malaysian palm oil fortune 2014 volume 3

5/26/2018 Malaysian Palm Oil FORTUNE 2014 Volume 3

1/12

The average price of crude palm oil inMarch settled at RM2,771/MT for thebenchmark contract FCPOc3 on theBursa Malaysia Derivatives Exchange,increased by RM153/MT over theaverage price of December last year. Itwas as expected that the prices were onthe uptrend but settled slightly lower than

the earlier forecasted price atRM2,750/MT. This was published inMPOC FORTUNE (http://www.mpoc.org.my/Malaysian_Palm_Oil_Fortune.aspx)volume 12 2013. Decreased stock ofMalaysian palm oil had supported verymuch the increase of palm oil prices. Thestock of Malaysian palm oil recorded at1.93 million MT in January dropped to1.66 million MT in February, the loweststock in three years and slightlyincreased in March to 1.69 MT.

A lower production in beginning of thefirst half of the year which is a normal

trend for palm oil production in Malaysiaput another pressure to the stockavailable in the world market. Productionof Malaysian palm oil for December,January, February and March were at1.67, 1.51, 1.28 and 1.50 million MTrespectively. However, collectively thesewere 98,000 MT lower than the average

of production in 2013 at 1.60 million MT.Also observed was a rising trend ofdomestic consumption of Malaysian palmoil for the period of January, Februaryand March at 208,788, 210,960 and237,894 MT respectively. These weremuch higher compared to the sameperiod last year which recorded less than150,000 MT each month in the firstquarter 2013.

Palm oil price was at the peak in earlyMarch 2014 as shown in the Chart 1above. Tight world supply of palm oil and

the threat of long drought in major palmoil producing countries had a majorpsychologically bullish impact on theprices. The drought and heat hadprevailed in 6 to 8 weeks in the first half ofthe year in many palm oil growing areasof both biggest producers of palm oilMalaysia and Indonesia.

The conflict on the Crimea betweenRussian and Ukrainian also had someimpact on the supply of rapeseed andsunflower seeds / oils as farmers reducedtheir sales activity in reaction to thesignificant currency devaluations in bothUkraine and Russia and trading houses

MPOCFORTUNE

MALAYSIAN PALM OIL COUNCIL KKDN PP 14669/05/2013 (032704) VOL: 3 2014

DIRECTOR

Faudzy Asrafudeen Sayed Mohamed

[email protected]

Muhammad Kharibi Zainal Ariffin [email protected]

Mohd Izham Hassan [email protected]

MARKET ANALYSTS

Asia Pacific Lim Teck Chaii (China) [email protected]

Asia Pacific Mohd Hafezh Bin Abdul Rahman (Excl. China) [email protected]

South Asia Fatimah Zaharah Md Nan [email protected]

Middle-East Mohamad Suhaili Hambali [email protected]

Africa Nor Iskahar Nordin [email protected]

Europe Azriyah Azian [email protected]

Americas Mohd Izham Hassan [email protected]

MARKETING & MARKETDEVELOPMENT DIVISION

For more information, please contactTel : 603 - 7806 4097 Fax: 603 - 7806 2272

Continued on page 7

Chart 1: Daily FCPO price movement 3800

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Resistance Level at RM2,901

Support Level at RM2,493

2nd Quarter CPO priceforecast Current dropin CPO price revivedthe Biodiesel sector inMalaysia and Indonesia


2/12


3/12

MPOCFORTUNE 3

MARKETInsights

CHANGE IS the only constant, saidHeraclitus. The evolution of life andlifestyles can be clearly observedthroughout the history of the world.Pakistan is no different and the lifestylesof people of the country have seen majorchanges since its inception more than 65years ago. With increasing globalisationand the shrinking of the world, thePakistani lifestyle has changed rapidly.

The last decade has especiallytransformed the Pakistani consumerlifestyle. This can be attributed to anumber of reasons, including amovement of the population from rural tourban areas, increasing industrialisation,

an increase in per capita income and therapid increase in technology andcommunications, to name a few.Wide-reaching changes have resulted,which include variations in familystructures, fashion, recreation and food.With an increase in disposable income,there has been a shift in consumertastesin traditional eating behaviours.

