agricultural commodities prices ⇒ ⇒ ⇒ ⇒ may be triggered by the growing production and use of biofuels. Tsukuba. Unilever. Malaysia. In addition. or are being developed by various stakeholders. 4. the United Kingdom and United States. 111 See http://www. For example. On the supranational level.globalbioenergy. corporate initiatives tend to focus on their own sectors and interests which motivate the definition of their own voluntary standards and certification schemes. Sustainability certification developments A variety of initiatives to set biofuels standards and develop sustainability certification 110 schemes have been.⇒ WTO jurisprudence is doubtful to consider favourably product differentiation based on environmental considerations and on how the products including biofuels are made and comply with food security. Likewise.org/bioenergyinfo/sort-by-date/detail/en/news/1202/icode/52/ 112 Company involved in renewable energy that designed.  Companies While governments and international actors tend to have a broader view of sustainability certification. setting sustainability criteria and measures related to blending targets. In other words. and BIOX Corporation112 are RSPO members and joined also Green Gold Label programme for energy generation.V. it ensures to buyers that suppliers are complaining with certain standards. Canada. Ontario. Cargill B. the European Commission and ASEAN are also active in establishing policy frameworks for biofuels certification. namely Belgium. including palm biodiesels. Brazil.and at times contradictory interests. The aims and definition of sustainability certification schemes depend on the interests of stakeholders who established them. Switzerland. Cefetra – traders and biofuels and the bank Rabobank International are among the members of the Dutch “Sustainable Production of Biomass” project group111. They have acquired experience in certification through company-specific certification and pilot studies and promote inter-company coordination and cooperation in providing governments and international initiatives with their points of view on the development and implementation of sustainability criteria and certification schemes. Indonesia. 4. Companies involved among other things in biofuels supply chain are active in discussions of biofuel sustainability certification. 92 .V. owns and operates a 67 million litre per annum nameplate capacity biodiesel production facility in Hamilton. built. the Netherlands. with various .1 Key stakeholders involved in the development of sustainability certification schemes Numerous certification initiatives and schemes undertaken or in various stages of development are the work of the four categories of stakeholders enumerated below. British Petroleum participates in RSPO and Shell asks suppliers to incorporate supply contract 110 Certification is a procedure by which a third party gives assurance that a product. labour rights or rural development. as well as support schemes and tax relief. Canada. the label indicating that compliance with standards has been verified is a form of communication with end consumers.  National Governments and regional groupings There are a number of countries involved in biofuels certification. process or service is in conformity with certain standards. Cargill B. biofuels certification schemes developed by private bodies may be considered private marketing schemes out of the scope of WTO rules. In the policy field there is however some overlap of interests and complementary initiatives. certification and other market instruments are included in the core mandate of the agency.  International bodies. UN-Energy Knowledge Network is an interagency mechanism aiming at promoting coherence within the United Nations family of organizations in the energy field and to develop increased collective engagement between the United Nations and other key external stakeholders.FAO launched in 2006 the “International Bioenergy Platform” – (IBEP). They are participating in sustainability networks and round tables and undertake research and pilot projects on the application and impact of sustainability criteria and the feasibility of certification schemes in developing countries. UNEP published a document reviewing the existing sustainability certification systems and 113 At http://www. United Nations Environment Programme (UNEP) is involved in the Roundtable on Sustainable Biofuels (RSB) which pursues a multi-stakeholders approach in developing international environment sustainability schemes for bioenergy products. Following the 2002 World Summit on Sustainable Development. which provides support to policy makers from developing countries on these considerations related to biofuels. Kellogg or Unilever are also members of RSPO and claim using sustainable palm oil in the manufacture of their products. biodiversity. UN-Energy published the document “Sustainable Bioenergy: A Framework for Decision Makers”113 stating the need for an international certification scheme ensuring that bioenergy is produced by most sustainable methods and includes the verification of their entire life cycle. The analysis of labelling.pdf 93 .un-energy. World Wildlife Fund (WWF) and the Forest Stewardship Council (FSC) are particularly involved in palm biodiesel sustainability. organisations and initiatives Their work in the area of sustainability certification ranges from policy guidance to principles and criteria development. However.clauses that ensure biofuel components are not knowingly linked to violation of human rights and sustainable feedstock – specific multi stakeholders’ initiatives. in particular for biofuels. In collaboration with Daimler-Crysler. seeking to provide technical analysis of issues related to biofuels production and trade and their impact on member countries.  Non-governmental organisations Many NGOs are concerned by the fact that biofuels are viewed in an overly positive light and that policy makers do not fully recognise and consider the disadvantaged created by the expansion of biofuel industry expansion on food security. Food conglomerates such as Nestle.org/sites/default/files/share/une/susdev. Food and Agriculture Organisation of UN .fao_. water and soil management and the fact that greenhouse gases emission savings are mot evaluated in terms of the life cycle of the products. UNCTAD launched the “Biofuels Initiative” in 2005. WWF and the Ministry of Agriculture of Baden Wuertemberg. The agency started since 2007 the work on developing an analytical framework to assess the implications of different types of energy systems in the food security context. NGOs have expressed different positions on the specific criteria to be included in certification schemes and didn’t yet reach a consensus on the priority and the level of detail to be given in these criteria.biofuels. supporting the formulation of national strategies. GBEP has established a task force on sustainability aiming at developing a voluntary framework of international sustainability principles for bio energy. intergovernmental organisations and some private sector associations. as well as individual experts concerned with ensuring the sustainability of biofuels production and processing. In 2007. “IEA Biotechnology Task 40” on International Sustainable Bioenergy Trade” 114 investigates the requirements for the creation of a commodity market for bioenergy and the development of certification system for sustainable bioenergy trade. Out of the 948 members in 2011.bioenergytrade.org/). The effects of the climatic changes and of high petroleum prices fuelled the promotion of biofuels.rspo. certification bodies and a trademark (see http://www. 7 per cent are retailers and the remaining 4 per cent are environmental. country specific analysis and the collaboration with other international initiatives and roundtables. “Global Bio Energy Partnership” (GBEP) was launched in 2006. processors and traders from different countries and regions involved. In August 2011. the participants have been mainly involved in research. 4. The partnership is developing and harmonizing methodologies for measuring the greenhouse gas impacts of biofuels. production of RSPO certified palm oil reached 5 million tonnes. Until now. and has created Expert Advisory Groups trying to reach consensus on controversial issues. companies. case studies. several other governments. In order to ensure the positive contribution towards sustainability goals without having disruptive impact on international trade.2 Conclusions and implications for developing countries Current and foreseen high petroleum prices and the increasing pressure to mitigate climate change effects are expected to sustain interest and market demand for biofuels and enhance their production and international trade. as macro level concerns would be difficult to evaluate with reference 114 www. during the 14th session of the Commission on Sustainable Development by co-opting the G8 members. equivalent to 10 per cent of the global palm oil production. In 2008. The stakeholders have established a set of principles and criteria for sustainable palm oil production and certification. The Roundtable on Sustainable Palm Oil (RSPO) is a multi-stakeholders platform promoting production. They should be based on scientific evidence and include quantitative criteria and indicators. Its objective is to bring together farmers. Switzerland. 36 per cent are were palm oil processors and traders and consumer goods manufacturers. but meanwhile opened the door to protectionist abuses by farmer lobbies and companies in several countries to secure high levels of subsidies for domestic biofuel producers.overviewing the certification labels including bioenergy and palm oil agricultural and trade labels.  International networks and roundtables “Roundtable on Sustainable Biofuels” (RSB) is the initiative launched by the Ecole Polytechnique Federale in Lausanne. NGOs. RSB released its “Draft Global Principles for Sustainable Biofuels Production”. banks and investors. 17 per cent are oil palm growers. use and trade in sustainable palm oil. social or development NGOs. indicating the ideal scenario towards which stakeholders should be progressing. certification schemes should be developed through a participatory process involving producers. governments and intergovernmental agencies.org 94 . From 2012 onwards. several voluntary certification schemes set up by industry and associations and recognised in importing countries will be in use simultaneously with mandatory. addressing especially smallholders in developing countries. and the issue of sustainability certification. Engagement in sustainable production of biofuels and the compliance with certification criteria would need to be sustained by support measures. government-led and industry-controlled sustainable palm oil schemes of Indonesia (ISPO) and Malaysia (MSPO). Certification should not involve unnecessary costs and should not disturb or delay international trade.to a single product. Trade in palm biodiesel is already affected by the need to ensure socio-economic and environmental sustainability along the entire supply chain. 95 . http://allafrica. Commod@frica. Fintrack.aifo-uemoa.com/stories/201109160960. energy.. leading information portal on soft commodities. Provides on line information on African commodities EC. weather and real estate.ifc. http://www.cmegroup.programme-repere. http://www.html Chicago Mercantile Exchange (CME). Provides prices of palm fruit bunches and palm oil American Palm Oil Council (APOC). markets and trade. http://www. décembre 2010. http://www. 15 September 2011.Association Interprofessionnelle de la filière Palmier à huile en Côte d’Ivoire.com/website/bm/derivatives/products/Commodity_Derivatives/fcpo 2.rabobank.com/content/research/erd/international/africa/africa.com.org/ AIPH . FAO 2006. www. The CME Group exchanges are world leading and most diverse derivatives marketplace..pdf Biodiesel magazine.americanpalmoil.fao. CME Group brings buyers and sellers together through the CME Globex electronic trading platform and trading facilities in New York and Chicago.br/ AIFO-UEMOA.ci/. CME Group also operates CME Clearing.agropalma. which provides clearing and settlement services for exchange-traded contracts including crude palm oil.europa. metals.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/IFC +Sustainability/Sustainable+Business+Advisory+Services/Biodiversity_BACP BMD . agriculture and food policy. http://www1.org/es/ESC/common/ecg/122/en/full_paper_English. equity indexes. 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Feb.uk/environment/2011/mar/08/africa-asia-palm-oil-caramel IPGRI . 2010. http://www.europa. offering news.do?uri=OJ:L:2009:140:0016:0062:EN:PDF “Indonesia Biofuels Annual 2011”.com/download/Global-Market-Challanges-Impact-on-PalmOil-and-Other-Vegetable-Crop. www.ifc.fas.ippanigeria.http://www.Studies on European policy.bursamalaysia.my/Global_Oils_And_Fats_Business_Magazine.pdf “International biodiesel markets . etc. GAIN report no.“Germany’s biodiesel sector has now to document its sustainability” – UFOP.org Institute for European Environmental Policy .pdf http://ec.org/ Initiative for Public Policy Analysis Nigeria.eu/ International Finance Corporation.Bursa Malaysia”.eu/agriculture/publi/caprep/prospects2010/pres_en.. market insights. http://www.eu/LexUriServ/LexUriServ. How to Feed the World in 2050.aspx?fileticket=UNfvwY%2Fcr6c%3D&tabid=4426&language =en-US “Globalising Crude Palm Oil Futures .mpoc. 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Number 2.com/about.gov/Recent%20GAIN%20Publications/Biofuels%20Annual_Kuala%20Lu mpur_Malaysia_8-3-2011. 25th March.my/v1/ Palmindustrie Côte d’Ivoire. http://business.com/ . http://www. http://www. MY 1006.html Palm Oil HQ. Dec.biz/app.oilworld.pdf “Malaqysia Biofuels Annual 2011”.ci/en/presentation. Volume 13.html “Policies to Support Biofuels in Europe: The Changing Landscape of Instruments” .org/News/news_analysis/823928/palm_oil_giants_target_africa_in_la nd_grab_following_indonesia_deforestation_ban.eu/LexUriServ/LexUriServ.my/ New strategy to boost palm oil production. FAO.org/2011/images/stories/news/Palm%20oil%20industry%20prep ares%20for%20rocky%202012.org. providing primary information and professional analysis on subscription Palm oil giants target Africa in 'land grab' following Indonesia deforestation ban. http://www.com/pages/news/201006/47320.org/pages/0.do?uri=OJ:L:2009:140:0016. information.org/ifcext/agriconsultation. 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The term "bull market" is most often used to refer to the stock market. over at least a two-month period. or B100 is 100 % biodiesel. B20 is 20 % biodiesel with 80 % petroleum. it's a bull market. no petroleum. sunflower. pessimism only grows. investor confidence and expectations that strong results will continue. It is unsaturated when any of these bonds is a double bond. but cannot be produced by the body. For example. rapeseed. such as the partial hydrogenation of vegetable oils. A third generation of biodiesel technologies will use oils from algae. used for transport or heating Biodiesel Is a liquid fuel which can be used in pure form in specially adapted vehicles. Fatty acids A large group of organic acids. Bull Market A financial market of a group of securities in which prices are rising or are expected to rise. such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500). Trans-fat Is the common name for unsaturated fat with trans-isomer fatty acids. A second generation of biodiesel technologies yields biodiesel from wood and straw. As investors anticipate losses in a bear market and selling continues. from 1 to 99. Biodiesel can be mixed with petroleum diesel in any percentage. If the trend is down. Bear Market A market condition in which the prices of securities are falling. currencies and commodities. for many. is considered an entry into a bear market. tallow and waste cooking oil. or blended with automotive diesel. They extend the shelf life of food and also add a certain pleasing mouth-feel to all manner of processed foods. which is represented by a number following a B. Part of the difficulty is that psychological effects and speculation may sometimes play a large role in the markets. but can be applied to anything that is traded. mainly composed of long chains of hydrocarbons ending in a carboxyl group. as opposed to price. such as bonds. palm. Trans fats are sometimes monounsaturated (one double-carbon bond) or polyunsaturated (several double carbon bonds). it's a bear market. and widespread pessimism causes the negative sentiment to be self-sustaining. coconut or jatropha. Fundamentals Term used to refer to physical or economic matters. Bull markets are characterized by optimism. such as weather or changes in supply and demand. especially those found in animal and vegetable fats and oils.ANNEX I EXPLICATIVE GLOSSARY Biofuels Are liquid fuels manufactured from biomass. 102 . B5 is 5 % biodiesel with 95% petroleum. They are rarely found in living nature. Although figures can vary. but never saturated (none). It's difficult to predict consistently when the trends in the market will change. Essential fatty acids are unsaturated fatty acids which are essential to human health. a downturn of 20 % or more in multiple broad market indexes. but can occur in food production process. or from animal fats. It is produced usually produced from vegetable oils such as soybean. A fatty acid is saturated when the bonds between carbon atoms are all single bonds. The consumption of trans fats increases the risk of coronary heart disease by raising levels of LDL (Low Density Protein) cholesterol and lowering levels of "good" HDL (high Density Protein) cholesterol. Since then. they produce/use/market non-hydrogenated oils and fats made from corn. or up to 7% by weight. shortenings. that is less than one gram per tablespoon. several large food manufacturers and retailers in the United States and the European Union reformulated them voluntarily for eliminating trans-fats and reaching "zero grams trans fats per serving" definition.In 2006. a study supported by the National Institutes of Health and the USDA Agricultural Research Service concluded that palm oil is not a safe substitute for partially hydrogenated fats in the food industry because it provokes adverse changes in the blood concentrations of LDL cholesterol just as the other trans-fat do (reference to hydrogenated soybean oil – the oil produced and exported by the United States and supported by one of the strongest national lobbies). trans-fat free palm oil products are produced and marketed in Asia and aggressively penetrate in the US and European markets as substitutes for a part of the non-hydrogenated oils and fats made from corn. Faced with the prospect of an outright ban on sale of their products. canola. canola. and soy oils used by food industries. and soy oils for margarines. confectionery and other food products. 103 . Currently. by boosting the saturation and then cutting the resulting solid fat with oils. bakery. health authorities’ worldwide recommend that consumption of trans-fat be reduced to trace amounts and mandatory food labelling and listing of trans-fats content was introduced in 2007 in several countries. In practice. Nigeria According to The Guardian. The following developments set into light the importance of foreign financing and intervention in the palm oil development in several ECOWAS countries.5 million acres for oil palm plantation. Africa offers suitable land available at prices lower than in Asia.a leading agribusiness and food company with integrated operations stretching from the farm field to the retail shelf. Consumer Products Group based in the UK. is investing in sustainable palm oil biodiesel production in Brazil. the favourable economics of production and the increasing demand for palm oil are boosting supply needs. because in addition to existing plantations most of which are low yielding. on a 63-year lease. They are increasingly investing in Africa too.5 billion US $ was made in Cross Rivers State for the purchase of land for oil palm plantation and palm oil production. The upstream moving of foreign investors. The newly created Sime Darby Plantation Liberia aims to develop 120. is acquiring 35% minority stake in Indonesian BRI (PT Bumiraya Investindo). however the expansion of oil palm plantations in Malaysia has reached a natural ceiling. together with food manufacturers and commodity traders. and Indonesian oil palm growth is being slowed by moratoriums on forest clearance. An investment of 6..6 % of the country’s total land area. in particular Asians. West Africa in particular is a net importer of vegetable oils. The joint venture is structured as two companies: a branded product company (PZ Wilmar Food Ltd) and a palm oil refinery (PZ Wilmar Ltd) with equities shared equally between the two partners. Archer Daniels Midland Company. oilseeds crushing. are competing for the acquisition of palm oil assets in South East Asia and beyond. edible oils refining. headquartered in Singapore and involved in oil palm cultivation. Malaysia-based multinational Same Darby signed a concession agreement with the government of Liberia on 220. industrial and energy uses. animal feed. Liberia Foreign investments in Liberia have secured by now access to more than 1. In 2009. Therefore. is affecting directly palm industries in ECOWAS region. oleo chemicals and biodiesel manufacturing. The lower African palm oil yields in comparison with Asia are compensated by the existing regional market fuelled by the fast rising demand for vegetable oils. one of world largest processors of oilseeds into products for food. a wholly owned subsidiary of Bunge Ltd . their price on domestic markets is very high due to costly maritime transport and duties imposed on imports. specialty fats. Bunge Agribusiness Singapore Pte. equivalent to about 5.000 hectares of land. the Asian leading agribusiness group Wilmar International Limited. Costs of plantation management are more or less similar to Asia.000 ha of the land in the first 11 years and to have the whole area developed by 2030. LIBERIA AND CÔTE D’IVOIRE The reliability of oil palm crop. a subsidiary of PZ Cussons Plc.ANNEX II FINANCIAL INVOLVEMENT OF FOREIGN GROUPS AND CORPORATIONS IN PALM SECTORS IN NIGERIA. but African labour is cheaper and the corporate taxes on plantation profits are much lower than in Asia. established by the end of 2011 a joint venture with PZ Cussons Nigeria Plc. For example. to develop palm oil and rubber plantations in four counties. major Asian investors and corporations involved in oil palm plantations and processing. which is the Indonesian palm plantation subsidiary of the multinational food producer TPS Food headquartered in Jakarta. The first oil palm tree was planted in Grand Cape Mount County in May 104 . and production levels of 10. Golden VerOleum Limited (subsidiary of Singapore palm oil producer Golden Agri-Resources). 