MARKET DEVELOPMENT
More Consistent Palm Oil Policy Sought
More Consistent Palm Oil Policy Sought
09/01/2015 (Daily Express) - India emerged as Malaysia's biggest palm oil buyer at 2.87 million tonnes in the first 11 months of last year, which was 35 per cent more than the 2.12 million tonnes posted in the same period in 2013. But recently, the situation has changed.
On December 24, India raised the import duty on rude palm oil (CPO) to 7.5 per cent from 2.5 per cent. It also increased the duty on refined palm oil to 15 per cent from 10 per cent.
Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad (pic) said India's decision was not surprising. It was meant to protect the interests of its oilseed farmers and edible oil refiners.
"It also signals to Malaysia that they are not interested to buy that much CPO. It warrants that Malaysia should stop declaring duty-free CPO exports and let market forces dictate its course." Jaaffar was referring to Plantation Industries and Commodities Minister Datuk Douglas Unggah Embas' announcement on the exemption of export duty on CPO from September last year. Such an announcement confuse downstream investors as to the government's commitment in adding value to the palm oil industry.
Many people think refiners and planters are at loggerheads. This is a wrong assumption because refiners are purely concerned about the price gap, and not how low the CPO price will go.
"It is a misconception that in times of falling CPO price, refiners are happy at the expense of planters. As refiners, we are margin players. It doesn't matter if CPO prices are high or low.
"In fact, everybody, from up-stream to downstream of the palm oil value chain, wins when CPO prices are high. That is the role of the refiners in supporting the CPO price as we buy and process every drop of CPO in the country,"he added.
Since September, CPO prices had averaged structure run its course, like what Indonesia is doing. Declaring duty-free CPO exports to bring down the national stockpile level in the hope of pushing up CPO prices is not as effective as before because Malaysia is no longer the world's biggest palm oil producer. "We need to be more discerning about this 'silver bullet' because the global economic situation is very different from 10 years ago.
"Ad hoc declaration of duty-free CPO exports can backfire and trigger a price war with Indonesia, which is hurtful for all oil palm planters, whether in Malaysia or Indonesia," said Jaaffar.
In the last two years, Pakistan's purchase of palm oil from Malaysia also fell significantly. The country consumes about 3.2 million tonnes of edible oils annually and meets more than half of its demand through imports.
Jaaffar said since 2013, Pakistan's parity to palm oil shipment from Malaysia.
This means Pakistan's purchase from Indonesia and Malaysia enjoy a 15 per cent rebate on import duties of 8,000 rupees (RM280) a tonne on CPO,10,800 rupees on refined, bleached and deodorised (RBD) palm oil, 9,050 rupees on palm stearin and 9,050 rupees on RBD palm olein. "Pakistan is a price-sensitive market. Since Indonesia is able to sell RBD palm oil more competitively than RBD palm oil at the expense of Malaysian RBD palm olein," he said China, like Pakistan, also slashed its palm oil purchase from Malaysia.
In the first 11months of last year, China bought 2.58 million tonnes, a 23 per cent shortfall from the 3.34 million tonnes in the same period in 2013.
In the last five years, Jaaffar noted that China's palm oil demand had been artificially pushed as "financial products" rather than "commodity products.
Since banks in China give peculiar treatment to palm oil, viewing it as "institutional instruments," palm cooking oil and margarine demand will continue to be augmented by fiscal policy changes there.
Nevertheless, Jaaffar said the current shortfall in China's palm oil purchase is also exacerbated by subdued consumer spending.
"China is Malaysia's best cooking oil market. In view of the cautions consumer spending, we need to be more focused on market segmentation to raise the popularity and branding of our oil." Three weeks ago, Second Finance Ministers Datuk Seri Ahamd Husni Hanadzlah said Prime Minister Datuk Seri Najib Razak would form the National Export Council export chain, logistics and output.
Poram lauds NEC's formation and urged the high-powered body to make an iron-clad commitment to palm oil downstream players that "a level playing field"with rivals will be maintained for the sake of Malaysia's export competitiveness.
"The current 'flip-flop policy' in exempting CPO export duties for six months from September to February is confusing foreign and local downstream investors. The erosion of investor confidence is not healthy for our economy," said Jaaffar. He also proposed that NEC adopts advocacy and political tools in tackling the global smear campaign on palm oil so as to boost the country's exports.
"The right (and also difficult) thing to do is to tackle barriers (tariff or non-tariff) to palm oil trade.
"This strategy is healthier for all stakeholders along the palm oil value chain, whether you are a planter, a cooking oil trader or a biodiesel manufacturer. We must remember that palm oil is Malaysia's economic security crop," said Jaaffar in reference to the country's annual US$20 billion (RM70.2 billion) palm oil exports, which support some two million jobs and livelihoods along the value chain.
He said it would be timely for Malaysia, Indonesia and Thailand to collectively have palm oil listed as "environmental goods and services" under the Asean Trade in Goods Agreement. Malaysia assumed chairmanship of Asean on January 1.
"The broad objective of this suggestion is to get environmental branding for palm oil and eventual adoption at Regional Comprehensive Economic Partnership, Asia Pacific Economic Cooperation, Trans-Pacific Partnership Agreement and other free-trade pacts," said Jaaffar. This year, the Asean Economic Community (AEC) will be rolled out. It is created for people, goods and money to move around with little or no economic barriers.