Now, an increasing number of Pakistaniconsumers dine out regularly and want toeat foods different from the traditionalPakistani dishes. This changing eating

habit of the Pakistani consumer is evidentas can be clearly seen from themushrooming of international foodchains, cafes and international cuisinerestaurants across the country. Thepopularity of these restaurant chains isalso due to the fact that many of these

cater to people in the middle and lowerincome classes, who make up themajority of the population.

The fastfood industry in Pakistan, whichcommenced in 1997 with launch ofMcDonalds, has grown extensively overthe past 17 years. This industry hasregistered a growth of 15% in the first 10years and then continued to grow at anaverage rate of 7%.Leading internationalfood chains suchas McDonalds, PizzaHut, Dominos, Hardees, KFC, Nandos,

Papa Johns and Subway are immenselypopular. Despite difficult economic,security and political conditions, newinternational food chains such as BurgerKing, Fatburger and Johnny Rocketshave opened outlets in Pakistan which

shows the potential of this market. Newlyestablished food chains such asYogenFruz and TuttiFrutti Frozen Yogurthave also entered the Pakistani snackand fast food market.

Continued on page 9

45,000

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020102010 2011 2012 2013

Chart1: Imports Trend of Palm-based Specialty Fats

Source: MPOB Data

Margarine

Tonnes

H Palm Oil Shortening Palm Kernel Oil Cooking Oil

Palm oil in PakistanHas very promisingpotential for wider use


4/12

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5/12

MPOCFORTUNE 5

Continued on page 10

European policies on biofuels andtheir implications on palm-oil basedbiodieselThe EUs regulatory framework affectingbiofuels is to be framed within the EUsstrategy to tackle climate change, whichhas required, and is leading to, theadoption of (inter alia)a classification ofbiofuels based on their productionmethods or carbon footprints. Directive

98/70/EC of the European Parliamentand of the Council of 13 October 1998relating to the quality of petrol and dieselfuels and amending Council Directive93/12/EEC(hereinafter, the Fuel QualityDirective) provides, in relevant part, aframework for EU Member States toreduce by 6% the greenhouse gasintensity of transportation fuels by 2020.

In addition, Directive 2009/28/EC of theEuropean Parliament and of the Councilof 23 April 2009 on the promotion of theuse of energy from renewable sources

and amending and subsequentlyrepealing Directives 2001/77/EC and2003/30/EC(hereinafter, the RenewableEnergy Directive) establishes a commonframework for the promotion of energyfrom renewable sources in the EU by

setting mandatory national overalltargets and measures to promote the useof energy from renewable sources, inorder to reduce emissions and to achievethe EUs climate change and energypolicy objectives. In relevant part, theRenewable Energy Directive establishesthat 10% of the energy used for transportin the EU should originate fromrenewable sources by 2020.

While promoting the use of energy fromrenewable sources, such as biofuels, asa tool to combat climate change, the FuelQuality Directive and the RenewableEnergy Directive cater for sustainabilitycriteria that apply to biofuels, which havea clear impact on international trade insuch products, including on palmoil-based biodiesel. The sustainabilitycriteria are directed at avoiding that anincrease in demand for such energysources, as well as the incentivesprovided for their use, lead to the

destruction of biodiversity or result inother counterproductive effects for theenvironment. They are based on twodrivers: (i) biofuels must reach agreenhouse gas emissions savingthreshold of at least 35% with respect to

the greenhouse gas emissions thatwould have resulted from using fossilfuels (as of 2017, this target will increaseto 50% for existing installations and 60%for new installations); and (ii) the landused to produce biofuels must havecertain characteristics (i.e., not have highbiodiversity value nor high carbon stock).

Biofuels that do not meet the

sustainability requirements are stillallowed in the EU market, but are noteligible for achieving compliance withrenewable energy national targets set byEU legislation and are not entitled tofinancial support. This has a clear impacton the importation in, and marketingwithin, the EU of biofuels that are definedas unsustainable, operating as a barrierto trade (de facto if not de jure) andresulting in trade discrimination, inpossible violation of WTO rules.