105 . By mid-2011. recording that year a turnover of just over half a billion US$. while its local subsidiary Maryland Oil Palm is now in charge of the management of the oil mill and 8.398 ha concession).000 tonnes annually. Through a 1. answering the strong environmental concerns in Côte d’Ivoire. Twenty similar mills and refining units are planned to follow (one per 15. In addition. EPO plans to achieve 50. world leaders in the integrated palm oil industry. SIFCA has also obtained an oil palm concession for 46 million euros. These were Wilmar International Ltd and Olam International Ltd. The project is expected to cut Sifca’s energy costs by half and reduce carbon dioxide emissions by 45.800 hectares of palm previously largely abandoned by the Crown Corporation Decoris Palm Oil. the company received the environmental permit to start cultivation of oil palm in Sinoe County. with concessions and land bank in Liberia. Newco covers 80% of the domestic palm oil supplies and 30% of the demand in the ECOWAS region.000 hectares in twenty years. doubling to 100.6 billion US$ agreement with the government of Liberia. It is worth mentioning that Sifca will be investing in a biomass plant which will utilise wood waste and palm shells to generate electricity to cover the energy needs in its palm oil factories. The UK publicly traded Equatorial Palm Oil (EPO) company. has started up in 2011 the first commercial oil palm mill that can process up to five tonnes of oil palm fresh fruit bunches per hour. A first palm oil plant is expected to start operating in 2014.5% being owned by Sifca.5% stake in the largest Ivorian palm oil refiner Newco.Palm CI. Sifca’s business and financial structure are shown below. between two Asian multinational corporations headquartered in Singapore. harvested from an existing Palm Bay estate (34. the company has set up a joint venture agreement with the Indian Siva group through its entity Biopalm Energy Ltd. together with the Swedish company Tricorona. Golden VerOleum (Liberia) Inc. About 90% of the palm oil produced will be for export. as well as a land bank of US$ 30 million facility in order to accelerate the development of 169.000 hectares of productive plantations in the next ten years. the Wilmar-Olam joint venture has acquired a 50.000 hectares of high yielding oil palm with technical and investment support from one of major agribusiness companies in South East Asia. Through all these acquisitions and complex financial packages and interests. is developing 220. which possessed at the time 51% controlling stakes in the largest group of Ivorian plantations partly owned by Unilever. Côte d’Ivoire The important position achieved by Côte d’Ivoire as palm oil producers and as regional and international export supplier was brought about by the set up in 2007 of the 50:50 joint venture Nauvu Investments. the joint venture between the Asian multinationals Wilmar and Olam became in 2009 the largest palm oil company in West Africa. In May 2011.2011.800 tonnes are forecast to be attained by 2015.000 additional hectares.000 ha). the other 49. The agreement provided for equity investment in the joint venture company “Palm Developments” of US$ 30 million. The newly formed joint venture acquired a 25% stake in the Ivorian agro-industry group SIFCA. Scope and structure of OLAM WILMAR joint venture and SIFCA participation 106 . 107 . Singapore http://www.pdf 108 .Source: “Formation of 50:50 Joint Venture for Investments in Palm Oil and Rubber Assets in Africa”.wilmar-international. 16 November 2007. Presentation to Analysts and Media.com/investor/Olam_Presentation. The key means to temporarily slow down production growth will be to intensify replanting of old trees. 2008 December THAILAND . 2008 December Sustainable palm oil: A first shipment of certified and traceable palm oil . 2008 2008 109 . the government is considering subsidizing the sale of palm oil-based diesel when low fossil fuel prices compromise the profitability of biodiesel production. Of particular concern to the oil crop sector is a provision that prevents the use of palm oil and soybean oil under the mandatory schemes and preferential taxation system until criteria for the sustainable production of biofuel feedstock are in place.palm oil support: After rising last month the reference price at which farmers sell palm fruit to crushers. the government plans to purchase palm oil from oil mills at a guaranteed price.supply control measures: Reportedly. Several more companies are expected to gain that status during 2009. Farmers that participate in the replanting programme will be given access to high quality planting material at subsidized prices. But environmental and social groups continue to question the value of the certification pointing at environmentally and socially unsustainable production methods in the countries of origin. The recent decline in mineral oil prices has made the use of palm as biodiesel feedstock uneconomic. A total of 300 000 ha is being earmarked for this purpose. leading to an excess of supply over demand. A first shipment of certified and traceable palm oil has been delivered to the EU last November. the first two oil palm plantation companies (both in Malaysia) have been ranked as certified producers of sustainable palm oil based on the criteria developed by the global multi-stakeholder initiative RSPO. from 2015.produced in Malaysia in accordance with RSPO’s sustainability criteria . EXPORTERS AND IMPORTERS OF PALM PRODUCTS YEAR MONTH MEASURES December MALAYSIA/INDONESIA . 2009 February INDONESIA .ANNEX III POLICIES ADOPTED IN 2010-2011 IN SELECTED COUNTRIES MAJOR PRODUCERS. USD 70 million worth of palm oil have been earmarked for bartering for fertilizer with the Russian Federation and the Democratic People’s Republic of Korea.palm oil barter trade: For the period 2009-10.biodiesel support: Reportedly.has been delivered to the European Union. national mandatory targets for future biofuel admixture in transportation fuels are being adjusted downward. 2009 February MALAYSIA . hoping to prevent prices from falling further. 2009 January Certification of ‘sustainable palm oil’: Recently. Furthermore.biofuel policies: Reportedly. December GERMANY . the two countries agreed to take coordinated action to address the current slide in palm oil prices and the slowdown in demand for palm oil anticipated for next year as a result of global economic recession. the calculation basis will be switched from the energy content of biofuels to the greenhouse gas emission savings resulting from their use. Palm oil based biodiesel should account for about three quarters of all biofuel sales. local traders and policy makers are used to follow contracts traded in Malaysia or the EU to determine prices. The subsidy would amount to Rp 1000 per litre of biofuel distributed.and benefiting from government support there . Once fully operational the programme is expected to absorb 500 000 tons of palm oil annually.25% (down from originally 3.an amount close to the country’s mandatory consumption of biofuels in 2009. The restrictions had been introduced to control carbon dioxide emissions associated with the use of peat land. and shall be frozen at 6. new legislation excluding biofuels that have previously received state aids from being eligible for national incentives and mandates will go ahead. The measure would allow increasing productivity in the oil palm sector. Tariffs ranging from 26 to 41 € per 100 kg are expected to apply for an initial period of six months.palm oil exchange: To date the world’s leading producer of palm oil lacks an own exchange and futures market for palm oil. the rate for 2009/10 is expected to be set at 3. March UNITED KINGDOM and GERMANY . 2009 March FRANCE .75%).biodiesel support: The government confirmed its plan to subsidize the sale of biofuels by state owned companies depending on how the prices for fossil fuel and biofuel feedstock (notably palm oil) develop. Under the currently envisaged level of government funding. rising gradually to 5% by 2013/14. This year. Surging imports of biodiesel produced in the USA .biofuel legislation: The EU Commission has requested that the sustainability criteria included in a national law on the promotion of biofuels be streamlined with the relevant EU directive.for local biodiesel production is expected to resume. Consequently. biodiesel sales shall benefit from a subsidy.especially soy and palm oil .are considered to have severely injured the competing EU biodiesel industry. 2009 March INDONESIA . Furthermore. all government vehicles will start using the blend. the government is considering lifting temporary restrictions (in place since late 2007) on the use of peat land forests for oil palm plantations.biofuel targets: The rates of mandatory inclusion of biofuels in transportation fuel are being corrected downward in both countries: in the UK. where taxes on biodiesel and biodiesel feedstock have been raised in January. France has announced that all tax advantages granted to biofuel will be discontinued by 2012.temporary biodiesel duty: From mid-March.25%. In Germany. March INDONESIA . March GERMANY . 2009 March MALAYSIA . importation of vegetable oils .YEAR MONTH MEASURES 2009 March INDONESIA .biodiesel: Government sources confirmed that blending of diesel fuel with five per cent palm oil biofuel will become mandatory on January 2010. 2009 2009 2009 2009 110 . As a result. imports of biodiesel from the USA will face temporary antidumping and anti-subsidy duties.25% to 5.oil palm plantations: Reportedly. State plantations seem committed to sell at least 20% of their output through the new platform. To remain competitive. the importation of biodiesel that has benefited from state aid could become uneconomical. the rate for 2009 is being reduced from initially 6.biodiesel taxation: Similar to Germany. the sale of up to 750 000 tons of biofuel could be supported in 2009 . March EUROPEAN UNION . Now private sources report that physical trading in CPO through a local exchange is going to start later this year.25% from 2010. Mandatory use of palm oil based B5-diesel in the entire transportation and industry sector is set to start next January. 2009 April MALAYSIA . a plant where yield levels have not significantly improved over the last decades. However. steady rise in international palm oil prices. by March 63 000 ha were approved. Accordingly.INDONESIA trade agreement: Under preferential trade negotiations. this month the exports of palm oil will remain tax-free. 2009 June RUSSIAN FEDERATION . but stopped short of Indonesia’s trigger price. the government is studying a mechanism for setting a national standard price for palm oil exports . 2009 April PAKISTAN . so far. the export tax on palm oil (which. It is the first step in creating a segregated supply chain for sustainably produced palm kernel oil. only about 1 per cent of the sustainable palm oil available on the market has been bought. Under the 200 000 ha oil palm replanting scheme. implying a temporary reduction in palm oil output by approx. 2009 June INDONESIA . Eventually. aims at protecting domestic supplies of vegetable oil) is likely to be reintroduced in June. which would put duties at par with those applied to imports from Malaysia. inter alia.YEAR MONTH MEASURES 2009 April UNITED STATES .so as not to depend on prices determined in the major European import markets.palm oil export tax: The government has kept the indicative world price at which the export tax on palm oil will be re-introduced at 700 US$ per ton.demand for sustainable palm kernel oil: An oleo-chemicals company started to purchase sustainable palm kernel oil certification credits. Pakistan has agreed to reduce duties on palm oil imports from Indonesia by 10 per cent. entailing a market off take of approximately 500 000 tons of palm oil.) 2009 June SRI LANKA . this breakthrough will allow enhancing the productivity and sustainability of oil palm.palm oil export price: Reportedly. 2009 May INDONESIA . 2009 June Sequencing of oil palm genome: According to official sources in Malaysia. The intention is to temporarily shield domestic products from the competition of lower priced substitutes. And the increase in the country’s duty free export quota for crude palm oil to 3 million tons in 2009 is expected to stimulate exports. researchers have finally managed to fully sequence the oil palm genome. 2009 June INDONESIA . 220 000 tons.import tax on selected vegetable oils: An import tax of 10% is expected to be introduced soon for palm oil and coconut oil for a period of nine months. the government is considering raising the special import duty on oils of palm and palming kernel above the current level of Rs 60 per 1kg. 111 . sales of certified palm oil seem to be slow in taking off.taxation of palm oil exports: Considering the recent. 2009 June Sales of certified sustainable palm oil: Palm oil that has been produced meeting environmental and social safeguards is available on the market since November 2008. (The NW Europe import price for palm oil has risen markedly last month. According to tentative figures compiled by the WWF. By doing so palm kernel oil producers that use more environmentally responsible practices to produce and harvest palm kernel oil are going to be paid a premium.palm oil import duty: To assist the domestic coconut industry.palm oil market measures: Government efforts to prevent oversupply on the domestic market continue. The tax had been suspended late last year. when a decline in international prices started weighing on the country’s palm oil exports. 75% of transport fuel coming from renewable energy sources. On the other hand. A community-wide share of 4% is expected instead. certification can add a premium of US$ 50 a tonne to palm oil in the wholesale market. One explanation is that the global economic slowdown has curtailed demand from priceconscious buyers: reportedly. Biodiesel accounts for roughly three quarters of renewable fuel use. in June the export tax was re-introduced at a level of 3 per cent. in line with the government’s policy to levy taxes when the world price exceeds a given level. The company.biofuel target: An official report states that the EU is unlikely to reach the indicative 2010 target of 5.biodiesel import duty: EU member states have agreed to extend the countervailing duty on biodiesel imported from the USA. for the next five years.5 per cent. to date global sales of certified palm oil seem to have been minimal. state-owned trading companies would be directed to import up to 1 million tonnes of crude palm oil. 112 . Similarly. expects to use 50 000 tons of certified palm oil in 2009 and considerably higher amounts in the coming years. 2009 July INDONESIA . the value of exports is anticipated to remain stable as are domestic cooking oil prices. The EUCommission estimates that. 2009 September INDIA .biodiesel import duty: The government is planning to reduce the basic customs duty on biodiesel from 7.5 to 2. Reportedly. To this end. thus reducing the likelihood of a legal dispute between the two blocks. The measure aims at shielding biodiesel production in the Community from unfair competition by US exporters. a subsidy of 15 Rupees per kg of oil sold would be made available. Apparently. Due to several factors the country is facing difficulties in meeting its biofuel consumption targets from domestic sources. 2009 September INDIA .from the current level of 6. The range of the permanent duties has been narrowed compared to the one in place so far. which was introduced in March 2009. 2009 September Certified sustainable palm oil: Suppliers of palm oil certified as sustainably produced (in line with RSPO criteria) report lower than expected demand from importers.subsidized vegetable oil sales: The central government is considering repeating last year’s sales of cooking oil through ration shops should retail prices rise.YEAR MONTH MEASURES 2009 June EUROPEAN UNION . 2009 September EUROPEAN UNION .25% . some 20-30 % of the utilization target is going to be met by second generation biofuels. committed to shift to certified palm oil as sole feedstock (i. buyers are concerned about costs and uncertainty of supply. 2009 July Certified palm oil: Neste Oil. The respective share in the year 2005 was 1%. government plans to cut the 2009 biofuel blending target . 2009 July GERMANY . The higher blending ratio will be introduced only in 2010 and then remain at that level in subsequent years. a Finnish biodiesel producer.and to further raise taxes levied on biofuels have finally been confirmed. While palm oil shipments are likely to decrease.25% to 5. bioethanol contributes 15%. snack food producer Mars committed to use exclusively RSPO certified palm oil originating from sustainable sources by 2015.biofuel target: Despite opposition expressed by the German parliament’s upper house. palm oil produced according to RSPO’s criteria for environmentally and socially sustainable production). Reportedly. by 2020.palm oil export tax: Suspended since December of last year. To make the operation economic.e. WTO anti-dumping guidelines have been adhered to. which introduced a system of full traceability of the palm oil it uses. crude certified palm oil sells at a premium of about 50 USD per tonne (uncertified palm oil was traded 600-700 USD per tonne in recent weeks). Reportedly.ASEAN free trade agreement: The newly signed agreement will include a ceiling of 37.3 million tons for 2015. and a similar pledge was also made by Marks & Spencer. in May 2009. the price for certified and conventional product will 2009 2009 113 . 0. reportedly. At the same time. by 2014.5 per cent on India’s import tariff for crude palm oil. 2009 October INDIA . Cadbury New Zealand is reported to have announced that it will stop using palm oil in the production of its dairy milk brand chocolate and revert to using only cocoa butter. 2009 October Food industry . reportedly. 2009 September INDIA .from. but this figure could rise to 4. as supplies of CSPO continue rising. the decision was taken after the company observed sales increases following the introduction of CSPO in certain processed foods. the tariff rate ranged between 80 and zero per cent. 2009 September INDONESIA . USD 40 per ton last year to USD 10-15 today. a major diesel consumer (that also runs 1800 state busses). The gradual change in buying policies . Inter alia.use of vegetable fats: Reacting to feedback from consumers. December Supply of sustainable palm oil: Estimates based on current RSPO (Roundtable on Sustainable Palm Oil) membership suggest that the amount of palm oil certified as ‘sustainably produced’ is set to grow significantly in the next years. the world’s leading palm oil producing nation: the Indonesia Commodity and Derivatives Exchange announced the launch of a new palm oil contract later this year.by which the industry is responding to new consumer concerns . Some market participants feel that. which follows the launch (with state support) of a new physical crude palm oil contract last June by the Jakarta Futures Exchange. efforts to create its own price benchmark are going on in Indonesia. December Use of sustainable palm oil: Retailer and private label brand Sainsbury’s in UK has pledged to use. Nestle committed to use only CSPO by 2015 (when sufficient quantities are expected to be available). These buoyant estimates assume that all RSPO member companies will progressively certify their entire output.biodiesel consumption: Reportedly.is made possible by increasing supplies of CSPO. the country’s variable exports tax has been reduced to zero per cent in July and is set to remain suspended also in September. the possibility to trade certificates and the related decrease in the CSPO price premium .palm oil export tax: Following the decrease in the international price for crude palm oil. The ceiling could benefit Indonesia’s palm oil exports to India. exclusively palm oil certified as sustainable.5 million tons of certified produce were available. The scientific advances are expected to accelerate the development of crop varieties with higher yield potential and better resistance to diseases and environmental stress. Indian Railways. In recent years.5 million tons by end-year. 2009 December Oil palm and rapeseed genome: Important progress in sequencing the genome of the two crops has been reported. the report points to the need for legal and political reforms at national level to achieve progress. or CSPO. Absorbing such amounts would require an expansion in global demand supported by the use of certified palm oil in power plants and as biodiesel feedstock. 