OFI July/August 2021

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OILS & FATS INTERNATIONAL JULY/AUG 2021 ▪ VOL 37 NO 6

OILSEEDS

Castor on the rise

AFRICA

Palm oil opportunities

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Science behind Technology

CONTENTS

OILS & FATS INTERNATIONAL

IN THIS ISSUE – JULY/AUGUST 2021 Sub-Saharan Africa

FEATURES

NEWS & EVENTS

Photo: Adobe Stock

Oilseeds

20

A new approach to dehulling

Comment

Rapeseed dehulling using screw pressing can raise oil yield and reduce the amount of anti-nutritional substances in the resulting seed cake

2

Photo: Adobe Stock

25

22

Castor on the rise

The castor oil market is forecast to expand against a backdrop of increased demand from the pharmaceutical and cosmetic sectors

Palm oil opportunities The Sub-Saharan Africa region has a population of more than one billion people and while it produces around 3M tonnes/year of palm oil, the area relies on imports to meet its edible oil demand

Navigating the storm

News

4

FSC cuts ties with Korean palm oil operator Korindo

Biofuel News

8

EU’s ‘Fit for 55’ package targets emissions in bloc

Transport News

10

Port agency takes control of Paraná River network

Renewable News

12

Strong oleochemicals demand forecast

Biotech News

14

Bayer and BASF face new lawsuits

Diary of Events

15

International events listing

International Market Review

16

Adjustment of market?

Statistics

32

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Contents July.Aug.indd 1

World statistical data

OFI – JULY/AUGUST 2021

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EDITOR'S COMMENT

OILS & FATS INTERNATIONAL

VOL 37 NO 6 JULY/ AUGUST 2021

EDITORIAL: Editor: Serena Lim serenalim@quartzltd.com +44 (0)1737 855066 Assistant Editor: Gill Langham gilllangham@quartzltd.com +44 (0)1737 855157 SALES: Sales Manager: Mark Winthrop-Wallace markww@quartzltd.com +44 (0)1737 855114 Sales Consultant: Anita Revis anitarevis@quartzltd.com +44 (0)1737 855068 PRODUCTION: Production Editor: Carol Baird carolbaird@quartzltd.com CORPORATE: Managing Director: Tony Crinion tonycrinion@quartzltd.com +44 (0)1737 855164 SUBSCRIPTIONS: Elizabeth Barford subscriptions@quartzltd.com +44 (0)1737 855028 Subscriptions, Quartz House, 20 Clarendon Road, Redhill, Surrey RH1 1QX, UK © 2021, Quartz Business Media ISSN 0267-8853 WWW.OFIMAGAZINE.COM

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Comment July.Aug.indd 1

Navigating the storm Global shipping has experienced an unseen level of turmoil in the past year and further disruptions, as well as high freight prices, are still expected.

More than 80% of global trade is moved by sea and producers and processors have almost taken it for granted that feedstocks will arrive from across the globe, and that they can deliver their product on time to customers in other parts of the world.

Then came COVID, with China locking down hard in February/ March last year, shutting down ports and stranding containers, Martin Herrington of IP Specialities told the recent 13th ICIS World Oleochemicals Conference (see Renewable News, p12). Since then, port capacities around the world have shrunk, due to COVID restrictions and sick or quarantining staff unable to work. Congested ports have meant vessels waiting to unload and unable to take on their next cargo, leading to a shortage of containers and ships. Winter storms in the USA, the Suez Canal blockage in March and bottlenecks at gateways in southern California and China’s Yantian port have also tied up ships and containers.

The results have been stark. A year before the COVID crisis, the cost to move a container from East Asia to the US West Coast was fairly stable at US$1,500, Herrington said.

As of 1 July, the average price to ship a container was US$8,399, Wall Street Journal (WSJ) reported Drewry Shipping Consultants as saying. Prices to ship from China to Europe and the US West Coast are closer to US$12,000 a container and some companies say they are being charged US$20,000 for last-minute agreements, the WSJ says.

“Everyone is spending much longer on round trips,” Philip Damas at Drewry said in the WSJ report. “Containers are waiting at ports for much longer. Productivity in container shipping is deteriorating. Every failure is effectively creating ripple effects. It’s a vicious cycle.”

It is worth remembering that vegetable oils are mostly shipped in bulk vessels and are less affected by disruptions in the container trade. However, dry bulk rates have also hit new highs, surpassing US$30,000/day for the smaller Panamax and Supramax vessels in which oilseeds are commonly transported (see Transport News, p10). These record rates have been spurred by strong soyabean exports from both the USA and Brazil to China, as well as grain exports out of the Black Sea. The disruptions are a reminder that most players in the oils and fats industry have long supply chains with the potential for many things to go wrong, and that logistics are equally important as raw materials.