The actual implementation of thesustainability criteria may have clear

discriminatory effects, inasmuch ascompliance therewith may, in certaininstances, be particularly burdensomefor certain types of biofuels (i.e., those

MARKETInsights

European Policies & LegislationImpacting Food Labelling and Biodiesel:

Current & Post 2014 Part 2 of 2


6/12


7/12

MPOCFORTUNE 7

reported as being hesitant in concludingnew grain export contracts.

Crude palm oil price at Rotterdam usuallytrades at a discount of USD50 to USD100a tonne to soybean oil, but in thebeginning of the second week of March,the prices of palm oil started to decline. Atthe average price of USD 968 for crudepalm oil, the premium of soybean oil over

crude palm oil in Rotterdam hadnarrowed to only USD 41.12 USD andconsumers in Europe started to react. InEurope, palm oil has lost itscompetitiveness in the energy marketoutside the mandates, primarily forelectricity production. Food consumershave partly switched to sun oil and soyaoil. In North Africa, as well as in Turkeyand Russia, sunflower oil had thegreatest price advantage. Indianimporters had considerably increasedpurchases of sun oil at the expense ofpalm oil.

2nd Quarter 2014 Price Trend

Toward the second quarter of the year,there will be always a situation in themarket where there will be a severelydepleted soybean supplies for US cropsand ampleness of supply situation forSouth America crops. For the US,beginning of second quarter, USDAestimates there would a severeslowdown of US soybean exports andexpected a steep increase of imports inthe next few months for US market.USDA also lowered the 2013/14 US

soybean ending stocks to a 10-year lowof 135 million bu.

Soybean stocks in South America mayturn out somewhat larger this season andwill then possibly have to compete with arecord US crop if weather cooperates. At

the same time, larger stocks accumulatedin China and other importing countries inrecent months would potentially hinderhigh exports from both South Americaand US for the period of April-September

2014. These scenarios represent for aconsiderable downward potential ofsoybean prices toward the end of secondquarter but this could not happen as thebullish factors of palm oil during thisperiod would bring soybean and soybeanoil price upward.

In the second quarter of 2014, the pricepremium of soybean oil over palm oil isexpected maintain its gap at around USD40-50 per tonne for Rotterdam price.

Prices of both oils are expected toincrease toward the end of secondquarter mainly supported by the lowerproduction palm oil toward the end of thisyear and increase usage of palm basedbiodiesel in Malaysia and Indonesia. Theincrease of palm oil price would be

normally followed by the increase ofsoybean oil and other vegetable oils inglobal market.

The severe dry spell affecting major palmoil producing areas of Malaysia,

Indonesia and Thailand in February andMarch has abated but was still insufficientto replenish soil moisture to adequatelevels. The palm trees have not yet fullyrecovered and still show spears in thedrought-affected regions, a clear sign ofmoisture deficits. The impacts from thedry weather would not likely be seen untilOctober through December, but couldlast as much as two years. With 5%reduction in production due to this dry

weather could equate to 2.7 milliontonnes in losses which could impact themarket significantly.

The setback of palm oil prices sinceMarch may have largely given way to

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SBO premium over CPO (right) CPO Rott (Left) SBO Rott (right)

2014

Chart 2: CPO vs SBO at Rotterdam Price (USD)

MARKETInsights

Continued from page 1


2nd Quarter CPO priceforecast Current dropin CPO price revivedthe Biodiesel sector inMalaysia and Indonesia


8/12


9/12

MPOCFORTUNE 9

Chart 2: 10 Year Edible Oil Import Analysis

Source: Shipping Agents Vessel Reports

Tonnes

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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0

The trend of snack foods and fast food israpidly increasing and will continue togrow. The developing fast food andsnack food market means moreopportunity for the usage of palm oil andits fractions. With palm oil being thepreferred choice in the confectionery,baking and frying industries, this presentsa promising opportunity for the furthergrowth of the palm oil market in Pakistan.