2009 September Progress in sustainable oil palm: According to a study issued by CIFOR (an international research institute belonging to the CGIAR network). decided to get involved in vegetable oil-based biodiesel production to meet its future requirements. and has been estimated at 9. Likewise. progress in the application of sustainability standards such as those developed by RSPO remains limited.YEAR MONTH MEASURES 2009 September New options in palm oil futures trading: The Chicago Mercantile Exchange (which includes CBOT) and Bursa Malaysia are planning to jointly list dollar denominated palm oil futures using Malaysia’s Ringgit-based contract as a benchmark. Currently available studies put GHG saving rates in palm oil in a wide range of 19 to 71%. in Malaysia. The base export price has been adjusted upward but remains below the level that would trigger a reintroduction of the export tax. despite its increased availability and previous commitment by companies to purchase it. palm oil. global compensation mechanisms will need to be put in place. but that rate may now be reduced to 3%. reflecting rather diverse and complex methods of calculation. including those previously deferred under sensitive lists.palm oil export tax: The export tax on crude palm oil will remain suspended in December. the government has announced that it will drop the 10% tax currently applying to biodiesel sales. Reportedly.a potential exporter of palm oil-based biofuel to the European Union . Furthermore. for producers to make commitments. 2009 December Palm oil environmental footprint: Malaysia . December MALAYSIA . WWF (a RSPO founding member) has announced the creation of a ‘Palm Oil Buyers Scorecard’ . 2009 December INDONESIA .e.from 20 tons of FFB per ha today to 35 tons in 2020. the government has allocated funds to assist smallholders in adopting sustainable production practices and in adhering to the RSPO certification process. up to half of total GHG emissions in palm oil appear to stem from the release of methane gas during the processing stage. biofuels should reduce GHG emissions by at least 35% compared to fossil fuels. use and promote sustainable palm oil.YEAR MONTH MEASURES eventually converge. As the recent strengthening in the market value of palm oil implies a higher subsidy. at a fixed. The six founding members of ASEAN agreed to immediately reduce their tariffs on key agricultural products - 2009 2009 114 . the issue of GHG emissions is also under debate at RSPO. Interestingly. Experts noted that the market is yet to provide clear signals on how it will value efforts by producers to control emissions and feet that. In Malaysia. 2009 December MALAYSIA . 2009 December ASEAN free trade agreement: The agreement (referred to as AFTA) is set to take effect next January. by which. The default value for palm oil current assumed by the EU is 19%. However. i. efforts are under way to equip palm oil mills with methane capturing technology.smallholder oil palm support: Reportedly. with members split over the proposed incorporation of emission targets into the standards for sustainable production. traders and manufacturers of palm oil and palm-based products based on their commitment to purchase. December Monitoring of sustainable palm oil use: Hoping to encourage the use and accelerate global purchases of available sustainable palm oil. financial incentives will be provide to smallholders to allow them to participate in replanting programmes aimed at raising yields . for the fifth consecutive month. subsidized price. and considering the very slow uptake of biodiesel consumption so far.decided to conduct in-depth work on the calculation of the oil’s impact on the environment. to spur domestic biodiesel demand. Consequently. implying the introduction of common preferential tariffs ranging between 5 and zero per cent for all products. during 2009-10.mandatory biodiesel use: Compulsory 5% blending was scheduled to come into effect country-wide in January 2010. the government and the oil palm industry plan to contain the outlays for biodiesel subsidization by reducing the compulsory blending rate. biofuel suppliers can claim bigger saving rates by providing adequate proof. The decision was triggered by forthcoming requirements in the EU. producers of biodiesel are allowed to buy their feedstock. Preliminary results seem to suggest that today only few buyers in Europe are using CSPO. with the oil palm industry contributing to the funding of this scheme. from 2010. Furthermore.a system to publicly grade leading global retailers. international research is encouraging farmers in Sub-Saharan Africa to cultivate soybeans to improve both.import tax on tropical oils: According to private sources. in UGANDA. and new uses and marketing systems are expected to reduce the farmer’s dependence on the meal and oil industry. The tax had remained suspended since August 2009. Comparable plans have also been launched in ETHIOPIA. large scale commercial production of biodiesel is planned in RWANDA. expecting significant improvements in livelihoods and social welfare in poor regions. And finally.palm oil export tax: Following the rise in the international price for palm oil beyond 750 USD.could be lifted in January in an effort to address a domestic shortage in vegetable oil that is expected to arise from reduced domestic crops. 2009 115 .YEAR MONTH MEASURES including soybeans as well as soy. where a private consortium is ready to develop 10 000 ha of jatropha.new investments in oilseed production: Several countries in the region are reporting renewed interest in oilseeds. The government is also planning to provide incentives to boost the development of the palm oil industry at the downstream level with a view to raise value addition and provide more employment. KENIA has introduced a plan for developing biodiesel from jatropha and other locally grown trees and is eyeing a biodiesel blending ratio with fossil diesel of 5%. the government decided to closely monitor (and partly suspend) widespread land acquisition and investment by companies involved in biofuel production (from jatropha and other feedstock). castor and soy. aiming at the production of 16 million litres of biodiesel annually. official sources announced plans to build three new ports for shipping palm oil to handle rising output in the world’s top producing country.introduced last June to afford protection to the domestic dairy industry . with the most competitive producers likely to gain market shares. Other biodiesel feed stocks under consideration include high-altitude oil palm. in TANZANIA. Exposed to similar criticism and concerned about national food security. NGOs have criticized large scale investments in oil palm for giving insufficient regard to environmental regulations and social concerns. palm and coconut oil . their income and local diets. the 10% temporary tariff . 2010 January INDONESIA . industrial development and new export earning opportunities. Traders reported that congestions at ports are increasingly hampering exports from the country. Meanwhile. moringa. December SOUTH AFRICAN REPUBLIC . 2010 January INDONESIA .trans fatty acids legislation: The government is developing legislation aimed at reducing certain trans-fats in processed and prepared foods so as to contribute to the reduction of chronic diseases associated with the presence of TFAs in the diet. 2009 December RUSSIAN FEDERATION . Canada and the United States.to zero. Soybean is promoted as a versatile crop that can grow well in the region and is suited for small-scale farming and processing. while naturally occurring TFAs in animal fats would be excluded. The proposed law would affect especially the use of partially hydrogenated vegetable oils. Comparable legislation is already in place in Denmark. the government is securing major investments in oil palm by private companies from Malaysia and Indonesia. the government has announced the reintroduction of the export tax on crude palm oil at 3% in January 2010.palm oil shipment facilities: Reportedly. This measure is expected to affect internal trade patterns. Government backed. focusing on castor. 2009 December AFRICA . jatropha and oil palm cultivation on arid land not used for food crops. in particular as biodiesel feedstock. In LIBERIA. In the meantime. Palm oil. the Philippines. and Thailand) will remove tariffs on 90 per cent of imported goods. Under the accord. which belongs to the list of sensitive products. Western companies did not appear to meet commitments to only buy sustainably produced palm oil. Public funds will be made available for purchasing land. Laos. 2010 February THAILAND .oil palm investment: A major Indonesian oil palm operator is reported to consider investing in Liberia’s oil palm industry. and further reductions are scheduled for the coming years. China and the six founding ASEAN countries (Brunei. ASEAN exports of palm oil (primarily from Malaysia and Indonesia) are expected to benefit from improved access to the Chinese market. a palm oil pricing committee has been set up to ensure adequate returns for farmers. Indonesia. The project will have to conform fully to the country’s environmental master plan and standards. February ASEAN . Singapore. and district leaders have been urged to allocate more land for oil palm cultivation.will accelerate infrastructure development in selected regions to assist industrial growth. global consumer goods company Unilever decided to suspend purchases of palm oil from a particular supplier in Indonesia until the same could prove that its plantations were not damaging high conservation value forests nor expanding onto peat land areas. the major issue of GHG emissions involved in land use changes was not adequately addressed and that related measures continued to be of a voluntary nature only. The organization found that. the government seems determined to promote environmental and social certification in palm oil-based biofuel production. In COLOMBIA.YEAR MONTH MEASURES 2010 January Sustainable palm oil: Reportedly. will see its import tariff reduced from 30 per cent to 9 per cent.while fully adhering to social. February LIBERIA .CHINA free trade area (ACFTA): The trade agreement has come into force at the same time as trade got liberalized within the ASEAN block itself. WWF reported that despite the availability of safe. Also.6% or US$ 46 million of its export business to Malaysia. while RSPO members were increasingly adopting improved production practices. Negotiations with the government on a concession agreement are reported to be on-going. environmentallyfriendly palm oil options. The initiative is expected to benefit the palm oil industry and allow further growth in the sector. February INDONESIA . The other four ASEAN members (Cambodia.7 mill ha) . Allegedly. official sources in INDONESIA confirmed the national target to expand total area under oil palm to 18 mill ha (from today’s level of 9. the country will lose 2. the expansion was needed to allow the country meeting its commitments regarding overall reduction in GHG emissions. It claims that current oil palm production and the sector’s planned expansion does not threaten local rainforests nor displace food crop production thanks to the availability of vast tracts of underutilized agricultural land. under an on-going public-private project. economic and environmental sustainability standards.exports of palm oil under AFTA: Thai sources estimate that as a result of the common preferential tariffs recently introduced under the ASEAN Free Trade Agreement (AFTA). February UGANDA . As to oilseeds. according to private sources. Meanwhile.assisted by Japanese private companies . the government has been asked to make 2010 2010 2010 2010 116 . at a recent RSPO meeting. and Vietnam) will follow suit in 2015.oil palm development: Reportedly.infrastructure development: Delegations of government and business leaders from Indonesia and Japan started discussing a project under which Indonesia . Meanwhile. Malaysia. oils and meals. Myanmar. The investment plan envisages the development of up to 240 000 ha (including 40 000 ha run by out growers). the government has released new funds to expand oil palm growing in the country via public-private partnerships. and would produce over one million tons of palm oil per year. YEAR MONTH MEASURES available for oil palm growing grassland portions that belong to a forest reserve. pointing out that such policies could induce importing countries to raise tariffs on refined palm products . Concerned processors use oil palm (Uganda) and sunflower and cotton seed (Tanzania) as raw material.oil palm futures: The Indonesia Commodity and Derivatives Exchange is ready to launch a crude palm oil futures contract in April with a view to create a local benchmark price.mandatory biodiesel blending: After a number of postponements.PAKISTAN. the premium for certified palm oil is reported to have fallen from 50 USD per tonne at the end of 2008 to USD 10 today. 2010 April Chicago futures markets: Coming May. 2010 March INDONESIA . US$-denominated futures contract for crude palm oil using the Bursa Malaysia Derivatives ringgit-denominated benchmark. 2010 April INDONESIA . By the beginning of 2011. intends to launch an electronically traded. limited availability of locally grown oilseeds is causing oil crushing and refining plants to work below their installed capacity. Indonesian palm oil is subject to a higher tariff than produce coming from Malaysia. Currently. Due to the on-going expansion of supplies. the industry expressed concern over these plans. in April. thereby creating employment. oil palm trade: Indonesia is reported to be negotiating with Pakistan about its import tariff for palm oil. While this should spur demand for certified oil. due to a preferential trade agreement that Pakistan signed with Malaysia in 2007. supply should double to 3 million tons as the number of certified plantations continues to rise. 2010 May EAST AFRICA .also in a bid to encourage refining and downstream processing at the local level. 2010 April MALAYSIA . March INDONESIA . The partnership between the two platforms aims at offering an alternative means of hedging risk to companies that trade in dollars and creates new opportunities for cross-trading with soybean oil. the ad valorem export tax will be raised to 4. the government would provide fiscal incentives and encourage banks to lend at reduced interest rates.5% in April (from the 3% rate applied since last January). it could also discourage producers from shifting to the more expensive methods required to produce and market sustainable palm oil.palm oil exports: According to official sources.in an effort to boost the domestic downstream processing sector. 2010 117 . the CME Group Inc. 2010 April INDONESIA . 2010 April Sustainable palm oil supply: RSPO has estimated current global supply of palm oil certified to comply with its sustainability criteria at 1. Reportedly. Currently. the country plans to limit exports of crude palm oil at 50% of output by 2015 and 30% by 2020 .palm oil export tax: In response to rising global palm oil prices. mostly coming from Malaysia.oilseed supply shortages: Reportedly. well over 50% of palm oil exports are in crude form. Cooking oil consumption in both countries remains heavily dependent on imported oils. Indonesia aims to have its exports charged with the same tariff enjoyed by Malaysia. the government is reported to be ready to implement B5 blending in June this year and to make available public funds to defray the costs associated with production and distribution.5 million tons per year. To attract the required capital for investment. the removal of import tariffs for biofuels is recommended as this should allow production and consumption to shift towards more emission-efficient biofuels. May Progress in sustainable palm oil . May Progress in sustainable palm oil . Sales are scheduled to begin once a new refinery featuring the technology and storage capacity that is required to fully segregate sustainable palm oil from all other oils opens in June 2010. oil palm cultivation seems poised to expand in the Amazon region. Assumptions on future EU production and import volumes and on the related direct/indirect land use changes remain controversial. The new chain should permit full traceability and would allow manufacturers to claim that a given product only contains certified sustainable palm oil. The effort is part of the company’s commitment to source all its palm oil from sustainable sources by 2015. For biodiesel. even when peat land emissions are taken into account. The study has further fuelled the debate on the suitability of different biofuels and the implication of different targets. the study assumes that most of the required production increase comes from domestically grown rapeseed. The large-scale private investments planned in one of the country’s poorest regions are supposed to produce wealth via employment creation and income generation. The EU Commission is expected to issue its own final report on the subject at the end of 2010. the project will contribute to reducing deforestation. The scheme. ILUC emissions could rapidly increase. Also.YEAR 2010 2010 2010 2010 2010 MONTH MEASURES May EUROPEAN UNION . To achieve maximum GHG emission reductions. however. potentially eroding the environmental sustainability of biofuels. May Progress in sustainable palm oil . in particular sugar cane ethanol. at the currently assumed consumption levels .INDONESIA certification initiative: Reportedly. July BRAZIL . Above the 5. certificates are used as an option to encourage growers to comply with RSPO requirements and certify their plantations as sustainable. 118 .environmental sustainability of biofuel use: A study prepared by IFPRI (on behalf of the EU Commission) states that.6% share. aims at protecting sales to markets where environmental concerns are important. the agricultural ministry of Indonesia is planning to set up a national certification scheme for sustainably produced palm oil (Indonesian Sustainable Palm Oil. Unilever uses a certificate trading programme (GreenPalm) which allows palm oil producers that follow RSPO’s criteria for environmentally and socially sustainable farming to increase their earnings by selling certificates. The company claims to be the first supplier in continental Europe. It also claims that the environmental sustainability of palm oil-based diesel remains similar to that derived from rapeseed oil.namely biofuels accounting for 5. plantations shall be established on previously deforested land and environmentally friendly practices are to be employed throughout the production chain. palm oil will be processed into biofuel for both domestic consumption and export. the study recommends that import demand concentrate on more sustainable sugar cane ethanol.oil palm expansion: Backed by the state as well as federal government.6 per cent of transport fuels in 2020 the environmental sustainability of biofuels is not significantly reduced when the effects of indirect land use changes (ILUC) are taken into account. The initiative follows reports about important buyers like Unilever and Nestlé suspending purchases from certain Indonesian suppliers on environmental grounds.segregated supply chains: Global vegetable oil supplier IOI-Loders Crocklaan Europe announced the imminent sale of fully segregated. Under the project.use of certificates: Unilever reports to have secured enough certificates of sustainable palm oil to cover the entire requirements of its business in Europe (as well as in Australia and New Zealand). ISPO). Details on how the certificates would be granted are not yet available. Until properly segregated supply chains for sustainable produce become widely available. which could become operational before the end of 2010. RSPO-certified palm oil. Allegedly. from December 2010 onward.whether imported or domestically produced . producers will need to fulfil specific principles and criteria related to environmental and social responsibility. which consists of a blend of palm and rapeseed oil. In the years 2009 and 2010. 