Many operators are now looking for increased buffers and stocks, evolving from a ‘justin-time’ to ‘just-in-case’ approach, the ICIS conference heard. Technology has also been the focus of companies such as Cargometrics and AXSMarine, which use software, data and digitilisation to analyse and streamline freight management. Existing agribusiness players such as the ‘ABCD’ giants – ADM, Bunge, Cargill and Louis Dreyfus Company – already announced plans back in October 2018 to work together to standardise and digitise global agricultural shipping transactions.

In the meantime, Herrington advises companies to identify risk points in their supply chain and diversify sourcing. That means asking questions like whether different suppliers are actually in the same area and therefore subject to the same weather disruptions. And whether safety stock is in your tank or with your supplier. Good relationships are also key.

“In reality, our supply chain relies on thousands of people – farmers, factory workers, truck drivers, sailors, retail workers and warehouse staff – showing up to work. Without them, nothing happens,” he says.

Serena Lim serenalim@quartzltd.com www.ofimagazine.com

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NEWS IN BRIEF INDONESIA: The government has lowered its top crude palm oil (CPO) export levy rate by US$80/tonne, – to be applied when palm oil prices reached above a US$1,000/tonne , AgriCensus reported on 20 June.

Export duties would be US$50/tonne when palm oil prices reached a minimum of US$750/tonne. For every US$50/tonne increase in price, the duty would rise

by US$50/tonne for palm oil and US$16/tonne for products – up to the ceiling rate of US$175 when CPO reached above US$1,000/ tonne, the report said.

Indonesian CPO prices had decreased to US$1,045/ tonne in mid-June, an 18% fall since their peak in early May, Palm Oil Analytics said.

FSC cuts ties with Korean palm oil operator Korindo The Forest Stewardship Council (FCS) announced on 14 July that it was ending its association with Korean timber and palm oil operator Korindo.

“Korindo was required to fulfil several conditions set by FSC to address inadequate past performance in their [Indonesia] palm oil business, and to determine that no further improper activities were taking place,” FCS said. However, FSC and Korindo were not able to agree on the procedure to independently verify progress.

The NGO said its relationship had "become untenable" and Korindo's trademark licences with FSC would be terminated from October.

The case began in 2017 when environmental campaign group Mighty Earth filed a complaint to FSC, alleging Korindo’s involvement in deforestation, human rights abuses and destruction of high conservation values in forests converted into oil palm plantations in Papua and North Maluku.

FSC said its investigations confirmed that Korindo had converted forests to establish oil palm

plantations, damaging high conservation value forests; and that Korindo had not met its standards for free, prior and informed consent.

In 2019, FSC set out six conditions for Korindo including a ban on land clearing and any activities in high conservation value areas. However, the disagreement on independent verification had led the organisation to cut its legal ties with Korindo.

Korindo chief sustainability officer Kwangyul Peck said in a statement on 15 July that the company had been in the process of working towards unconditional association with FSC. "We are confident to reactivate the process as soon as possible, making this a temporary situation only.”

Korindo’s website said the group had 20,662ha of palm oil concessions in Papua and 8,444ha in North Maluku, totalling just under 30,000ha, of which 9,149ha planted. The firm has operations in plantations (timber, palm oil and rubber); paper and forest products; construction and heavy industry; logistics; real estate; and financial services.

A number of lawsuits have been filed in the USA alleging that fish oil products do not contain fish oil, law platform JD Supra reported on 9 June.

Filed in California federal courts, the lawsuits targeted well-known dietary supplement products, alleging that the transesterification process used to create fish oil supplements left the finished products without any of the omega-3 fatty acids DHA or EPA, JD Supra wrote.

The plaintiffs also alleged that the resulting omega-3

Photo: Pixabay

US lawsuits target fish oil supplement producers

US lawsuits are alleging that fish oil supplements do not contain fish oil

molecules in the finished product were different to the

omega-3 molecules naturally found in fish oil.

“Once transesterified, fish oil is irrevocably transformed, such that it is no longer fish oil and therefore cannot be so named or labelled,” the lawsuits alleged. For this reason, the plaintiffs claimed that these products misled the public with false and deceptive labelling that was in violation of federal and state laws.

The lawsuits were still in their early stages but the potential impact was substantial, with fish oil supplements representing a large consumer market, JD Supra said.

Indonesian company commits to forest remediation plan A palm oil plantation owned by PT Agrinusa Persada Mulia is planning to restore forest in Indonesia as part of a remediation plan, Eco Business reported on 15 June.

KPN Plantation, known as Gama Plantation until 2019, said it would remediate 38,000ha of forest in Papua and West Kalimantan, provinces that had undergone mass deforestation between 2013 and 2018, according to the report.