Before the advent of the fast foodindustry, palm oil was mainly used formaking vanaspati, which is thepredominant cooking medium inPakistan. Over the last decade, palm oilusage in Pakistan has expanded tovarious industries and a wide range ofpalm oil fractions are being imported inthe country. The fast food and snack foodindustries are among the biggestconsumers of palm olein, which is beingused by most of the industry leaders for

frying purposes. This trend is also filteringdown to smaller manufacturers, both inthe organised and unorganised sectors.

Palm olein is imported directly fromMalaysia by some international chainsand at the same time, palm olein-basedspecialised frying oil is also beingproduced by the local industry. Two

brands of super olein in commercialpackaging arealso available in themarket. Other positive indications are theinstallation of fractionation units in thecountry and the increasing trend of palmolein blending in soft oils, especially inthe summer.

The increased usage of palm oil in

commercial frying and various foodapplications has also resulted in anincrease in the imports of palm finishedproducts and specialty fats. The importsof packed cooking oil, margarine andpalm kernel oil and its fractions areamong the fast growing items that arebecoming an integral part of foodindustries in Pakistan.

At the end of 2013, the imports of palm oiland its fractions registered an increase ofapproximately 16% as compared withimports in 2012 and stood at 2,327,938

metric tonnes (MT). From the 10-yearimport analysis, it can be seen that theimports have been growing steadily at anaverage of 5.8%. This consistentincreases in the imports are attributed tofactors such as the increased usage ofpalm oil in food applications, growth inpopulation and stagnant indigenousoilseed production.

Indigenous oilseed has shown adeclining trend in Pakistan and the gapbetween total consumption andavailability has been growing. This gaphas made Pakistan a net importer of oilsand fats and this situation is not likely tochange in the foreseeable future. Thesteady increase in the imports of oils andfats is a clear indication that Pakistan willcontinue to remain a lucrative destinationfor countriesexporting edible oils.

The evolution of the consumer lifestyle inPakistan has resulted in a number ofareas of potential expansion for the palmoil market. These include the areas ofconfectionery, frozen food, ice-creamand chocolate, soaps and oleochemicals,paints, pharmaceuticals, dairy andcreamers and animal feed. Palm oilconsumption will increase, in the foodindustry especially, and will be an area ofopportunity and focus. While the

traditional ghee and oils remain, the useof specialised oils and fats will increasenow, where palm oil can play a big role.

With a population of 180 million and apopulation growth rate of 2% a year,Pakistan will always remain a netimporter of oils and fats. Coupled with theincreasing consumer awareness andexposure to education, the Internet andsocial media, the versatility of palm oiland its uses will continue to come to theforefront. Pakistan is an agrarian countrywhere agriculture contributes 21% to the

GDP, employs 45% of the labor forceand, along with raw & processedagricultural supplies, generates 65% ofthe total export earnings. TheInternational Monetary Fund said thatPakistan has met nearly all of itsquantitative performance markers, thatits economy is showing signs ofimprovement and that its reform programremains broadly on track.

Palm oil is the most suitable edible oil forPakistani manufacturers and consumersand there is a strong Malaysian

presence, with joint ventures in thecountry as well. Additionally, with itslogistic advantage over competition fromsoft oils, the multi-purpose palm oil cancontinue to make inroads into thePakistani market. Faisal Iqbal, MPOCPakistan

MARKETInsights


Palm oil in PakistanHas very promising potential for wider use


10/12

10 MPOCFORTUNE

European Policies &

Legislation ImpactingFood Labelling and

Biodiesel: Current &

Post 2014

attributed default values that are lower

than the 35% required greenhouse gas

saving threshold, like palm oil-based

biodiesel or soybean biodiesel) or for

certain exporters (those that are notcertified under a scheme recognised by

the EU), as shown by the WTO dispute

triggered by Argentina against the EU

before the WTO.

Similar considerations also apply to the

EUs proposed amendment to the Fuel

Quality Directive and the Renewable

Energy Directive (the so-called ILUCproposal), which is aimed at addressingthe emissions arising from the impact of

indirect land use change (ILUC) on

greenhouse gas emissions (i.e., those

created as a result of increased land

demand for the production of biofuels,where such land could have been used

for food, feed or fibre production). This

proposed amendment would operate a

further classification of biofuels into firstgeneration biofuels and advancedbiofuels, with the latter set to receive amore favourable treatment in the EU

market.