With 600 million people, or almost nine per cent of the world population, and economic size of US$1.8 trillion, the AEC is Asia's third-largest economy.
On December 24, India raised the import duty on rude palm oil (CPO) to 7.5 per cent from 2.5 per cent. It also increased the duty on refined palm oil to 15 per cent from 10 per cent.
Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad (pic) said India's decision was not surprising. It was meant to protect the interests of its oilseed farmers and edible oil refiners.
"It also signals to Malaysia that they are not interested to buy that much CPO. It warrants that Malaysia should stop declaring duty-free CPO exports and let market forces dictate its course." Jaaffar was referring to Plantation Industries and Commodities Minister Datuk Douglas Unggah Embas' announcement on the exemption of export duty on CPO from September last year. Such an announcement confuse downstream investors as to the government's commitment in adding value to the palm oil industry.
Many people think refiners and planters are at loggerheads. This is a wrong assumption because refiners are purely concerned about the price gap, and not how low the CPO price will go.
"It is a misconception that in times of falling CPO price, refiners are happy at the expense of planters. As refiners, we are margin players. It doesn't matter if CPO prices are high or low.
"In fact, everybody, from up-stream to downstream of the palm oil value chain, wins when CPO prices are high. That is the role of the refiners in supporting the CPO price as we buy and process every drop of CPO in the country,"he added.
Since September, CPO prices had averaged structure run its course, like what Indonesia is doing. Declaring duty-free CPO exports to bring down the national stockpile level in the hope of pushing up CPO prices is not as effective as before because Malaysia is no longer the world's biggest palm oil producer. "We need to be more discerning about this 'silver bullet' because the global economic situation is very different from 10 years ago.
"Ad hoc declaration of duty-free CPO exports can backfire and trigger a price war with Indonesia, which is hurtful for all oil palm planters, whether in Malaysia or Indonesia," said Jaaffar.
In the last two years, Pakistan's purchase of palm oil from Malaysia also fell significantly. The country consumes about 3.2 million tonnes of edible oils annually and meets more than half of its demand through imports.
Jaaffar said since 2013, Pakistan's parity to palm oil shipment from Malaysia.
This means Pakistan's purchase from Indonesia and Malaysia enjoy a 15 per cent rebate on import duties of 8,000 rupees (RM280) a tonne on CPO,10,800 rupees on refined, bleached and deodorised (RBD) palm oil, 9,050 rupees on palm stearin and 9,050 rupees on RBD palm olein. "Pakistan is a price-sensitive market. Since Indonesia is able to sell RBD palm oil more competitively than RBD palm oil at the expense of Malaysian RBD palm olein," he said China, like Pakistan, also slashed its palm oil purchase from Malaysia.
In the first 11months of last year, China bought 2.58 million tonnes, a 23 per cent shortfall from the 3.34 million tonnes in the same period in 2013.
In the last five years, Jaaffar noted that China's palm oil demand had been artificially pushed as "financial products" rather than "commodity products.
Since banks in China give peculiar treatment to palm oil, viewing it as "institutional instruments," palm cooking oil and margarine demand will continue to be augmented by fiscal policy changes there.
Nevertheless, Jaaffar said the current shortfall in China's palm oil purchase is also exacerbated by subdued consumer spending.
"China is Malaysia's best cooking oil market. In view of the cautions consumer spending, we need to be more focused on market segmentation to raise the popularity and branding of our oil." Three weeks ago, Second Finance Ministers Datuk Seri Ahamd Husni Hanadzlah said Prime Minister Datuk Seri Najib Razak would form the National Export Council export chain, logistics and output.
Poram lauds NEC's formation and urged the high-powered body to make an iron-clad commitment to palm oil downstream players that "a level playing field"with rivals will be maintained for the sake of Malaysia's export competitiveness.
"The current 'flip-flop policy' in exempting CPO export duties for six months from September to February is confusing foreign and local downstream investors. The erosion of investor confidence is not healthy for our economy," said Jaaffar. He also proposed that NEC adopts advocacy and political tools in tackling the global smear campaign on palm oil so as to boost the country's exports.
"The right (and also difficult) thing to do is to tackle barriers (tariff or non-tariff) to palm oil trade.
"This strategy is healthier for all stakeholders along the palm oil value chain, whether you are a planter, a cooking oil trader or a biodiesel manufacturer. We must remember that palm oil is Malaysia's economic security crop," said Jaaffar in reference to the country's annual US$20 billion (RM70.2 billion) palm oil exports, which support some two million jobs and livelihoods along the value chain.
He said it would be timely for Malaysia, Indonesia and Thailand to collectively have palm oil listed as "environmental goods and services" under the Asean Trade in Goods Agreement. Malaysia assumed chairmanship of Asean on January 1.
"The broad objective of this suggestion is to get environmental branding for palm oil and eventual adoption at Regional Comprehensive Economic Partnership, Asia Pacific Economic Cooperation, Trans-Pacific Partnership Agreement and other free-trade pacts," said Jaaffar. This year, the Asean Economic Community (AEC) will be rolled out. It is created for people, goods and money to move around with little or no economic barriers.
With 600 million people, or almost nine per cent of the world population, and economic size of US$1.8 trillion, the AEC is Asia's third-largest economy.