KPN’s chief operating officer, Hendri Saksti, was quoted as saying that the com4 OFI – JULY/AUGUST 2021

General News July.Aug NEW.indd 2

pany’s plan “reaffirmed our responsibility and commitment to remedy past mistakes”.

In KPN’s recovery plan, the company had committed to restore three times the area of forest it believed it was liable for clearing, Eco Business wrote. Remediation efforts would include peatland rewetting, reforestation, conservation and social forestry.

In 2018, a Greenpeace investigation revealed that Gama, a group of plantation firms, had cleared 21,500ha of rainforest in Papua and West Kalimantan during the

previous five years, Eco Business wrote.

A Greenpeace campaign targeted Singapore-listed Wilmar International, leading Wilmar to cut off Gama and several other palm oil suppliers in June 2018.

Gama then declared a group-wide moratorium on new land development and, after consulting with Wilmar and environmental group Aidenvironment, consolidated the 63 companies that operated on 200,000ha of plantation area into a single group. Wilmar re-instated Gama as a supplier in 2019. www.ofimagazine.com

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NEWS

Al Ghurair to buy leading Middle East crusher Al Ghurair Investment (AGI) is acquiring multi-seed crusher Edible Oil Company (EOCD) from Dubai Investment Industries (DII), World Grain reported on 29 June.

A leading crushing company in the Middle East, EOCD can crush up to 2,200 tonnes/ day of soyabeans, 1,300 tonnes/day of canola seeds and 1,000 tonnes/day of sunflowerseeds, according to the report.

The agreement was a step towards

WORLD: Global food commodity prices fell in June for the first time in 12 months, according to the benchmark United Nations Food and Agriculture Organization (FAO) Food Price Index released on 8 July.

The index tracks changes in the international prices of the most globally traded food commodities and averaged 124.6 points in June, down 2.5% from May, but still 33.9% higher compared with the same period last year. The decline in June marked the first drop in the index following 12 consecutive monthly increases, reflecting declines in the prices of vegetable oils, cereals and dairy products, the FAO said. This more than offset generally higher meat and sugar prices.

The FAO Vegetable Oil Price Index averaged 157.5 points in June, falling by 9.8% from May and marking a four-month low.

“The sizeable drop mainly reflects lower prices of palm, soyabean and sunflower oils,” the FAO said.

“After rising for 12 consecutive months, international palm oil quotations retreated in June, chiefly influenced by prospective seasonal production gains in leading producing countries and a lack of fresh import demand. Meanwhile, subdued global import demand also exerted downward pressure on soya and sunflower oil prices."

6 OFI – JULY/AUGUST 2021

General News July.Aug NEW.indd 3

cer John Iossifidis said.

DII would continue to pursue investments across strategic projects to diversify its business portfolio, the report said.

“The time was now right for EOCD to benefit from AGI’s expertise and strengths within the sector. We are optimistic this divestment will channel a new growth curve for EOCD,” DII general manager Mohammed Saeed Al Raqbani said.

Lower rapeseed crop from Canadian heatwave Canadian rapeseed crop estimates have been lowered following a record heatwave at the end of June which saw temperatures reach just below 500C and dozens of deaths.

The US Department of Agriculture (USDA) lowered its yield forecast to 22.4 decitonnes/ha and output down to 20.2M tonnes, Germany's Union for the Promotion of Oil and Protein Plants (UFOP) reported on 21 July.

Prices rose as a result, with Winnipeg canola futures reaching a record high at the equivalent of just less than €661/tonne on 13 July. An exceptional increase had already been recorded in the days before, with the largest possible gain in one trading day having been reached.

"In other words, rapeseed rose around €100/tonne in

Photo: Adobe Stock

IN BRIEF

AGI’s commitment to expanding its food and resources business in the United Arab Emirates (UAE) and wider region, World Grain wrote.

“Following a decade of success in co-operation with EOCD, now is the opportune moment for us to acquire this thriving business to augment our existing resources portfolio, as we prepare for our next phase of growth,” AGI group chief executive offi-

Temperatures reached 49.60C in western Canada at the end of June

Canada in a single week," UFOP said.

Whereas Canada's stocks from 2019/20 amounted to just over 3M tonnes, the country's storage facilities were virtually empty at 1.2M tonnes prior to the 2021 harvest.

"Even if the harvest were

to reach the estimated 20.2M tonnes, exceeding the previous year's output by 1M tonnes, total supply would slide to a level 740,000 tonnes below the previous year's figure and 1.5M tonnes below the five-year average," UFOP said.