2010 July RUSSIAN FEDERATION. the shortening. will benefit from the duty reduction. 1000 and Rp. biofuel producers were compensated at a rate of. To participate in public biofuel support programmes. RSPO or similar certification schemes may be used to prove compliance with the criteria 2010 July INDONESIA . face the onus of proving GHG emission savings of at least 35% . Consequently. good agricultural and business practices and legal compliance. Certification processes. Rp.environmental standards for biofuel: The Commission remains committed to enforce. whereas environmental and social interest groups have called for further clarification regarding the measurement of indirect land use change effects. 2000 per litre. Pakistan’s main supplier of CPO. is ready to introduce voluntary certification for sustainably sourced soy products. social interest groups have voiced concerns with regard to the dominance of GM varieties. and KAZAKHSTAN . The official stance have been well received by the industry. all supplies . EU officials pointed out that the new directives will in no way affect crude palm oil exports to the EU market for traditional consumer products like food. 9. The sustainability criteria centre on (i) the lifecycle GHG emissions of biofuels and (ii) the type of land use underlying biofuel production. To qualify for the label. Sales of biodiesel and bioethanol will be subsidized at a rate of Rp. 2010 July Roundtable on Responsible Soy (RTRS): The RTRS.palm oil import duty: Reportedly. compliance verification and traceability will be regulated next. however. With regard to palm oil. 2010 July Consumer-oriented palm oil shortening: A newly commercialized palm oil shortening/hardening is meant to help food manufacturers and industrial bakeries to meet end-consumer demands for sustainably sourced and healthy products. BELARUS. suppliers will. The initiative aims at promoting responsible production irrespective of the underlying production model. Allegedly. Meanwhile. climate implications of the crop’s rapid expansion and its use as biofuel feedstock. inter alia. contains only palm oil certified as sustainable (by either RSPO or 2010 119 . a world-wide initiative that groups stakeholders from across the soy commodity chain and includes environmental groups.000 has been announced in the 2010/11 federal budget. production and use is expected from the industry. 2010 July PAKISTAN .000 per ton to Rp. Standards include prohibitions regarding the conversion of forests and of areas with high conservation value (such as rich savannahs) as well as regarding the use of the hazardous pesticides.40 per kilo duty will apply to packages up to 1 kg and containers up to 20 tonnes.YEAR MONTH MEASURES July EUROPEAN UNION .biofuel subsidy: The country’s 2011 budget includes provisions for continued support to biofuel production. Currently marketed diesel contains 5% of palm oil-based biodiesel. strict standards that will apply equally to EU-produced and imported biofuels. With regard to palm oil-based biofuels. A Euro 0. 2000-2500 per litre whenever their price exceeds the market price for mineral oil-based fuel. the three-country customs union decided to temporarily raise its tariff on packaged palm oil. cosmetics and detergents. Voluntary certification schemes developed by the industry are welcome and will be independently assessed.palm oil import duty: A reduction in the import tariff for crude palm oil from Rp. the definition of highly bio diverse grassland and the methodology for identifying degraded land. Bulk shipments will continue to be imported duty free. Particularly Indonesia. 8. evidence of sustainable sourcing.will fall subject to the new requirements (if they are to qualify for public support). respectively.as opposed to the officially applied default value of 19%. with financial compensation or land swaps granted to affected companies. August Sustainable sourcing of palm oil: Global food producer and trader Cargill decided to partner with the World Wildlife Fund to undertake an assessment of its palm oil sources in Indonesia. The decision to stop new concessions is part of a deal reached with Norway. Conditions for cooperation and performance-based criteria still need to be negotiated. social and financial nature .which the proposed bilateral partnership would endeavour to address. Past forest/peat land conversions into plantations and for industrial use constitute a major source of livelihood in the country. the governments of Indonesia and the United States are considering to enter into a comprehensive partnership to control the conversion of forest and peat land by diverting oil palm expansion in Indonesia toward degraded land. contingent on progress made in deforestation/emission reduction. although revocation of existing licenses might be considered in particular cases. The project’s objective is to establish fully responsible supply chains by identifying and addressing all major environmental and social issues. run pilot projects and to work on the issue of conflicting claims on land.an important source of GHG emission and thus global warming. Guyana and a number of African nations.5 % (in place since April this year) to 3 %.palm oil export tax: In response to the past fall in global palm oil prices. in August. Reportedly. degraded but still suitable land was available to accommodate further growth of the vitally important plantation industries. i. In this regard. and several other developed countries have pledged funds at last year’s Copenhagen Climate Conference. Supplier that do not meet the requirements but are committed to achieving sustainability will be provided with technical support. The objective is to measure progress amongst suppliers in the implementation of the principles established by RSPO thereby encouraging the adoption of socially responsible and environmentally sustainable production methods. The effective and equitable implementation of such a strategy entails major challenges of a technical. 2010 July Sustainable sourcing of palm oil: In pursuance of its goal to obtain 100 per cent of the palm oil it uses form sustainable sources. Government officials pointed out that sufficient non-forest. Cargill aims at buying 60% of its overall palm oil from certified sources by the end of 2010. If implemented successfully. Meanwhile support would be provided to set up appropriate control mechanisms. July Low-carbon oil palm expansion: Reportedly. 2010 August INDONESIA . but are still suitable for oil palm cultivation. The performance of Nestlé’s palm oil suppliers will be audited by TFT against a set of criteria. August INDONESIA/NORWAY .e. legal. Norway has already signed similar agreements with Brazil. the ad valorem export tax from 4. 2010 2010 2010 120 . areas that were cleared of forest long ago and now contain low carbon stocks and low levels of biodiversity. Logging concessions already granted to companies shall be honoured. reaching general consensus on methodologies and procedures for identifying acceptable areas for sustainable oil palm expansion will be important. The assessment shall be used to identify gaps vis-à-vis the RSPO standards and suppliers will receive specific assistance to improve their production practices. which agreed to assist the country in preserving its forests. Funding for sustainable forestry programmes (worth up to USD 1 billion) shall be released from 2014. the government decided to lower. global consumer goods company Nestlé decided to partner with non-profit organization The Forest Trust (TFT). the initiative could boost international cooperation in forest preservation in line with the UN-backed REDD scheme.joint initiative to halt forest conversion: The Indonesian government announced a 2-year moratorium (starting next year) on concessions for clearing forest and peat land .YEAR MONTH MEASURES GreenPalm) and is characterized by a limited content of saturated fats. EU biofuel sales have been estimated to reach only 15 million tons of oil equivalents this year.57% of total transport fuel sales. which compares to considerably higher rates in previous years. is reported to be growing less strongly than bioethanol and biogas use. the government seems committed to develop B10. (ii) consolidation among companies to increase their land base. such as (i) rises in the cost of land. According to EU directives. the project comprises the development of smallholder production with access to dedicated purchasing centres and extension services. The prospect of rising limitations on future expansion in plantations . In addition to generating local employment. concern about future. Instead of the corresponding 18 million tons. the government’s main preoccupation concerns the effect of rising domestic oil prices on consumers. Investigations are expected to take about nine months. voluntary blending has been replaced earlier this year by mandatory B3 fuel nationwide and mandatory B5 is scheduled for January 2011. consumption of biodiesel.biofuel consumption targets: Unofficial sources estimate that the EU is falling short of its target for biofuel use in the transportation sector. and gradual rises in production costs is reported to be spreading among palm oil producers in Asia. the ad-valorem export tax from 3 to 6 per cent . the government decided to lift. 2010 September INDONESIA . As to the type of biofuel used. Reportedly. which is currently being engine-tested. and (ii) whether US exporters shifted to blends containing less than 20 per cent biodiesel so as to circumvent the bloc’s anti-dumping and countervailing duties (imposed on US imports in March 2009). The B10 target requires further expansion in the domestic oil palm plantation area so as to avoid competition between food and fuel uses and to stay away from the need to import biofuel feedstock. Furthermore.YEAR MONTH MEASURES September EUROPEAN UNION .biodiesel blending rates: Biodiesel consumption seems set to increase further in coming years. 2010 September INDIA . September Rise in palm oil production costs: Triggered by Indonesia’s prospective planting moratorium (see August 2010 MPPU issue).land concession for oil palm development: Reportedly. by end of 2010.vegetable oil import taxation: In response to rumours that the government might raise import duties in an effort to support domestic farmers.the highest level since November 2008. As in recent years. in PNG and West/Central African states). in September. (iii) increasing investments outside of Indonesia and Malaysia (e. official sources stated there was no intention to reintroduce or raise tariffs since such measure could increase the inflationary effect of growing global vegetable oil prices on the domestic market. The export tax is adjusted on a monthly basis with a view to ensure adequate domestic supplies.based on increasingly stringent environmental regulations . the European Commission decided to investigate whether (i) biodiesel produced in the United States is being shipped into the EU via third countries. thereby preventing surges in domestic prices. biofuels were supposed to account for 5. 2010 2010 2010 2010 121 . which accounts for roughly 80% of biofuel transport fuels (expressed in energy content).palm oil export tax: Following the recent rise in the global price of palm oil.could have important repercussions across the sector.investigation on trade in biodiesel: Reportedly. Year-on-year rise in biofuel consumption is estimated at around 20% in 2010. The decision follows a confidential complaint lodged by the European Biodiesel Board. 2010 September LIBERIA . September EUROPEAN UNION . and (iv) increased efforts to raise productivity levels. a concession was signed between the government and an Indonesian company to set up a 200 000 ha oil palm plantation. September THAILAND .g. such as sweet sorghum or algae seem to offer better potential. The goal is to become South-East Asia’s hub for the supply of green aviation fuel.YEAR MONTH MEASURES September Reformulation of fat profile in food products: Reportedly. Although palm oil is considered a suitable feedstock. September Fully segregated sustainable palm oil: Cargill has signed an agreement with Unilever Europe to supply fully segregated. Some 8 800 smallholders organized in 17 cooperatives have been certified to comply with the RSPO ‘Smallholder Principles and Criteria’ for sustainable production.e. Certification is expected to lead to rising incomes for producers as demand for certified palm oil is anticipated to continue expanding in coming years. 2010 October LIBERIA . (iii) benefit sharing with smallholders and communities. The company informed that by changing the fat profile it is aiming at improving the nutritional composition of its products. in the audit. mandatory blending of transport diesel with 5% of palm oil-based fuel) caused domestic production of biodiesel to virtually stop. and (iv) sustainability codes of practice. In the framework. certified by RSPO. priority areas and options for action are outlined. 2010 September Palm oil sourcing policies: Private sources reported that a number of major. based on a recently published audit of the producer’s cultivation practices. The oil will be physically segregated at every step of the supply chain. The smallholder scheme in question is linked to a large. At the current price level for crude palm oil and in the absence of subsidies. when European aviation regulations calling for the introduction of renewable fuels in airplanes are expected to come into effect. sustainable palm oil. (ii) mobilization of sustainable private sector investment. September RSPO certified smallholder palm oil: Certification of the first smallholder oil palm scheme has been reported from Indonesia. Opportunities on the export market are also very limited due to (i) increased wariness of some buyers to 2010 2010 2010 2010 2010 2010 122 . Participating parties are committed to environmentally and socially sustainable methods of production and to work with smallholders.biodiesel production: Reportedly. already certified plantation and mill operated by Cargill. September Vegetable oil-based aviation biofuel: Thailand: Reportedly. concerns were raised about the sustainability of the company’s production practices. Reformulation involves shifts in the type of vegetable oils employed. October MALAYSIA . The four thematic areas identified as being crucial are: (i) policy and regulatory environment. Cargill is in a position to offer segregated. The investment is seen as a central growth pillar in rebuilding the country’s economy and reducing poverty. the possible breach of national laws. Reportedly.oil palm development: A major public-private partnership has been launched to develop the oil palm industry. confectionary manufacturer Mars is reformulating chocolate products sold in France and the UK to reduce the content of saturated fats by 15-20 per cent. and the environmental impact of past deforestation and peat land conversion. Other crops. refined oil after having received RSPO certification on selected plantations as well as refineries run by the company. global food companies decided to stop purchasing palm oil from a particular supplier in Indonesia. margins are reported to be insufficient to justify biodiesel production. the government’s recent decision to postpone by one year the introduction of B5 (i. September Global framework for palm oil development: The World Bank and the International Finance Corporation have presented a draft framework for future engagement in the palm oil sector. the country is planning to develop jet biofuels with the objective to meet demand from 2012. areas for expanding oil palm seem to be limited and competing uses for food purposes and as fuel for land-based transport pose problems. Plantations are developed according to modern environmental standards. United States food manufacturer General Mills decided to stop buying palm oil from companies suspected of using environmentally harmful practices. and companies buying palm oil from areas other than those earmarked for oil palm development risk losing their environment licenses. October Sustainable palm oil: Reportedly.certified palm oil: In a bid to stimulate consumption of certified sustainable palm oil. the government has taken the following measure: Reportedly. 2010 December CHINA . Oil palm expansion will also be monitored via satellite images. the country’s vegetable oil industry proposed to the government to apply a discounted duty on future imports of ‘green’ palm oil.edible oil trade policy: With this seasons’ improvement in domestic oilseed output and generally easing food prices. which would allow rehabilitation of previously deforested areas. Concerned about rising inflation rates and with domestic vegetable oil prices recently reaching two-year highs.oil palm development. Ghana: Reportedly. The food company is committed to procure. including soybeans. Furthermore. Reportedly. pricing mechanisms. the government is developing an oil palm master plan to meet local demand for vegetable oil and improve the country’s competitiveness as a regional exporter. land-use policies. Global Mills is following the footsteps of other global food companies.oil palm expansion: Reportedly. and (ii) the availability of competitively priced biodiesel from other countries. all of its palm oil from responsible and sustainable sources. producers are asking that the duty exemption granted for imports of unrefined vegetable oil be discontinued.measures to stem food price rise: futures markets. product certification and marketing. December INDIA . December BRAZIL . the government has informed that the exemption would remain in place until early 2011. soya meal. The measure aims at deterring speculation on commodity markets. soya oil and palm oil. December AFRICA . by 2015. Oil palm plantations may only be established on degraded land.YEAR MONTH MEASURES purchase palm oil-based diesel based on environmental considerations. The public-private partnership builds on a loan provided by IFAD as well as local. While considering the request. smallholder oil crop production (in particular oil palm) is raised and smallholders are directly linked with processors. Under the project. 2010 2010 2010 2010 2010 123 . technology transfer. the project has led to a significant increase in oil production from domestic sources and marked improvements in average per caput consumption. private capital and bilateral grant money. the government decided to introduce a set of rules that guarantees sustainable forms of oil palm expansion and prevents further deforestation. 2010 December INDIA . the government has asked the country’s futures exchanges to raise margin requirements applied to trade in selected commodities. until September 2011.oil palm development. Uganda: A large national oil palm development project launched in 1998 is ready to enter its second phase. transportation infrastructure. Areas covered in the plan include access to finance. the government decided to extend the ban on bulk edible oil exports for another year. The industry expects that pressure on big consumers to move toward environmentally friendly purchasing policies will rise in coming years. December AFRICA . All oil palm growers will be required to register for regular inspection. while reducing the country’s dependence on imported oils. palm oil export tax: taxation system review.YEAR MONTH MEASURES December INDONESIA . Reportedly.which remained excluded from the India-ASEAN free trade agreement signed last year. the government has announced a new oil palm replanting scheme for 2011. The previous. industry-funded scheme (which was introduced in 2008 in response to weak palm oil prices and involved 200. While mandatory biofuel blending is set to commence in soon. According to private sources. The Malaysian Palm Oil Board was reported to have allocated funds to five major petrol companies for investment in infrastructure for biodiesel blending.although helpful in reducing fluctuations in domestic supplies and prices . starting in January 2011. concessions on Malaysian palm oil exports to India . the government may consider cutting.palm oil export tax: monthly revision. 2010 2010 2010 124 . i. Details on certification methods and procedures as well as compliance control are yet to be issued.free trade pact: A bilateral trade pact set to come into effect next year will likely include. mandatory blending at B5 level .support to biodiesel: petro-diesel subsidy.000 hectares) is reported to have been almost completed. Following uninterrupted growth in international palm oil prices. December INDONESIA . noting that the latter has been progressing slowly. Reportedly. the industry is complaining that at the current.oil palm replanting: Concerned about slow output growth and stagnating yield levels. 