May 5 2004 - THERE’S some exciting news on the horizon from the US forMalaysian palm oil producers.

US-based Kraft Foods Inc, a leading world producer of cheese, biscuits,snacks, grocery items and a variety of convenience meals, is consideringusing more palm oil in its products.

If Kraft, which has a presence in 150 countries, opts for greater use ofpalm oil, it could enable Malaysian producers to make greater inroads intothe US market where soyaoil is traditionally dominant.

Kraft has been using palm oil in small quantities, but one of itsofficials told Business Times that it is planning to increase uptake ofthe oil to reduce the level of saturated and hydrogenated fats in itsproducts.

Kraft vice-president for corporate affairs in the international businessdivision, Richard Johnson, said that any move on palm oil is part of thecompany’s plans to meet stricter US health and labelling standards by 2006aimed at reducing harmful transfatty acid content in food products.

It’s been the company’s game plan all this while to reduce transfattyacids in our products by 2005 as part of our obligation to customers. Wefind that palm oil could be a good alternative, Johnson said in a phoneinterview.

We have been using palm oil all this while in some of our confectionery asit is a good alternative in reducing transfatty acids, he said.

Johnson, however, declined to quantify the amount of palm oil that mightbe used, but said that it could be in a mixture with other edible oilssuch as soyaoil.

Some industry sources said they understood that some other US food makersare also considering greater use of palm oil in their products, includingNestle USA Inc and Unilever USA.

The US and Canada are expected to enforce stricter food labelling laws byJanuary 2006 to give consumers a clearer idea of how much some of theirfood may be harming their health.

The long-awaited law passed by the US Senate this year on therecommendation of the Food and Drug Administration will start requiringfood makers to list separately on their labels the amount of harmfultransfatty acids in their products.

Currently, the only way a consumer can find out whether a food itemcontains transfattty acids is to look at the fine print on the label andfind the words hydrogenated or partially hydrogenated oils or vegetableoil shortening and/or margarine.

Edible oils like soyaoil, canola and rapeseed oil can be used to makehydrogenated fats for use in food formulations, but Malaysian researchershave proven that palm oil is by far the safest and the cheapest.

Transfatty acids are produced when oils and fats containing unsaturatedfatty acids are hydrogenated in the presence of a catalyst. These acidsare associated with the onset of coronary heart disease and an increasedrisk and incidence of diabetes.

Hydrogenation primarily increases the melting range of the unsaturatedfats, thereby enabling their incorporation into many solid fatformulations.

Transfatty acids are present in foods containing traditional stickmargarine, bakery and frying fats, vegetable shortenings and vanaspatithat have been subjected to hydrogenation.

They have now become a universal food culture and are readily reflected inbakery products, fried foods, breakfast margarine and, to a smallerextent, dairy and meat products.

Current transfatty acid consumption in the US is estimated at 2.6-3 energyper cent while in some West Asian and South Asian population, it may be ashigh as 7 energy per cent.

Kraft is the first US food company to label palm oil as one of its inputsin a wide range of cookies, something unheard of in US given its soyaoillobby’s sensitivity to palm oil.

Meanwhile, an industry source said one reason why some US food makers arelooking at using palm oil as a base material is due to its lower pricecompared to soyaoil and because it is the next best substitute.

Crude palm oil futures are currently trading at RM1,800-RM2,000 a tonne,which are about US$150 (US$1 = RM3.80) a tonne cheaper than soyaoil.

An analyst said the Kraft plan is good news for Malaysia and offers a bigmarket potential because it has been rather difficult for palm oil topenetrate the US market, a traditional stronghold of the soyaoilproducers. This is definitely good news for palm oil prices as we movecloser towards 2006, said the source.

According to the Malaysian Palm Oil Board website, the US bought 257,849tonnes of palm oil last year.

However, an industry source said this development may result in a backlashfor the palm oil industry as the American Soybean Association could launcha campaign to limit palm oil’s presence in the US.

"The association will not be taking this piece of news lying down. I amsure it will lobby the US Government with all sorts of allegations aboutthe disadvantages of palm oil. It may rekindle the anti-palm oil campaignof the 1980s all over again,”"said the source.

An analyst said IOI Corp Bhd is set to benefit in the event a decision ismade to use more palm oil as its IOI Oleochemical Industries Bhd is inclose touch with several US food makers via its refinery Loder Croklaan.

Loder Croklaan has an established network in the US and is working closelywith several US food makers to find a trans-free solution for foodmanufacturing. This will contribute positively to the group’s earnings,said the analyst.