In addition, if approved, it would attribute

distinctive ILUC emission factors tobiofuels, depending on whether they

originate from: (i) food crops, and, in

such latter instance, whether they havebeen produced from cereals and other

starch rich crops, sugar crops, or oil

crops. According to the proposed

amendment, these ILUC emission

factors will be relevant for monitoring

purposes only, but will most likely be

factored into the calculation of the overall

environmental impact of biofuels oncethe EU framework will be revised (i.e., in

2020). Once more, palm oil-based

biofuel, which is attributed, together with

other vegetable oils, the highest ILUC

emission factor, stands to be particularly

affected by this proposed framework. See dispute European Union and Certain

Member States Certain Measures on the

Importation and Marketing of Biodiesel and

Measures Supporting the Biodiesel

Industry, WT/DS459.

Within such troubling regulatory context,

EU biofuel producers have also taken

initiatives of their own to drive palm

oil-based (and other) biofuels out of the

EU market. In particular, a number oftrade defence proceedings were

triggered against imports of biofuels from

a number of different countries, such as

the United States, Argentina and

Indonesia. These actions have recently

led (inter alia) to the adoption ofprovisional anti-dumping duties on

imports of palm oil-based biodiesel and

soybean biodiesel into the EU, and

pose an additional challenge for the sale

of palm oil products into the EU.

Conclusions

The regulatory and commercial threats

currently faced by palm oil concern bothits food and biofuel applications. With

respect to its food application, the illegal

and deceptive palm oil freecampaignsare being perpetrated in suspicious

synchrony with regulatory changestaking place in the EU and in other

European countries, which will require

the indication of the vegetable origin of

oils on food products labels. With

respect to the biofuel application of palm

oil, blanket regulation and legislation has

been adopted or is being drafted, based

on environmental objectives. These

legislative initiatives harbour worryingdevelopments and, in synchrony, thereis a proliferation of private initiatives

intended to keep palm-oil based biofuels

outside of the EU market.

There is a clear link between the

regulatory developments taking place, or

adopted, at the EU and/or EU Member

States level and the actions undertaken

by private operators: if the position of the

regulator is not challenged, it will de factoresult ingovernmental confirmationthatthe allegations being brought by privates

through their deceptive and illegalcampaigns are based on true facts.

This is why the Malaysian Palm Oil

Council has decided to take action and

lodged administrative complaints before

competent the French administration

(both centrally and at regional level), in

relation to the many instances of

misleading claims described above. In

parallel, judicial action before the

competent French Tribunal duCommerce has been taken against a

well-known French retailer for its

deceptive and illegal nutrition claims.

These actions, if accompanied by

positive decisions of the administrative

and/or judicial authorities, will provide the

substantive bases through which the

infringers can be forced to halt their

misleading and illegal campaigns and to

for palm oil to regain consumers trust.

These challenges need to be coupled to

a set of concerted and syncronised trade

and diplomatic actions, which have to be

taken in parallel as part of an overallstrategy to act against the misleading

allegations being brought against palm

oil. These actions must focus on a

number of bilateral and multilateral

instruments. Bilaterally (i.e., both

vis--vis the EU and individual EUMember States), the many palm oil

producing countries around the world

should turn the issue from one of mere

technical, consumer protection and

labelling nature to one of trade

relevance.

Provisional anti-dumping duties are set toexpire on 28 November 2013, when definitive

measure will reportedly be imposed.