2010 December MALAYSIA . a government official stated that the current taxation system will be up for review because . the tax is adjusted on a monthly basis with a view to ensure adequate domestic supplies and prevent high volatility and hikes in domestic prices. 2010 December MALAYSIA . 2010 December MALAYSIA/INDIA . With the export duty on biodiesel kept fix at 2%. 7. According to official sources. Malaysia.is now set to come into effect in June 2011.palm oil certification: The government announced that.originally planned for January 2010 . The state-funded programme shall be implemented over 2-3 years and will involve some 365.5%. Indonesia’s industry seems to welcome national certification as opposed to RSPO-controlled certification. in December 2010. respectively. from next year. companies could step up export-oriented biodiesel production. did not help raising exports of higher-value refined oil as opposed to crude oil.e. inter alia. subsidies traditionally applied to sales of conventional diesel. 10% and 15%. local traders are concerned that the high tax rates will reduce the competitiveness of the country’s exports compared to those of the main competitor. December INDONESIA . Since 2007. A 15% rate had not been applied since August 2008. Higher tax rates also imply a bigger gap between the duties applied to palm oil and palm-oil based biodiesel (palm methyl ester).support to biodiesel: blending incentives. the ad-valorem export tax on crude palm oil will be raised for the fourth consecutive month.the system has proven ineffective in spurring the downstream palm oil industry. high level of palm oil prices and without public support the production and marketing of biodiesel is not economically viable. The rates applied in October. November and December are. national certification of sustainable production (see news item in May 2010 MPPU) will become mandatory for all plantation firms and smallholders cultivating oil palm. The measure would end an advantage currently enjoyed by petrodiesel when compared to palm-based biodiesel. 2010 December MALAYSIA .000 hectares of palms older than 25 years. and from 50 to 10 rupees per kg of palm oil. The mark is meant to reassure consumers that products they buy contribute to sustainable palm cultivation practices. the measure is expected to induce more companies to commit using only certified palm oil. According to British press. 2010 December THAILAND . the government decided to reduce the taxes applied on palm and coconut oil imports. are notoriously pricesensitive and therefore not likely to pay the premiums associated with certified oil .4 million tonnes per year .in spite of requests by oil refiners to be allowed to raise retail prices (following rises in production cost due to record high palm fruit values). as flooding has adversely affected local palm oil production. Overall.vegetable oil import duties: Concerned about recent surges in retail prices for edible oil and the resulting hardship for consumers. these premiums have fallen to USD 3-5 per tonne. Some observers even warn of possible excesses of supply over demand. mass balance calculation. If widely adopted. voluntary price ceiling for palm oil will remain unchanged at Baht 38 per litre .more and more key buyers (such as Unilever or Nestlé) are committed to gradually move away from non-certified palm oil. 2010 December THAILAND .biodiesel mandate: Reportedly. compared to levels as high as USD 50 only two years ago. RSPO has launched a trademark/logo for free use by product manufacturers and retail companies when packaging items that use certified sustainable palm ingredients. because of costs involved and because premiums offered by the market (for certified product) are small. Leading international vegetable oil refining companies are estimating that annual global production of sustainable certified palm oil will need to rise to 15 million tons by 2015: this is because . notably China and India. RSPO estimates current. December Certified sustainable palm oil: trademark. Reportedly. current annual expansion is estimated at only 1. certified oil reaches the market via three RSPO-approved trading systems: the full segregation method. actual demand for certified palm oil at 1. Originally introduced to encourage domestic coconut production.palm oil consumer price: With a view not to add burden to flood affected people. This view is supported by the fact that many oil palm producers continue to resist moving towards certification. Currently.feeling the pressure form environmental and social interest groups . However. Certification of sustainable palm oil started two years ago. the shift from mandatory use of B3 to B5 will be delayed from mid to late January 2011. The Body Shop (a major retail company for soap and cosmetics) decided to stop buying palm oil from a supplier reported to be producing under socially unsustainable conditions in Colombia. meaning that production could fall short of future demand.at least in the short to medium term. or a book & claim mechanism.while annual production capacity is said to have reached 3 million tonnes.5 million tonnes globally. the duties will now be lowered from 60 to 15 rupees per kg of coconut oil. the supplier in question used to satisfy up to 90% of the retail company’s palm oil needs. future growth of the market for certified palm remains difficult to predict. 2010 125 . 2010 December Certified sustainable palm oil: global supply and demand situation. 2010 December Certified sustainable palm oil: sourcing policies. the government-brokered. Apparently.YEAR MONTH MEASURES 2010 December SRI LANKA . pointing out that buyers in some important consuming nations. The steep drop in premiums occurred when supply of certified palm oil picked up. 2010 2011 2011 2011 126 . Production would be geared primarily towards the biodiesel market. Colombia’s agricultural research institute CORPOICA is now reported to have started cooperation with Mexico. the government decided to lift the country’s export tax to 25% in February . 2011 February BRAZIL . The adjustment implies a considerable burden for export sales especially of processed palm oil. Furthermore. To date.palm oil export tax: Following the steady rise in international palm oil prices.03 million ha. the federal government has urged traditional growing states to step up efforts and has decided to also explore expansion possibilities in other Eastern states. mostly for exportation (or exportation of oil for subsequent transformation into biodiesel abroad). making shipments less profitable compared to those of competitors.YEAR MONTH MEASURES December Biodiesel South-South cooperation: Colombia continues to offer its technical know-how in biodiesel production to countries in Central America. January THAILAND . In turn. with no more than 178 000 ha covered by plantations as against a potential area estimated at 1. After participating in the construction of biodiesel plants in El Salvador and Honduras. notably Malaysia. Brazil’s biodiesel demand for domestic use and export is set to grow steadily. Furthermore. the country’s oil palm development programme has produced limited results. Apparently. The gradual increase in retail prices is expected to reduce the burden on consumers. however.the highest level since the sliding tax scheme was introduced in 2007. the Rupees15 000 per ha subsidy granted to producers might be increased to Rs 40 000 and higher input subsidies are being considered. January INDONESIA . Reportedly. 2011 February INDONESIA . January INDIA . temporary supply shortages and price inflation developed in the domestic market. Subsequently. Reportedly. the government has given the green light for a gradual upward adjustment in prices . close to the eastern Amazon forest.palm oil market interventions: Following steep rises in the cost of crude palm oil. Eventually. investors are responding to a government backed programme launched last May that offers soft loans and other incentives. the government and manufacturers agreed on a onetime release of palm oil in retail packages at a fixed price so as to calm domestic markets. A special thrust is expected to be given to oil palm cultivation in the next five-year plan (2012-17). Current biodiesel production relies primarily on soy oil as feedstock. the government requested the cooperation of large palm oil producers regarding a steady flow of supplies and informed that it would consider granting special palm oil import licenses. Over 2 million tons are estimated to be required for domestic mandatory blending alone. manufacturers sought government permission to raise palm oil retail prices by at least 25%.oil palm development: Given the country’s almost total dependence on palm oil imports. the government decided to lift the st country’s export tax further to 20% (effective 1 January) . was not granted. where a plant using jatropha and palm oil will be set up with public funding.the highest level since 18 months.oil palm expansion: Oil palm cultivation seems set to expand over the coming years in the northern state of Pará. which. important investments are planned by a biofuels subsidiary of state-controlled mineral oil giant Petrobras and other companies. the federal government is looking into possibilities of developing domestic production.palm oil export tax: In view of further rising international palm oil prices.in accordance with rising raw material prices and based on a review of real costs of production. Strict adherence to environmental and social safeguards is envisaged. oil palm productivity . last month the government ordered producers to raise subsidized oil supplies by 20%. The country’s total land under oil palm amounted to 90. replanting by large-scale private and governmentlinked plantation companies will also be encouraged via financial incentives.YEAR MONTH MEASURES 2011 February LIBERIA . Challenged by developments in consumer markets. the Netherlands – Europe’s leading hub 2011 2011 127 . smallholders are estimated to account for 40% of total oil palm area and 28% of national oil output. Initially. Reportedly.oil palm expansion: Malaysia-owned oil palm giant Sime Darby announced that this year it will start planting oil palms on a 220. sustainability certification of smallholder production according to RSPO principles will be facilitated.5) Finally. Furthermore. also because of growing domestic demand from biodiesel producers. last year. The decision to switch to certified palm oil consolidates the company’s efforts in this field. palm oil: Palm oil production costs have surged after domestic production was affected first by drought and then by widespread flooding.000 new job opportunities is envisaged. the government managed to persuade leading producers to step up inventory releases and to abide by the capped price. an increase in the government set retail price to 47 Bath (from currently 38 Bath) has been approved so as to reflect the rise in production costs. 2011 February MALAYSIA . To avoid adverse effects on consumers. The government’s first priority remains to produce enough palm oil for food demand. while global prices also rallied. the government announced that it will support replanting activities over the 2011-2013 period. an increasing shortage of palm cooking oil has developed in the domestic market. the company started supporting sustainable production practices last year by buying Green Palm certificates. 2) Eventually. the government has taken the following measures: 1) Manufacturers have been urged to refrain from hoarding in light of soaring prices.consumption policies. in first week of January. 4) The shift in mandatory biodiesel blending from B3 to B5 planned for January 2011 (which would lift CPO demand by the biofuel industry to around 1 million tons) will be postponed until at least the middle of 2011. Several funding options were under consideration. Reportedly. the creation of some 30-35.Smallholders: MPOB has launched a government backed programme aimed at raising productivity among smallholders. 2011 February MALAYSIA . 3) The government also promised to speed up palm oil imports (the first in three years) and said it would rethink the export plans for crude palm oil. Finally. The current average yield of 12-15 tons of FFB per ha is to be lifted to 18-20 tons in the short term. Interventions will focus the adoption of good agricultural practices and the production of higher quality fruit brunches.oil palm productivity .000 ha in 2009.000 ha concession granted by the government. The supply of high-yielding hybrid planting material by the private sector is said to be adequate. 2011 February MALAYSIA .000 ha of oil palm need to be replanted countrywide. In this context. including state-financed as well as private-public formulas. February THAILAND . In Malaysia. Independent smallholders will be granted a one-off replanting sum followed by monthly payments for two years so as to compensate the loss of income from replanting activities.Plantation sector: During 2011-2013. public outlays for edible oil sales at subsidized prices have grown in line with rising palm oil prices. in order to avoid formation of a backlog. every year some 125. As a result. the government informed that it was exploring the possibility to set up a fund for subsidizing palm oil sales so as to help consumers deal with escalating prices at times of supply shortages.palm oil subsidies: Reportedly. In an effort to counter hoarding and tight supplies.Sourcing policies: Dutch bakery ingredient firm Sonneveld will join the list of food processors that commit to use (from 2013 onward) exclusively RSPO certified sustainable palm oil. February Sustainable palm oil . 6 million tons.oil palm expansion: The industry expressed doubts regarding recent government initiatives to encourage oil palm cultivation and thus lift palm oil output to 4 million tons over the next 5 years.3 million in 2009. According to SEA. Furthermore. 2011 March INDIA/MALAYSIA . higher demand was also fuelled by the appreciation of the Ringgit against the US dollar. Palm oil accounted for the bulk of last year’s plantation crop export earnings. 2011 2011 2011 2011 128 . shipments of that oil could suffer. leading to higher world prices. In January alone. March INDIA . February Sustainable palm oil . rubber and cocoa surpassed supply. mirroring the good prices fetched by palm oil. the Human Resources Ministry started discussions with government linked palm oil companies with the aim to raise wages for local and foreign plantation workers. Considering the strong rise in world prices and. By leaving the duty on palm oil unchanged.palm oil export earnings: Reportedly.free trade pact: The newly signed free trade agreement (which expands on the India-ASEAN trade pact that came into effect January 2010) includes significant additional tariff concessions for Malaysia’s palm oil exports to India. 1% and 3%).000 tons to around 1. Government officials stated that the duties were not contributing to food-price driven inflation and pointed to recent signs of easing inflation.vegetable oil import duties: Reportedly. relevant ministries have held consultations on whether to temporarily lower import taxes on soybeans and soya oil (to. oil palm cultivation faces important hurdles. including insufficient irrigation facilities.palm oil export tax: During March. 2011 March MALAYSIA . Given the hike in palm oil prices.8 million tons compared to 2. the country’s revenue from plantation crop exports has climbed to a new record last year. March CHINA: inflation control measures . Custom officers reported that spiralling prices for crude palm oil have led to an extraordinary increase in the country’s export tax revenues. while keeping palm oil duties unchanged (at 9%). The duty elimination is not expected to have a noteworthy effect on stearin markets. The only tariff change introduced concerns crude palm stearin. in domestic edible oil prices.5% so as to protect domestic refining industries. industry sources were expecting a reduction in tariffs for refined oils. To a certain extent. consequently. Earnings rose as global demand for vegetable oils.import duties on vegetable oils: The government informed that the country’s duty structure for edible oils will remain unchanged. 2011 March INDONESIA . The move would assist the country’s crushing and refining industry in coping with rising world prices and hopefully contribute to controlling domestic inflation. the government has stepped up the control of deliveries to the national market to ensure that domestic demand is met. Officials stated that workers deserved improved wages.minimum wages for oil palm plantation workers: Reportedly. whose 10% duty will be discontinued.YEAR MONTH MEASURES for the import and distribution of palm oil – said it was aiming at importing exclusively certified palm oil from 2015 onward. export taxes in the palm oil complex will stay at the record level established in February. with crude oils attracting zero duties and refined produce charged 7. March MALAYSIA . the export tax collected amounted to 48% of the target set for the entire year. 2011 March INDIA . while sales rose from less than 500. surpassing the 2008 record. the currency in which exports tend to be denominated.World production and trade: RSPO reported that in 2010 global production of certified palm oil amounted to 3. legal impediments and the fact that oil palm does not enjoy plantation crop status are said to discourage private sector investments. respectively. The company is dedicated to using environmentally and socially sustainable production practices.Brazil: Global agri-business firm ADM is joining the list of oil palm investors in the state of Parà. free. one of the country’s leading seed producers (Felda Agricultural Services) is proposing to drop the existing seed export ban. 130 and 50 million seedlings per year.palm oil consumption policies: Following up on earlier announcements. ADM’s plantation and processing facility will conform to relevant RSPO guidelines. As part of Brazil’s Social Fuel Stamp programme. 2011 2011 2011 129 . duty cuts had been envisaged with a view to halt the escalation in food costs. exportation is prohibited to ensure domestic supplies as well as to protect related IPRs. (ii) palm oil stocks held by the private sector are being turned into cooking oil and distributed at discounted prices by the Public Warehouse Organization. Reportedly. the government is determined to retain the revenue derived from import taxation. Allegedly. Late last year. according to industry sources. special import permits amount to a total of 120 000 tons. In an effort to find solutions towards forest conservation. About two thirds are for domestic use. Overseas demand for certified seed is said to be huge. the development of high carbon stock forests. high conservation value forest areas and peat land will be subject to strict controls. State ordered refining operations are subsidized to ensure that end prices do not exceed the ceiling set by the government. Sierra Leone and Thailand. March Oil palm expansion . and (iii) crude palm oil is being imported with government permission. while the remainder enters exports. the government has implemented several measures to address the domestic shortage in palm oil: (i) crude palm oil originally reserved for biofuel production is being refined into cooking oil. respectively. The country is a world leader in oil palm breeding and cloning programmes and owns some of the highest yielding varieties. March New private-public partnerships: Indonesia .forest conservation in oil palm: Indonesian oil palm business Golden AgriResources Ltd has entered a multi-stakeholder partnership involving the Government of Indonesia and The Forest Trust that aims at achieving long-term sustainability in its palm oil operations . import duties on palm and soya oil will remain unchanged. Allegedly. including Colombia. the country now produces enough seed to cater for both domestic use as well as the export market. The planned investment aims at diversifying the company’s feedstock options for biodiesel production. 2011 March PAKISTAN . In addition. 12 000 ha of palm will be developed along with a processing plant.in both. The distribution of foreign palm oil to food industries and other domestic users is centrally controlled. prior and informed consent for indigenous and local communities will be guaranteed as will compliance with relevant laws and national interpretations of RSPO principles.oil palm seed market: Malaysia is estimated to produce close to 90 million oil palm seeds per year. Honduras. providing them with technical assistance and guidance on sustainable production methods.YEAR MONTH MEASURES 2011 March MALAYSIA . The company committed to regularly evaluate and publicly report its performance in these areas. Since the 1970s. Over the next five years. Current exports are restricted to Malaysian companies operating overseas and to government-to-government trade with selected countries. Indonesia. March THAILAND . As to foreign purchases. with Indonesia and Africa alone requiring.vegetable oil import duties: Contrary to earlier announcements. Shipments have been restricted to February and March in order not to interfere with new local supplies expected from April onward. environmental and social terms. ADM has committed to purchasing produce also from approximately 600 small family farms (cultivating 6 000 ha) in the neighbourhood. High mineral oil prices and the anticipated relaxation in palm oil prices should help containing government outlays. The project will look into the effects of forest fragmentation and the impact plantations have on biodiversity. revealed transhipments of US material through Canada as well as a shift in US exports to B19 blends to circumvent existing duties. export 2011 2011 2011 2011 130 .YEAR MONTH MEASURES March Environmental footprint of plantation crops: A new international research project called Stability of Altered Forest Ecosystems (SAFE) has been launched in Malaysia with government backing. 