Bilaterally, the EU is engaging many

such countries in the negotiation of

preferential trade agreements (i.e.,

FTAs, EPAs, CEPAs, etc.). These foramust also address palm oil, both in terms

of the EU rules on environmental

protection and sustainability (under the

EUs Renewable Energy Directive and

the Fuel Quality Directive) and in light of

the applicable EU and EU Member

States rules on food safety, food quality,

nutrition and health labelling, and on theprevention of deceptive practices. It is

true that this realm belongs to the private

world and that private standards largely

escape international trade rules at

MARKETInsights




11/12

MPOCFORTUNE 11

CPO Brent Oil SBO

Chart 3: CPO vs SBO vs Brent Oil Prices1,600

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a renewed uptrend in the second quarter.Looking at the Chart 3, the reducing priceof palm oil would narrowing the gap ofprice differences between Brent oil / CPOand recent price weakness revived thefeasibility of the biodiesel programmes inIndonesia and Malaysia. Both

programmes already had a clear-cuteffect on the world market in recentmonths with exports declining and palmoil stocks in Malaysia remaining fairly lowdespite a large production increase inMarch.

In March 2014, the B5 admixturemandate was implemented in PeninsulaMalaysia, whereas in 2013 it had beenimplemented only in the central andsouthern regions of the Peninsula. TheB5 is a blending of 5 percent palm methylester with 95 percent of fossil diesel, willbe extended nationwide by July this year.Implementation of the policy is expectedto boost domestic consumption by anadditional 500,000 tonnes annually. Ithas been announced that anotherincrease in mandatory biodieseladmixture for transport fuel to 7% (B7)will come into force in early 2015. Thiswould increase further the usage of palmmethyl ester for biodiesel by another

700,000 tonnes annually. Higherdomestic consumption in majorproducing countries because ofgovernment biofuel mandates alsoleaves fewer supplies available to export.

Hence, based on the trend, there areseveral bullish factors to support palm oil

prices toward the end of second quarterand the price is expected to increase

which is likely to be more thanRM2,800/MT for the average price inJune. Global palm oil imports will pick upin the second quarter as demandincreases before Ramadan. There arealso positive signs that CPO prices wouldto increase further in third quarter as

demand picks up especially in the festivemonths of July during the Eid Fitricelebrations in July.

Oil World reports that purchases willclimb to about 10.5 million metric tons inthe April-to-June quarter from 9.6 milliontons in the first quarter, with more exports

expected from Indonesia and Malaysia,said in a report. Importers will need toreplenish stockpiles of vegetable oilsmade from soybeans, sunflower andpalm in the next six months, and demandfor cooking oils usually climbs before theMuslim fasting month of Ramadan, whencommunal meals increase.

Other soft oils situation also needs to bemonitored especially on the export ofsoybean and soybean oil development inthe market. The drop in Brent oil pricescould also bring the palm oil pricesdownward. But this would not be thescenario as Brent oil prices wererelatively stable for the whole year 2013and 2014, unless there is someunexpected political or economical arise. Mohd. Suhaili, MPOC HQ

MARKETInsights


2nd Quarter CPO price forecast Current dropin CPO price revived the Biodiesel sector inMalaysia and Indonesia


12/12

MPOCOffices

WorldwideMalaysian Palm Oil Council (MPOC)2nd Floor Wisma SawitLot 6, SS 6, Jalan Perbandaran47301 Kelana Jaya, SelangorTel: 603-7806 4097Fax: 603-7806 2272www.mpoc.org.my

American Palm Oil Council1010 Wisconsin Av, Suite 307Washington DC 20007Tel: +1 (202) 333 0661Fax: +1 (202) 333 0331www.americanpalmoil.comE-mail: [email protected]: Mohd Salleh Kassim

MPOC Africa Regional Office5 Nollsworth Crescent, Nollsworth ParkLa Lucia Ridge Office Estate,La Lucia 4051, KwaZulu-Natal, South AfricaTel: +27 (31) 5666 171Fax: +27 (31) 5666 170E-mail: [email protected] Address:P.O.Box 1591M.E.C.C. 4301, South AfricaContact: Kamal Azmi

MPOC Bangladesh62-63 Motijheel Commercial Area,7th Floor, Amin Court Building,Dhaka, BangladeshTel: +88 (02) 9571 216Fax: +88 (02) 9551 836E-mail: [email protected]: Fakhrul Alam

MPOC ShanghaiShanghai Westgate Mall Co. Ltd.Room 1610B, 1038 Nanjing Rd. (w)

Shanghai 200041, P. R. ChinaTel: +86 (21) 6218 2085 / 6218 2513Fax: +86 (21) 6218 1125E-mail: [email protected]: Teah Yau Kun

MPOC Pakistan11 3rd Floor, Leeds CentreMain Boulevard Gulberg, 111 Lahore, PakistanTel: +92 (42) 3571 6600 / 3571 6601Fax: +92 (42) 3571 6602E-mail: [email protected]: Faisal Iqbal

MPOC IndiaS-4, New Mahavir Building, Cumballa Hill RoadKemps Corner, Mumbai 400 036Tel: +91 (22) 6655 0755 / 6655 0756Fax: +91 (22) 6655 0757E-mail: [email protected]: Bhavna Shah

MPOC Europe Regional Office31 Avenue Emile Vendervelde1200 Brussels BelgiumTel: +32 (2) 7748 860Fax: +32 (2) 7794 371E-mail: [email protected]: Uthaya Kumar

MPOC MoscowMoscow, 4th Dobrininskiy side-street,8 BC 'Dobrinya', 1st floor, Office R00-126Tel : +790 963 520 40Email: [email protected]: Aleksey Udovenko

MPOC Cairo3 Gamal E1-Din Afify Street, Nasir CityZone No.6, 11371 Cairo, EgyptTel: +20 (2) 2273 8108Fax +20 (2) 2273 8106E-mail: [email protected]

Contact: Zainuddin Hassan

MPOC IstanbulGuzel Konutlar SitesiDilek Apartment Daire 3Balmumcu, Besiktas - Istanbul, TurkeyTel: +90 (212) 2668234Fax +90 (212) 2668236E-mail: [email protected]: Norhaznita HusinPublisher: Malaysian Palm Oil Council (MPOC)

2nd Floor Wisma Sawit, Lot 6, SS 6,Jalan Perbandaran, 47301 Kelana Jaya, Selangor

Printed by: Aktiara Corporation Sdn Bhd 1 & 3, Jalan TPP 1/3, Taman Industri Puchong Batu 12, 47160 Puchong, Selangor

multilateral (WTO), regional (EU-ASEAN,EU-ACP, etc.) and/or bilateral level. However,the argument can be made that, if the EU andpalm oils producing countries were to defineand agree to a set of mutually-recognisedstandards and conformity assessmentprocedures that could certify palm oilsenvironmental sustainability (in general orlimited to the production destined for food

applications), this would already greatlydiminish the appeal and effectiveness of thehighly-damaging palm oil freecampaigns inEU producers and consumers minds.

Trade facilitation mechanisms and dedicatedchapters could be engineered within theframework of the relevant preferential tradeagreements with the EU to the sole benefit ofpalm oil trade. Multilaterally, this issue couldbe systematically taken up in all relevant fora(i.e., the TBT Committee, the Council forTrade in Goods, etc.), as many othercountries are doing with respect to the

increasingly contentious issue of the use ofprivate standards and their effects on trade,as well as with respect to the EUssustainability requirements. If need be, theWTO dispute settlement mechanism may alsobe resorted to and third Governments (de

facto if not de jure) discriminatory and illegalpractices should be challenged.

Market access can only be preserved if acomprehensive, effective and well-definedstrategy is adopted and implemented by thepalm oil industry. There is no silver bullet.The EU market is still an attractive andlucrative one, but it is also highly sophisticatedand regulated by complex, costly and

resource-intensive mechanisms. As theMPOC continues its battle to defend the goodname of palm oil in Europe and around theworld, this strategy must attract the supportand pro-active engagement of the naturalalliesof palm oil: the Governments of palmoil-producing and -exporting countries, palmoils EU importers, processors and customers,and the many other industries that have asystemic interest at stake and that should beworried by the regulatory and marketdevelopments that are taking place againstpalm oil and that represent dangerousprecedents. Kumar, MPOC Europe

This article is based on presentation made byMs. Eugenia Costanza Laurenza, Associate,FratiniVergano European Lawyers,Brussels, Belgium at the European Palm oilConference held in Paris, France, recently.

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European Policies & Legislation Impacting

Food Labelling and Biodiesel: Current &

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malaysian palm oil fortune 2014 volume 3

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