500 000 tons will be required. In future.oil palm development: The following details have emerged regarding the government’s new plans in this field: a budgetary allocation of Rs 300 crore has been made to aid the establishment of 60 000 ha of new plantations. sales will be tax exempt and a variable subsidy will apply to pump prices.palm oil export tax: Reportedly. Critics of the progressive tax system. Anticipating a yield of 5 tonnes per ha.6 and 3. April EUROPEAN UNION . The private foundation that is funding the project (and has links to oil palm business) committed to publish all research results and to promote corrective action if required. with a 5-year delay. the country’s export tax on crude palm oil will be lowered from previously 25% to 22.palm oil trade: Private interests in Malaysia are increasingly frustrated by the EU’s strict requirements regarding the environmental footprint of biofuel feedstock. which. the government remains committed to introduce mandatory B5 blending this year although palm oil sold for traditional uses has been fetching record prices in recent months. the new duties could come into force towards end 2011 and remain in place until 2014. say that progressive taxation tends to discourage farmers and hampers the development of the downstream palm oil industry. they will likely include discussions about a sustainability chapter addressing EU palm oil importation issues. To make biodiesel competitive. the government is looking into the possibility of replacing the progressive taxation system with a flat tax on crude palm oil. From June. in April. EU officials underlined that the regulations apply to all feedstock equally and that all shipments of certified sustainable produce are welcome. Meanwhile. purchases of certain biodiesel blends from Canada and all US imports could face duties in excess of 400 € per tonne. 2011 April EUROPEAN UNION/MALAYSIA .biodiesel developments: Reportedly. As to the on-going bilateral free trade agreement talks between the two countries. For comparison. 2011 April INDIA .palm oil export tax: Mirroring a decrease in the international price of palm oil. Until now.special biodiesel duties: Reportedly. It was also pointed out that shipments destined for food and industrial uses other than biofuel faced no formal restrictions. Blending facilities are being set up with government support.5%. the initiative aims at an annual output of 300 000 tonnes of palm oil after 5 years. reportedly. an international NGO has issued a report claiming that oil palm expansion in Borneo Island continues to include conversion of carbon-rich peat swamp forests. estimates of the installed production capacity range between 2. sales of blended diesel will be introduced in stages in the different states. for nationwide operation. later.4 million tons. The initiative follows a year of investigations. If endorsed by EU members. which was introduced to safeguard supplies of palm oil to the domestic cooking oil industry. This year’s step-wise implementation is estimated to require maximum 100 000 tonnes of biodiesel. Various options are being considered. the European Commission is considering widening the anti-dumping duties imposed on US biodiesel imports in March 2009 and possibly extending them to Canada. notably palm oil. 2011 April INDONESIA . April MALAYSIA . April INDONESIA . 131 . April Sourcing of certified sustainable palm oil for food: From last month. 2011 2011 2011 2011 2011 2011 April MALAYSIA . in Germany. ISCC certification conforms to the EU’s Renewable Energy Directive and. companies supplying biofuel need it in order to qualify for state subsidies and privileges. To comply with European GHG saving targets. a global manufacturer of oils and fats. fully segregated supply chains the company committed to purchasing directly certified sustainable palm oil. the UK subsidiary of AAK. reliable and segregated supply chains for certified produce can only be found in the European market.palm oil consumption policies: In spite of indications that palm oil prices at the global level (and hence also at national level) are set to come down. The company committed to do the same for palm oil stearin from 2012/13 onward.gov. April Biofuel certification and supply issues: Integrated palm oil supply chain: Global renewable energy provider Mission NewEnergy Ltd. all parties of the supply chain must become members of RSPO and need to obtain RSPO approval of their equipment and operations. which is available at http://www. April Sourcing of certified sustainable palm oil for food: US food company Kellogg announced that its worldwide palm oil use will be matched by purchases of RSPO-endorsed GreenPalm certificates (NB: the money raised in certificate trading is used to reward palm producers for working in a sustainable and responsible way). the state has allocated 700 000 hectares of peat land for oil palm cultivation. Also.sarawak. carbon emissions along the entire supply chain will be certified using ISCC (International Sustainability & Carbon Certification System). April THAILAND . the government decided to retain the price control measures introduced last January (to stabilize the domestic market) for three more months. Last year. Currently. for a given volume of purchases. which aims at reducing the long breeding cycle of oil palm from 12 to 6 years. the development and commercial release of superior seed material without making recourse to genetic modification. eventual losses incurred by crushers and refiners will be compensated for by a state subsidy of 1. today.sustainable oil palm development: The Sarawak State Government (Borneo Island) issued a statement illustrating its commitment towards socially responsible and environmentally sustainable oil palm development. April Oil palm productivity: Effort are underway to accelerate. is using certified sustainable palm oil in its full range of bakery fats and other standard products. and Malaysian palm oil producer Felda Global Group have entered into a long term supply agreement establishing a fully integrated supply chain for certified palm biodiesel. Once sustainably grown produce becomes available in sufficient quantities via reliable. Malaysian biotechnology company ACGT (Genting Plantations Bhd) informed about its work on genomic-based marker-assisted selection technology. Initiatives taken to ensure responsible peat land use are detailed in the document. through improved breeding techniques.79 Bath per litre. Hence. Reportedly.YEAR MONTH MEASURES did not exceed 200 000 tonnes (unofficial records). the palm oil retail price remains at 47 Baht per litre and the FFB price at which crushers buy from farmers remains at 6 Baht per kg. Customers have been reminded that in order to claim ethical sourcing at subsequent marketing stages.my/en/media-centre/in-the-news. Sarawak reported the largest oil palm expansion in the country. Under current labelling laws. this is the second time a company breaching RSPO principles is facing censure. in particular the higher cost of imported soybeans.draft palm oil labelling bill: Tabled in parliament last year. The company. claiming that it hampers trade and discourages investment. The adjustment was made to reflect recent rises in production costs. In a public hearing. Reportedly. consumer goods manufacturer Unilever. especially for smallholder producers. May THAILAND . which leaves the retail price for palm oil at Baht 47. 2011 May THAILAND . which has been given a deadline for reaching an equitable solution over compensation issues. Malaysian officials criticized the bill stating that it was based on misleading claims. the use of certified sustainable palm oil (conform to RSPO criteria) would be encouraged. The local oil palm industry continued to criticize the taxation system. Meanwhile. The system has received provisional recognition under Germany’s regulatory scheme for biofuels. Reportedly.palm oil export tax: Mirroring a further drops in the international price of palm oil. palm oil (which is estimated to be used in approx. said that it might review its buying position if the supplier failed to address the alleged violations. 2011 2011 2011 132 . which buys palm oil from the plantation company in question.5 to 17. May Certified sustainable palm oil: RSPO decided to suspend the certification process for an important palm oil plantation in Malaysia until an on-going dispute with natives over plantation land is resolved. The manufacturers’ original request for a stronger price hike was rejected as it would have posed too heavy a burden on consumers. and that palm oil would be classified as a single generic product based on the environmental impact of production methods without differentiating between countries of origin. 2011 May AUSTRALIA . the country’s sliding export tax on crude palm oil will be lowered from previously 22. attention was drawn to the high cost of certification. Palm oil producers refrained from asking for similar upward adjustments. 2011 May INDONESIA .5%. that palm oil would be singled out as the only product with mandatory labelling for reasons not related to health or nutrition. Concerned about adverse effects on consumers. The case is putting to test RSPO’s capacity to implement voluntary dispute resolution mechanisms and sanctions that are acceptable to its entire membership. Furthermore.YEAR MONTH MEASURES April Biofuel certification and supply issues: New certification system: The Roundtable on Sustainable Biofuels (RSB) has launched the RSB Certification System. the system provides the assurances operators need to guarantee the sustainability and traceability of their feedstock and fuels. As to the bill’s recommended use of certified sustainable produce. the proposed bill calls for specific labelling standards being applied to food products that contain palm oil. in May. consumers would be specifically informed about the inclusion of palm oil in foods.palm oil consumption policies: Shortage of palm cooking oil in the domestic market is reported to persist. Under the proposed bill. the government decided to indefinitely postpone the planned shift in mandatory biodiesel blending from B3 to B5.soy oil retail price: At a meeting between the state committee overseeing product prices and edible oil manufacturers an agreement has been reached to raise the price for one-litre bottled soybean oil from Baht 46 to 55. and even ordered a cut in the mandate from B3 back to B2 during the months of March and April. accepted the decision and is working closely with RSPO to find a solution fair towards all parties. The new retail price shall remain in effect for at least three months. 40 % of food products) falls under the generic label “vegetable oil”. Malaysia’s extensive forest and wildlife preservation policies were also illustrated. Concerns have also been voiced regarding the implications of a draft palm oil labelling bill that is under consideration in Australia (see MPPU May 2011 issue). The Group recognizes the potential of palm oil production to contribute to poverty reduction . the two countries jointly engaged in new efforts to defend the interests of their oil palm industries.to help improve farmers’ income and to reflect increases in production costs. total release of rapeseed oil from government stocks amounted to about 1. Reportedly. June MALAYSIA-INDONESIA .foreign oil palm investment: Two palm oil firms from.provided good environmental and social practices are followed .cooperation on palm oil: Reportedly. the government is said to also eye export opportunities. the creation of a European Palm Oil Council has been announced. Future lending by the Group will focus on four key areas: (i) regulatory and governance reforms. Initially. 133 . Malaysia and Singapore have been granted concessions to develop oil palm on a total of 420 000 ha. and (b) initiatives that encourage production on degraded lands and seek to improve productivity of existing plantations. In the meantime. Reportedly. Among other initiatives. mandatory ISPO certification (Indonesian Sustainable Palm oil) is reported to be almost ready to start. June CHINA . Priority will be given to (a) institutional and market initiatives that support smallholders and foster benefit sharing with rural communities. bringing state reserves to below 1 million. (iii) improved benefit sharing with smallholders and communities. New screening and assessment procedures will also be introduced to enable appraisal of opportunities and risks around issues of land use and acquisition.8 million tons. since last October. The government is set to appoint an ISPO Commission that will manage the certification system and issue the required approvals to sustainably managed plantation companies. Although addressing primarily domestic food needs.palm oil certification: Originally.about 18 per cent more than last year . the two countries reportedly agreed to seek legal advice as to the directive’s consistency with WTO provisions. Furthermore. June LIBERIA .YEAR 2011 2011 2011 2011 2011 MONTH MEASURES May Lending framework for global oil palm development: After an 18-month moratorium on lending for new palm oil investment and extensive consultations with a wide range of stakeholders.public rapeseed stocks: The government is expected to soon start buying rapeseed (from the crop that is currently being harvested) to replenish state vegetable oil reserves. Reportedly. respectively. social and environmental impact assessments will be undertaken before any development begins. governance. On the EU Directive on the Promotion of the Use of Renewable Sources (RED). the companies are committed to invest extensively in physical and social infrastructure and are expected to assist in the development of out-grower schemes involving smallholders. voluntary) RSPO certification has reached 1. according to RSPO. June INDONESIA . some 20 plantations will be selected for trials of the new certification. and (iv) development and widespread adoption of environmentally and socially sustainable standards and codes of practice. the amount of Indonesian produce enjoying (internationally recognized. scheduled to be launched in January this year. the World Bank/IFC Group adopted a new framework and strategy for future engagement in the global palm oil sector.and hopes to make a contribution to strengthening the sectors’ sustainability. (ii) responsible private investments. companies found to be breaking ISPO rules are going to be subject to sanctions. community concerns and working conditions. The government is expected to pay Yuan 4 600 per tonne of rapeseed . in the longer term.2 million tons. most end-users are forced to resort to buying certificates to back up their claims of sustainable sourcing.4% compared to the corresponding months of 2010. Proforest maps the structure of UK supply chains and uses of palm oil at each stage and reviews potential policy options along with the likely costs and benefits of each. Furthermore. thus remaining historically very high. including the submission of formal replies to questions and extensive collaboration with EU officials during a site visit. edible oil enterprises in Heilongjiang (the country’s main soybean production base) are reported to be working way below installed capacity. the government of the United Kingdom is considering the introduction of specific policy interventions aimed at increasing the volume of sustainable palm oil consumed within the country’s supply chain. June Certified sustainable palm oil .5% and 6. Initially conceived as a stepping stone towards physically fully segregated supply chains. the fragmented nature of the industry and a very complex palm oil supply chain are said to prevent buyers from finding the quantities required. in May and June 2011. Also. the exemption is a result of the company’s full compliance with the EU’s processes.draft palm oil labelling bill: The Australian Senate will likely reject a draft bill about compulsory labelling of palm oil in food products (see also MPPU no. Originally. August AUSTRALIA .users’ consumption against production of an equivalent amount of sustainable oil somewhere at source. Doubts have arisen as to whether the issues surrounding palm oil presence in foods justify an amendment of the existing labelling laws. The company expects to complete the transition to certified sustainable produce by 2015.YEAR MONTH MEASURES 2011 June UNITED KINGDOM . In a report commissioned by the government. Meanwhile. consumer organizations and conservation groups. Reportedly. 25. Only if inventories were found to be sufficiently ample. Reportedly. an independent non-profit organization.global trade: Sources close to RSPO pointed out that currently only about half of the available certified palm oil actually enters trade as segregated produce. price controls would be relaxed. price ceilings were supposed to be lifted by June. caught between retail price caps and rising crop prices. Reportedly. June Exemption from EU countervailing duties on biodiesel: A Canadian renewable energy company reported that it has been exempted from EU duties applying to biodiesel imports from North America. May 2011). the price cap on sales of edible oil introduced towards the end of last year with a view to counter food price inflation is still in place. legislators also pointed to progress being made in the adoption of specific labelling under existing voluntary arrangements.sustainable palm oil consumption: According to Proforest.retail price cap on edible oil: According to industry sources. However. at this point. the government decided to carry out an assessment of cooking oil stocks available in the country. 5. 2011 June Certified sustainable palm oil . consumer price inflation has risen. The certificate trading scheme offsets end. respectively. Private sources expect the price caps to remain in place until mid-August. Although more and more end-users are keen to buy segregated produce. 2011 2011 2011 2011 134 . August CHINA . divisions became evident between industry bodies. certificates could dominate trade in sustainable palm oil longer than originally envisaged.sourcing policies: Global producer of household products SC Johnson has joined the list of companies committed to using exclusively palm oil originating from responsible and sustainable sources. However. a recently published list of exemptions to the moratorium has attracted the attention of environmental groups. those concessions and licenses that were granted before the new law became effective are exempted from the moratorium.biofuel sustainability certification: Starting this year. compared 20% applied in July. the export tax on crude palm oil and its derivatives will be lowered to 15% in August. a dozen independent auditors have already been officially appointed and given the green light to start the certification process.ban on forest and peat land conversion: Since the nation-wide 2-year moratorium on forest clearing and peat land conversion has come into effect last May (see also MPPU no. and (vii) a programme from biofuel producer Greenenergy covering sugar cane ethanol from Brazil. (v) 2BSvs. The bottom rate of the sliding tax would remain unchanged at 1.5%. The lack of labourers also led to higher wages. (vi) RSBA. mostly Indonesia. demand for labour is high and wages have become increasingly attractive. In particular. August INDONESIA . Reportedly. a scheme focused on sugarcane-based biofuels in Brazil. in order to count towards the EU's renewable energy targets. competition between the two countries to retain labour force has increased sharply in recent years. 20 & 26) is officially expected to start no later than August.palm oil certification: Mandatory certification according to the newly launched ISPO environmental standard (see also MPPU no. a German government-funded scheme covering all types of biofuels. a French industry initiative covering all types of biofuels. 17. expansion activities by Indonesian and Malaysian oil palm firms in Borneo Island seem to have come under greater scrutiny. utilization of biofuel . the initiative has been slow to take off. August INDONESIA . The reason provided for the proposed adjustment is that the levy failed to spur local processing of palm oil into downstream products as originally envisaged. thus pushing up production costs. In point of fact. The first seven voluntary certification schemes have just been approved by the European Commission. A number of civil society groups have questioned the schemes’ ability to objectively demonstrate sustainability in biofuel production. Reportedly.YEAR 2011 2011 2011 2011 2011 MONTH MEASURES August EUROPEAN UNION . an initiative for soy-based biofuels in Argentina and Brazil. a scheme developed by biofuel producer Abengoa to cover its supply chain. a chronic shortage of workers has developed in Malaysian oil palm plantations. 135 . namely (i) ISCC. August MALAYSIA/INDONESIA .oil palm plantation workers: In oil palm. August INDONESIA .whether of domestic or imported origin . Announced in November of last year.requires proof of sustainable production methods. Plantation companies report that the reduction in labour force has negatively affected productivity (and profit margins) as they are forces to increase the intervals between harvests. As a result. harvesting remains predominantly manual and is difficult to mechanise. where 80% of the labour force comes from abroad. August 2010).palm oil export tax: Following the recent drop in international quotations. The auditing exercise is expected to require about 1-2 months per oil palm firm. (iii) RTRS-EU-RED. the government is also considering lowering the upper limit in the country’s progressive export taxation system to 20%. (ii) Bonsucro-EU. compared to 25% at present. In Indonesia. the government and the main stakeholders of the palm oil value chain still need to agree on the composition and operations of an ISPO commission and secretariat. Reportedly. strict entry requirements and work permit rules together with better job opportunities in Indonesia have led to a drop in foreign worker arrivals in Malaysia. Over the last years. (iv) RSB-EU-RED. where oil palm continues to expand strongly. a scheme covering all forms of biofuels. August Conversion of palm oil mills: A number of palm oil processors in Malaysia and Indonesia engaged in efforts to convert their conventional mills into “green” ones via the full exploitation of waste products. The conversion includes the production (and commercial sales) of dry long fibre pellets and the breaking-up of palm oil mill effluent along with the corresponding energy extraction. August Biofuel feedstock preferences: Global producer and supplier of certified sustainable biofuels Neste Oil reported the following shifts in its raw material procurement: crude palm oil now accounts for no more than 50% of total feedstock. the US. the Round Table on Responsible Soy Association. tall oil and entirely new materials (such as algae) continues. with an alleged payback period of only 3-4 years thanks to the associated cash returns. The company’s supplies to customers in Europe. which reduces waste treatment costs. Furthermore. Producers using RTRS certification also have the option to include a biofuel annex to the auditing process. Other benefits reaped by the farmers are said to include increased crop productivity and enhanced operational efficiency. A big company that runs plantations in both Malaysia and Indonesia informed that its production of certified palm and palm kernel oil has reached 1. including several civil society organizations. currently about 9% of global palm oil output is being certified.YEAR 2011 2011 2011 2011 2011 MONTH MEASURES August Certified sustainable palm oil .5 million tons and is set grow to 3 million tons by 2015. First purchases of soybean and soy oil certificates have been reported by Unilever Brazil and the Dutch feed and food industry. The company actively assists producers in the adoption of sustainable practices and specifically helps smallholders to understand the RSPO criteria. smallholders at a Cargill-owned plantation in Indonesia recently started selling certified palm oil at a premium. Reportedly. To facilitate trade. The cost of converting a 60t FFB/hour mill is reported to amount to US$ 10 million. (ii) responsible labour conditions. Currently. (iv) environmental responsibility. while the proportion of waste animal fat and by-products form vegetable oil refining has grown to 40%.Industry sourcing: Cargill is committed to source 100% of the palm oil products it trades from RSPO certified sustainable sources by 2020. the feedstock base has been expanded by adding jatropha and camelina oil. where RTRS certification enjoys official recognition. about 70% of the palm oil traded comes from certified sources. Around 54% of all certified produce originates from Malaysia.Supply: Global production of RSPO certified palm oil is reported to grow rapidly. followed by Indonesia with 35%. RTRS also launched a certificate trading platform under which soybean producers receive rewards for delivery of certified produce. August Certified sustainable soy: Certification and trading of sustainable soy has been launched by RTRS. used cooking oil. The Association expects to certify 0. Producers in Brazil and Argentina have already applied for certification. Australia and New Zealand will be fully certified already by 2015. waste fish oil. August Certified sustainable palm oil . RTRS brings together stakeholders of the entire soy value chain. and (v) good agricultural practices. The company also conducts research on soybean oil. Certification requires compliance with the following five principles: (i) good business practices and legal compliance. According to industry estimates. Canada.5 million tons of soybean this year and double that amount during 2012. (iii) responsible community relations. Reportedly. This plan is supposed to help the company to meet the rising demand for sustainable produce amongst manufacturers and retailers. 136 . which provides them access to the EU biofuel market. today about 5 million tons undergo certification – compared to only 1 million tons in 2009. At the same time palm oil producers will be encouraged to adopt more sustainable practices. the government decided to allocate. supposedly demonstrating the feasibility of oil palm cultivation in the Brazilian Amazon region . trade data reveal a drop. competing exporters (in particular Malaysia) as well as buyers of Indonesian oil palm products could be adversely affected.government imports of edible oil: Reportedly. Private sources estimate that the subsidized sales to poor households since 2008 have contributed to the rise in overall domestic consumption in recent years. Therefore. which is Indonesia’s main customer for palm oil. until September 2012. 2011 September Certified sustainable palm oil .independent from voluntary RSPO certification (which is currently used by producers to certify about 17% of domestic output). prices form commodity exchanges in Malaysia and Indonesia will be used to calculate the international reference price.accorded to refined oil relative to crude oil exports. the government intends to extend its edible oils import programme for public distribution at subsidized prices.RSPO certification: Three years after its launch.5-25 per cent. But the key change is the preferential treatment . through the country’s Palm Oil Board.palm oil export tax .5-22.000 smallholders that cultivate about 650.national certification scheme: Following the footsteps of Indonesia.smallholder support: Reportedly. Reportedly. could be affected . tax range will be narrowed to 7. importing countries. On the other hand.000 per ha to small farmers for them to participate in the replanting and new planting of oil palms and thus contribute to the expansion of domestic production. 2011 September INDONESIA . denotes renewed efforts by the government to promote domestic processing and value addition in palm oil. Malaysia.000 ha of land. Up to 1 million tons would be imported and distributed by state-run trading agencies. RM 7. the min. 2011 September Certified sustainable palm oil .also because. which is due to expire in September 2011. the Malaysian government reportedly started planning a national certification scheme . In fact. Furthermore. lower tax cap . in the share of refined oil palm products in total shipments (to less than 50%). The 1 million ha mark has been reached through the certification of the supply base and mills of a major Brazilian producer.5-13 for refined oil – compared to the current.September tax rate: With international palm oil prices about unchanged in August.i. Malaysia may consider introducing new measures to support its own processing sector.in a manner compatible with sound environmental and social standards. September MALAYSIA . concerning close to 5 million tons of palm oil or about 10% of global output.5 per cent for crude palm oil and 7. the government does not fully support the RSPO scheme which 2011 2011 137 .YEAR MONTH MEASURES 2011 September INDIA .Modified taxation scheme: A modified palm oil taxation system is going to come into effect in October. protecting its own refining industry via higher import duties might not be an option when the country is faced with inflationary pressure. /max. common band of 1. While progressive taxation based on world market prices is going to remain in place. the export tax on crude palm oil will remain at 15% during September. RSPO certification is now reported to involve a production area of 1 million ha word-wide. The programme is targeted at some 300.e. which. Assuming Indonesia’s future shipments of processed palm oil rise as a result of the new tax rates. over recent years.palm oil export tax . in addition to quotations in Rotterdam. In particular India. according to market observes. September INDONESIA . where refined product shipments account for over 80% of total exports. could be exposed to increased competition considering that Indonesian refiners enjoy significantly lower production costs. in particular those that have expanded their own refining capacities and thus prefer to buy crude palm oil could experience a partial shift from crude to (more attractively priced) processed palm oil imports from Indonesia. YEAR MONTH MEASURES is said to be subject to revisions and not to provide the type of service the market requires. While providing some relief to the EU biofuel industry. the country’s Food Ministry is backing the industry’s request and has taken up the matter with the Finance Ministry. buyers will be offered direct. securing food supplies alone via the introduction . at the current tariff levels and with reduced prices for processed products coming from Indonesia. Malaysia’s industry (which provides virtually all of Australia’s palm oil) responded with a second appeal to the Parliament explaining that the draft law was based on misleading claims and the bill presented an indirect trade barrier violating international trade rules. in the longer term. namely an increase in the emission savings threshold that all biofuels must meet in order to count towards the bloc’s bioenergy targets (thereby gaining access to various preferential treatments). Reportedly. Furthermore. the Senate opted to go ahead. recognizing that. submitting the bill to the House of Representatives. the idea is to delay feedstock specific rules on ILUC in favour of an indirect approach that will affect all biofuel crops equally. the 2013 threshold could be revised upward to 45-50%.at national level . small producers would not face any disadvantages in obtaining certification. including oil palm. the release by the European Commission of guidelines on the influence of indirect land use changes (ILUC) on carbon savings in biofuel production and utilization seems to have been postponed by 6 or 7 more years because scientific uncertainties persist. close to 80% of the country’s edible oil requirements are covered by imports of crude palm oil.overseas farm land acquisition: According to unofficial sources the government is working on policies that will allow Indian agribusiness companies to buy land abroad for growing various crops. Originally set at 35% (emission savings compared to fossil fuel) from 2013 and 50% after 2017. the new policy would be meant to help phase out the worst performing biofuels and prevent further investments in biofuel production systems with low levels of sustainability. the country’s annual refining capacity is currently estimated to be utilized to only 60%. 2011 2011 2011 2011 October AUSTRALIA .draft palm oil labelling bill (see also MPPU no. 2011): Reportedly. The ILUC concept attempts to measure the effects of local production of a particular biofuel feedstock on global food crop production and GHG emission levels. Already. policy makers are looking into means to encourage outsourcing of domestic food production. which subsequently gets refined locally. physical access to certified palm oil. especially in Latin America and Africa. October INDIA . 25&27. although the concerned Parliament committee recommended not to pass the draft bill on labelling standards for food products that contain palm oil. Given India’s rising population and related food security concerns. could be earmarked. Reportedly. with due attention to all the concerns raised by the trade. 138 . Under the planned national system. large tracts of uncultivated land. Also the vulnerability of domestic agriculture to adverse weather conditions seems to be of concern. At present. thus hurting the country’s refining industry. However. Reportedly.sustainable biofuel production: Earlier expected for end 2011. October INDIA . India’s imports of refined palm oil are likely to rise sharply. October EUROPEAN UNION .of yield improving technologies and better irrigation facilities could prove challenging. May& Aug. India’s processing industry is urging policy makers to raise the country’s import duty on refined palm oil from currently 7. Meanwhile the bill has also been expanded to apply to any food as well as non-food product containing palm oil or its sub-products.5% to at least 15%.import duty on refined palm oil: In response to Indonesia’s restructured export tax (which is expected to boost the nation’s shipment of refined oil possibly making it unprofitable for importing countries to buy crude palm oil for local processing). EU policy on ILUC: Although the European Commission committed to improve EU biofuel policy by introducing guidelines on the influence of indirect land use changes (ILUC) on carbon savings. animal feed and bio-fuel for commercial use. (iii) the introduction of tax rebates for the downstream industry. which in November 2007 sealed a free trade agreement with Pakistan. the private industry is set to increase the price for germinated seed by 30% from January next year. until 2007. is destined to see profits in the production and exportation of refined produce falling as a result of Indonesia’s tax adjustment. Pakistan will cut its import duty on Indonesian crude and refined palm oil by 15%. the government has decided to adjust the actual level of the tax for processed palm oil from 15% to 8%. On this matter. October MALAYSIA . Experts estimated the new price advantage enjoyed by Indonesian competitors at USD 70 to 130 per tonne of refined palm oil. purchases from Indonesia had shrunk in favour of imports from Malaysia. October MALAYSIA . due in particular to increases in minimum labour wages and foreign worker levies as well as higher fertilizer costs and electricity tariffs affecting production costs in plantations and processing plants. December EUROPEAN UNION – biofuel policy and industry concerns. and called for the resulting emissions to be taken 139 . October INDONESIA / PAKISTAN . the release of new rules has been postponed repeatedly because of persisting scientific uncertainties.conversion of palm oil mills: In Malaysia.5% .oil palm seed cost: Reportedly. a group of scientists and economists urged EU policy makers to formally recognize that biofuel production can have indirect impacts on land-use. As under current conditions reducing costs by such amounts may well be unattainable for Malaysian refiners. Over the last few years. The aim is to turn the waste products of the milling process (estimated at more than 80 million tonnes of biomass per year at country level) into bio-fertilizer. all aimed either at increasing domestic palm oil supplies or at lowering the domestic price for crude palm oil: (i) the gradual reduction (or abolition) of the existing tax-free export quota for crude palm oil. Reportedly. (ii) the reduction (or removal) of windfall taxes that were imposed on oil palm plantations in a period of rising profits. Industry experts listed the following options for possible government intervention.YEAR 2011 2011 2011 2011 2011 2011 MONTH MEASURES October INDONESIA . the notion of converting conventional mills into “green” ones via the full exploitation of waste products will be the objective of a newly formed public-private partnership (between Sime Darby Foundation and Universiti Kebangsaan). while increasing the rate for crude oil from 15% to 16. which over the years succeeded in exporting most of its palm oil in refined form.possible assistance to palm oil refiners: Indonesia’s recent restructuring of palm oil export taxes was bound to affects its main competitor in the export market. and (iv) setting domestic price ceilings for crude palm oil. thus granting the same treatment it applies to imports from Malaysia. The country. Pakistan sourced 55% of its palm oil imports from Indonesia.a tax st structure that clearly favours shipments of refined products. Malaysia. The ILUC concept attempts to measure the effects of local production of a particular biofuel feedstock on global land use and GHG emission levels as well as on the production and prices of basic foods. October MALAYSIA . The new agreement will come into force next January. Behind the rise are (i) heavy investments in past years into breeding for higher yields and (ii) rising production costs. after more than six years of negotiation.palm oil trade: The recently signed preferential trade agreement between the two countries is expected to restore Pakistan’s imports of Indonesian palm oil to their traditional level. the government seems to be under pressure to consider measures to support the industry. The new rates will come into effect on 1 October.palm oil export tax: After its recent decision to modify the upper and lower limits for the export duty on crude and refined palm oil (driven by the objective to stimulate shipments of processed products). Under the new trade pact. with prices for rapeseed oil (the main feedstock) rising markedly. the country could find itself faced with both higher landed costs for refined palm oil and rising international prices for crude palm oil. the sector’s weak performance is not the result of falling demand for biodiesel. Interestingly. So far the government has not yielded to the industry’s request. concerns of oil palm growers: Reportedly. the country’s export tax on crude palm oil has been lowered from 16. Importing of soy oil and palm oil-based biodiesel has become increasingly attractive. bioethanol stands to gain an advantage over biodiesel when land-use impacts are factored in. EU bioethanol producers are reported to have come out in support of accounting for ILUC. Indonesia and Singapore. the EU’s targets for renewable energy in transport may fail to develop genuine carbon savings in the real world. the recent change in Indonesia’s export duty structure for palm oil and derived products represents a major threat to India’s vegetable oil refining industry (see also MPPU no. also the fate of the EU’s biofuel industry seems to be at stake. supposedly out of concern that the proposed measures could propel domestic food price inflation upward.palm oil export policies. because. Rather.palm oil export policies. The export tax on refined palm oil was also lowered. protecting the domestic refining industry may prove difficult in the long run: the sector is said to suffer from inefficiencies and poor infrastructure. In recent. Main origins are Argentina. EU biodiesel production and trade: Total biodiesel output is estimated at 9-10 mill tons this year. In any case. eventually. 21% higher than in 2010. those imports have been tentatively estimated at 2. During December. the industry is now asking for an upward revision in the base prices on which import taxes are calculated. For the current year. While the discussion centres on environmental gains and social justice.5 mill tons. December EUROPEAN UNION – biofuel policy and industry concerns. the Indian government is determined to seek a reduction in Indonesia’s export tax on crude palm oil. 2011 December INDONESIA . The low utilization rates could force part of the industry to close down. export tax: Based on a decrease in international palm oil quotations. Attention was drawn to numerous studies indicating that emissions related to biofuels expansion are significant and can be quite large – possibly exceeding those related to conventional fuel.YEAR MONTH MEASURES into account fully when assessing which biofuels help in the fight against global warming. 2011 December INDONESIA . Observers point out that a policy which ignores ILUC effects leaves the industry in turmoil and doesn’t allow biofuel producers to plan properly for the future. The petition states that without addressing ILUC. 28 & 29). 2011 December INDIA – palm oil import policy: As anticipated. allegedly. similar cases the EU decided to impose anti-dumping duties. notably that of biodiesel producers. implying that expansion in production has come to a halt and that no more than 40-45% of the EU’s installed production capacity is being used. oil palm planters and smallholders used to ship crude palm oil are complaining that the government’s recent export tax restructuring is forcing them to pay more for their exports than processors who export refined oil. According to the latest media reports. The EU biodiesel industry claims that part of these imports involve dumping and therefore decided to call on the EU Commission to investigate on the issue. After initial calls to lift the import duty on refined oils (so as to stem the inflow of refined palm oil from Indonesia). Such situation is said to lower the incentive for smallholders to replant and improve 2011 140 . the bloc’s biodiesel industry has produced studies claiming that the impact of ILUC has been greatly overestimated. which weakens its position vis-à-vis international competitors. Apparently. In the meantime. the export tax rates will remain unchanged.5% in October to 15% in November. Market observers are warning that. ignoring ILUC in the bloc’s policies could in fact cause increases in GHG emissions rather than reductions. possibly in lieu of low-cost supplies of Indian rice to Indonesia. domestic biodiesel production has become less profitable and more exposed to import competition. The subsidy is required to maintain the price of biodiesel at RM 1. At present. Recent official sources confirmed that the two countries agreed to review their respective tax structures. The estimate implies that about three quarters of domestic production are exported – a development that reflects the government’s policy to set export taxes for palm oil-based fuel at a lower rate than crude palm oil. since 2008 shipments (most of which are bound to the EU) have gone through a four-fold increase and are estimated at 700-750 thousand tons this calendar year by private sources. A total of 890 000 tons of is expected to be required to satisfy demand (based on an estimated annual diesel consumption of 2. In addition biodiesel exports are reported to enjoy a tax-free threshold. After a slow start in the mid-2000s. the subsidy provided per litre amounts to RM 0. 141 . especially in price-sensitive countries like China and India. which potentially affect palm oil businesses worldwide. the higher crude oil export tax may also encourage smuggling. the two countries are determined to come up with mutually beneficial solutions and strategies. Nationwide introduction of B5 is scheduled for early 2013. 2011 2011 2011 2011 December INDONESIA – biodiesel exports: The country’s exports of palm oil-based biodiesel (mainly to the European Union) are reported to be on the rise. The Netherlands. December NETHERLANDS – refining industry affected by Indonesian export policy: After India and Malaysia.0426. Apparently. the same as regular diesel. December MALAYSIA – biodiesel programme: Launched in June of this year. Considering that Malaysia also imports crude oil from Indonesia (as domestic refining capacity has grown beyond the country’s own output) a duty-free quota on Indonesian-origin CPO bound for Malaysia might also be considered. The country’s refining industry is concerned about both a possible build-up in stocks of refined oil as well as growing difficulties in sourcing sufficient amounts of crude palm oil (CPO). mandatory sales of B5 biodiesel in the three central states of Peninsular Malaysia are reported to proceed as planned. offer home to massive processing plants owned by domestic and foreign investors. focusing on review of their respective export policy measures. 28 & 29). Recent trade reports suggest that Indonesia’s new export tax structure has conferred global trade in refined palm oil with an edge over crude oil – thus leading to significantly lower margins for refiners in traditional crude palm oil importing countries. To address these concerns. The programme relies on public subsidies to the tune of RM 106 mill per year. Malaysian exporters could lose market share. Indonesia could be exposed to growing criticism for using tools like export taxes.80 per litre.5 %. With the country’s refined palm oil becoming more expensive compared to Indonesia. the Netherlands has voiced concerns about adverse effects Indonesia’s revised palm oil export policy is having on the Dutch vegetable oil refining industry.49 billion litres). one of the EU’s main import hubs. Options examined include a revision of Indonesia’s export duties on refined palm oil and a reduction in both countries’ high CPO export tax. the tax on biodiesel has been capped at 7. December MALAYSIA/INDONESIA – palm oil policies: The recent change in Indonesia’s export duty structure for palm oil and derived products potentially reduces the competitiveness of refined palm oil production and export in Malaysia (see also MPPU no. In addition. officials from the two countries are engaged in talks. In the recent tax structure change. Joint measures that will benefit downstream palm oil processing industries in both countries are expected to be announced before year-end.YEAR MONTH MEASURES productivity levels. YEAR MONTH MEASURES 2011 December Certified sustainable palm oil - global market challenges: Current production of certified sustainable palm oil is estimated at 5.2 mill tons globally – hence accounting for less than 10 per cent of world supply. If supply is limited, demand seems to be even smaller: reportedly, less than 60 per cent of the certified product is finding a buyer. According to market participants, lack of demand is more of a problem than lack of supply. Although major users of palm oil have pledged to move towards sourcing sustainably produced product, many of them are said to remain reliant on offsetting GreenPalm certificates rather than physical oil to meet their commitments. Moreover, part of the global market seems unwilling to pay a premium for sustainable oil. As a result, incentives for sustainable production tend to remain inadequate. Means to expedite the production and use of sustainable palm oil are being debated at RSPO, the multi-stakeholder, non-governmental initiative that has led sustainability efforts at the international level. Reportedly, increased attention is being given to possibilities of involving governments more closely. One proposal is to encourage national governments to reduce import duties for certified sustainable palm oil so as to offset the price premium coming with the product. Indeed unofficial sources reported that EU policy makers have been invited to consider exempting eco-friendly palm oil from the bloc’s 3.8% import duty. Reportedly, the initiative is supported by the Dutch government and could be included in the EU’s on-going free-trade negotiations with Malaysia and Indonesia. 2011 December Certified sustainable palm oil - Indonesian initiative: The Indonesian Palm Oil Association (GAPKI) announced its withdrawal from RSPO. Reportedly, the industry body decided to focus on assisting the government in launching ISPO, the country’s own certification system for sustainably produced palm oil. December Certified palm oil-based fuel: Renewable energy business Mission NewEnergy has obtained ISCC certification (International Sustainability and Carbon Certification) for its palm oil-based biodiesel, which is said to allow GHG emission savings of 41-47%. With ISCC fully meeting European Union RED-requirements, the company has begun selling palm oil-based diesel to the EU market. The company informed that it has also submitted an application to the EPA in the United States, which is currently evaluating compliance with relevant US requirements. 2011 Source: The oilseeds desk of the Trade and Markets Division of FAO 142 ANNEX IV PALM PRODUCTS: CUSTOMS TARIFFS AND TAXES  Import Tariffs, Palm Oils - European Union, December 2011 CN 115 heading 1511.1010 1511.1090 1511.9011 1511.9019 1511.9091 1511.9099 1516.2091 Product Palm oil, crude, non-food applications, under customs control Palm oil, crude, other Palm stearin, solid fractions, in immediate packaging of a net content not exceeding 1 kg Palm stearin, solid fractions, other Palm oil, refined/palm olein, non-food applications, under customs control Palm oil, refined/palm olein, other Palm oil, hydrogenated or interesterified, in immediate packaging of a net content not exceeding 1 kg General/MFN (ex. Malaysia, Indonesia) GSP base regime (ex. Brazil, Nigeria, Thailand) GSP and special arrangements (ex. Colombia, Ecuador, Guatemala, Costa Rica, DR Congo) Economic partnership agreements (ex. Côte d’Ivoire, Ghana, Papua New Guinea) 0% 0% 0% 0% 3.8% 0% 0% 0% 12.8% 4.4% 0% 0% 10.9% 116 3.8%2 0% 0% 5.1%2 1.6%2 0% 0% 9% 3.1% 0% 0% 12.8% 8.9% 0% 0% 115 Combined Nomenclature, established by the European Union and meeting, at one and the same time, the requirements of the Common Customs Tariff ( ) and of the external trade statistics of the European Union – see online EU customs tariff database (TARIC) http://ec.europa.eu/taxation_customs/customs/customs_duties/tariff_aspects/customs_tariff/index_en.htm 116 The EU has fully suspended, provisionally until 31.12.2013, its import duties on these products for the manufacture of industrial monocarboxylic fatty acids CN heading 3823.1910; methyl esters of fatty acids of heading 2915 and 2916; fatty alcohols of subheading 2905 17, 2910 19 and 3823 70 used for the manufacture of cosmetics, washing products or pharmaceutical products; fatty alcohols of subheading 2905 16, pure or mixed, used for the manufacture of cosmetics, washing products or pharmaceutical products; stearic acid of CN heading 3823.1100; goods of heading 3401 143 Palm oil, hydrogenated or inter9.6% 6.1% 0% esterified, other Source: European Union Export Helpdesk, http://exporthelp.europa.eu/thdapp/display.htm?page=it%2fit_ImportTariffs.html&docType=main&languageId=en 1516.2096  0% Export tariffs, palm oils and biodiesel – Indonesia, December 2011 Export tariff Crude palm oil CIF Rotterdam, US$/ton Less 700 701-750 751-800 801-850 851-900 901-950 951-1000 1001-1050 1051-1100 1101-1150 1151-1200 1201-1250 Over 1251 Crude palm oil (%) 67/PMK.011/2010 117 applied up to September 20112 0 1.5 3 4.5 6 7.5 10 12.5 15 17.5 20 22.5 25 Crude palm oil (%) 128/PMK.011/20113 Applied from Sept. 2011 onwards 0 0 7.5 9 10.5 12 13.5 15 16,5 18 19.5 21 22.5 Source: Indonesia National Trade Repository INTR, http://eservice.insw.go.id/index.cgi  Tax on crude palm oil exported outside quota, Malaysia, December 2011 117 PMK, abbreviation for “Peraturan Menteri Keuangan”, meaning “Regulation of finance ministry” 144 Refined, bleached, deodorised RBD (%) Palm oil based biodiesel 0 0 1.5 3 4.5 6 8.5 11 13.5 16 18.5 21 23 0 0 0 0 0 0 2 2 2 5 5 7.5 10 my/ 145 . Price of CPO First 650. Source: JKDM HS – Explorer http://tariff.gov.00 RM per ton Plus on the next 50 RM per ton Plus on the next 50 RM per ton Plus on the next 50 RM per ton Plus on the next 50 RM per ton Plus on the balance Tax. free of export licensing. as shown below. A tax is levied on crude palm oil exported outside the quota.customs. % ad valorem Nil 10 15 20 25 30 No export tax is levied on refined palm oil (RBD) and palm olein. but subject to export licensing.Certain quotas of crude palm oil exports are free of tax. Côte d’Ivoire trade agreement African Growth and Opportunity Act Nigeria Name Generalized System of Preferences Australia Generalized System of Preferences Canada Generalized System of Preferences European Union Generalized System of Preferences . Sweden .New Zealand Generalized System of Preferences Switzerland Generalized System of Preferences .New Zealand Generalized System of Preferences Norway Generalized System of Preferences Switzerland Generalized System of Preferences Turkey Generalized System of Preferences United States Type Provider(s) Entry into force GSP Australia 1/1/1974 GSP Canada 7/1/1974 GSP European Union 7/1/1971 GSP Japan 8/1/1971 GSP New Zealand 1/1/1972 GSP Norway 10/1/1971 GSP Switzerland 3/1/1972 GSP Turkey 1/1/2002 GSP United States 1/1/1976 Other United States 5/18/2000 PTAs Others: ECOWAS . GHANA AND SENEGAL Côte D’Ivoire Name Generalized System of Preferences Australia Generalized System of Preferences Canada Generalized System of Preferences European Union Generalized System of Preferences Japan Generalized System of Preferences .United States African Growth and Opportunity Act 146 Type Provider(s) Entry into force GSP Australia 1/1/1974 GSP Canada 7/1/1974 GSP European Union 7/1/1971 GSP Japan 8/1/1971 GSP New Zealand 1/1/1972 GSP Switzerland 3/1/1972 GSP Turkey 1/1/2002 GSP United States 1/1/1976 Other PTAs United States 5/18/2000 . NIGERIA.Japan Generalized System of Preferences .ANNEX V AGREEMENTS IN FORCE IN CÔTE D’IVOIRE.EU economic partnership agreement.Côte d’Ivoire trade agreement and Brazil .Turkey Generalized System of Preferences . New Zealand GSP New Zealand 1/1/1972 Generalized System of Preferences Norway GSP Norway 10/1/1971 Generalized System of Preferences Switzerland GSP Switzerland 3/1/1972 Generalized System of Preferences Turkey GSP Turkey 1/1/2002 Generalized System of Preferences United States GSP United States 1/1/1976 Other PTAs United States 5/18/2000 Type Provider(s) Entry into force Generalized System of Preferences Australia GSP Australia 1/1/1974 Generalized System of Preferences Canada GSP Canada 7/1/1974 Generalized System of Preferences European Union GSP European Union 7/1/1971 Generalized System of Preferences Japan GSP Japan 8/1/1971 Generalized System of Preferences .Ghana Type Provider(s) Entry into force Generalized System of Preferences Australia GSP Australia 1/1/1974 Generalized System of Preferences Canada GSP Canada 7/1/1974 Generalized System of Preferences European Union GSP European Union 7/1/1971 Generalized System of Preferences Japan GSP Japan 8/1/1971 Generalized System of Preferences .New Zealand GSP New Zealand 1/1/1972 Generalized System of Preferences Norway GSP Norway 10/1/1971 Generalized System of Preferences Switzerland GSP Switzerland 3/1/1972 Generalized System of Preferences Turkey GSP Turkey 1/1/2002 Name African Growth and Opportunity Act Senegal Name 147 . EU interim economic partnership agreement 148 .Type Provider(s) Entry into force GSP United States 1/1/1976 Duty-Free Tariff Preference Scheme for LDCs LDC-specific India 8/13/2008 Duty-free treatment for LDCs . Republic of 1/1/2000 African Growth and Opportunity Act Other PTAs United States 5/18/2000 Name Generalized System of Preferences United States Others: Ghana – Netherlands double taxation agreement. Ghana . Chinese 12/17/2003 Preferential Tariff for LDCs .Chinese Taipei LDC-specific Taipei.China LDC-specific China 7/1/2010 Duty-free treatment for LDCs .Republic of Korea LDC-specific Korea. Incoterms® rules have traditionally been used in international sale contracts where goods pass across national borders. FOB implies an export sale. state in a number of places that the obligation to comply with export/import formalities exists only where applicable. The documents required for a FOB contract are the commercial invoice. Moreover. FOB contracts Under the INCOTERMS. as soon as the goods pass the ship’s rail. trade blocs. and pay loading costs according to custom requirements of the port to the extent that they are not included in the freight. They help traders avoid costly misunderstandings by clarifying the tasks. obtain the export licence. Incoterms® – International Commercial Terms The Incoterms® rules are the global standard for the interpretation of the most common terms in foreign trade. Incoterms® rules are increasingly used in domestic trade. that that the buyer has to bear any unforeseen costs and risks in bringing the goods to destination and that he must pay the sales price no matter what happens to the goods. have made border formalities between different countries less significant. This means. In this respect. among other things. provide a clean-on-board receipt in proof of delivery of goods. Incoterms® 2010. In the United States. A FOB contract (meaning “Free on Board)” implies that the goods are placed on board of a ship by the seller. and pay export taxes and fees. Optional documents may include certificate of origin and import clearance. Consequently. 149 . These international standard business rules are recognized and used worldwide in international and domestic contracts for the sale of goods.html) organises courses of six hours of online instruction and training in Incoterms® 2010. a customary clean receipt and the export licence.org/Incoterms_onlinetraining/. contract for the carriage and pay the freight. inadequate packaging).org/id93/index. deliver the goods on board of the vessel agreed upon. The risk of loss or damage to the goods is transferred from the seller to the buyer. the rules have been adapted in 2010 in order to make them applicable to both international and domestic sale contracts. they provide internationally accepted definitions and rules of interpretation for most common commercial terms. where needed. It is useful to note that the International Chamber of Commerce (http://www. which were launched in mid-September 2010 and came into effect on 1 January 2011. B. The buyer’s primary duties are to: nominate the carrier. costs and risks involved in the delivery of goods from sellers to buyers.iccwbo.iccwbo. like the European Union. please consult http://www. however. as long as the cause cannot be attributed to the seller (for example. In various areas of the world. and pay unloading costs. Traders commonly use Incoterms® rules for purely domestic sale contracts. pay loading costs to the extent that they are included in the freight. The seller’s main obligations are to: supply the goods in conformity with the sales contract.ANNEX VI FOB AND CIF CONTRACT TERMS A. rather than the former Uniform Commercial Code shipment and delivery terms. at the port of shipment defined in the terms of the sales contract. to preserve her from a worse fate. are optional. As far as the insurance is concerned. obtain the export licence and pay export taxes and fees. such as the certificate of origin or a consular invoice. waves. In this case. provide the buyer with the invoice. the seller frequently makes the arrangements for shipment on buyer’s behalf. C. This means that he does not have to pay in case of partial (particular) loss or damage. when the invoice. CIF contracts CIF means “cost. or damage to. and pay loading costs and unloading costs to the extent that they are not included in the freight. and pay unloading costs to the extent that they are included in the freight. The C&F (“cost & freight”) contract terms are similar with CIF terms. the goods during carriage. the buyer having the duty to reimburse the seller’s expenses. a clean bill of lading and a cargo insurance policy or certificate. The documents required for a CIF contract are the commercial invoice. export licence and insurance policy. The buyer’s duties are to: accept delivery of goods upon shipment. The seller’s responsibility under this contract is to: supply the goods in conformity with the sales contract. CIF INCOTERMS are based on the principle of minimum liability for the seller. such as stranding 118. on liner-terms (the freight. paid by the buyer. the buyer turns to the insurer. unless otherwise agreed (such as charges of freight forwarders’ charges and shipping agents’ costs). with the addition that the seller has to provide marine insurance against the risk of loss of. who only has to procure insurance on “free from particular average – FPA” terms. the insured amount is CIF price plus ten per cent. or for some fraudulent purpose 150 . but only when an incident “generally” affects the ship or cargo. bill of lading. contract the insurance of goods during carriage and the insurance premium. in case of loss or damage to the goods. is inclusive of carriage and cost of cargo handling at the loading and discharging ports). contract for the carriage of the goods and pay the freight charges to the agreed port of destination. load the goods on board of the vessel agreed upon. insurance and freight”. cargo insurance policy and bill of lading are provided to him. Other documents. The seller establishes the insurance contract and pays the premium.Palm products are usually carried by regular liner vessels (vessels designed and built primarily for the carriage of cargo which ply regular trade route and sailing schedule). if required. The FPA insurance covers also total loss or damage. collision or fire. 118 Running of a vessel on shore by the winds. Postal address International Trade Centre Palais des Nations 1211 Geneva 10. 5.org The International Trade Centre (ITC) is the joint agency of the World Trade Organization and the United Nations.3 SHAPE THE FUTUR OF YOUR SECTOR’S SUCCESS HOW TO DEVELOP A SECTOR STRATEGY Street address International Trade Centre 54-56 Rue de Montbrillant 1202 Geneva. Switzerland P: +41 22 730 0111 F: +41 22 733 4439 E: itcreg@intracen. Switzerland .org www.intracen.HANDBOOK Ver.