Bursa Malaysia to launch new contract Bursa Malaysia will launch a new palm oil futures contract (FCPO) for East Malaysian palm oil producers, The Edge Markets reported on 24 May. “The [new] contract mirrors most of the FCPO specifications, with enhancements made to benefit East Malaysian palm oil players,” Bursa Malaysia Derivatives CEO Samuel Ho said.

Located in the East Malaysian island of Borneo, Sabah state and neighbouring Sarawak contribute 45% of Malaysia's crude palm oil (CPO) production, The Edge Markets wrote.

Palm oil traders in the two states have said the current contract puts them at a disadvantage as East Malaysian is typically sold at a discount to spot prices in Peninsular Malaysia, while freight costs are higher as the designated delivery points are also in the peninsula, making physical

delivery unfeasible, according to the report.

The new East Malaysian Palm Oil Futures (FEPO) contract would cater for physical deliveries in East Malaysia through three designated ports.

“With the launch of FEPO, we are also integrating Malaysian Sustainable Palm Oil (MSPO)-certified CPO from East Malaysia into the derivatives market delivery process,” Bursa Malaysia added.

Bursa Malaysia’s FCPO contract sets the global price benchmark for palm oil.

• Bursa Malaysia announced on 1 July that it would launch after-hours night trading by the fourth quarter of this year, enhancing the attractiveness of the Malaysian derivatives market to traders around the world. www.ofimagazine.com

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BIOFUEL NEWS EU: Imports of biofuel are expected to drop by a quarter this year as the bloc draws on large stocks to meet rising demand following the easing of COVID-19 restrictions, Reuters reported the European Commission (EC) as saying on 6 July.

“Due to abundant unused stocks, imports of biofuels are expected to decline in 2021 by about 25% to 3bn litres for biodiesel and 1bn litres for ethanol,” the EC said in its short-term outlook for agricultural markets.

However, imports of used cooking oil (UCO) from China and other Asian countries for producing biodiesel had increased by over 30% last year, and the share of this feedstock was expected to continue growing in 2021.

BRAZIL: The government has raised the country’s mandatory biodiesel blend rate from 10% to 12% in a bid to control fuel inflation amid high soyabean prices, Reuters reported on 13 July.

The increase was below this year’s target of 13%.

About 70% of Brazil’s biodiesel was produced from soyabean oil and prices had been rising due to strong demand and tight supply of soyabeans, Reuters wrote.

USA: The United States Department of Agriculture announced an additional US$700M COVID in aid package for biofuel producers on 15 June.

A month earlier, US President Joe Biden’s proposed 2022 budget also included financial backing for biofuels, bioenergy and sustainable aviation fuel (SAF), Ethanol Producer reported on 2 June. The budget allocated US$1bn in support over the 2022/26 period. It also included US$15.4bn in support to increase biorefinery, renewable chemical and biobased product manufacturing.

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Biofuel news July.Aug.indd 2

EU's 'Fit for 55' package targets emissions in bloc The European Commission (EC) published its ‘Fit for 55’ legislative package on 14 July, which proposes more blending of sustainable aviation fuel (SAF) and maritime fuel.

The ‘Fit for 55’ package provides clear and binding targets towards greenhouse gas (GHG) emissions reductions of 55% by 2030.

The ReFuelEU Aviation initiative would oblige fuel suppliers to blend increasing levels of SAF in jet fuel taken onboard at EU airports, including synthetic low carbon fuels, known as e-fuels.

The FuelEU Maritime Initiative would stimulate the uptake of sustainable maritime fuels and zero-emission technologies by setting a

maximum limit on the greenhouse gas content of energy used by ships calling at European ports.

Although the ‘Fit for 55’ proposals were welcomed by the European Biodiesel Board (EBB), it said the transport sector needed more sustainable, affordable and available solutions like biodiesel.

“Today’s package severely limits biodiesel’s role and fails to provide the right support and incentives to fully ramp up European transport decarbonisation efforts. Most significant is the striking absence of support for sustainable biodiesel in hard-to-decarbonise transport sectors like freight, aviation and maritime,” the EBB said.

US Supreme Court backs biofuel waivers The US Supreme Court has ruled that small refineries are eligible for hardship waivers from biofuel blending mandates without having to continuously qualify, Argus Media reported on 25 June.

Last year, the US 10th Circuit Court of Appeals said that small refineries (those that processed less than 75,000 barrels/day) must continuously receive a waiver from the Renewable Fuel Standard (RFS) to remain eligible for exemptions.

However, small refiners argued that they should be eligible for a waiver in any year that they were facing financial hardship, even if they had not sought a waiver for a number of years, Argus Media wrote.

In its ruling, the Supreme Court said: “Our analysis can be guided only by the [RFS] statute’s text – and that nowhere commands a continuity requirement,” Justice Neil Gorsuch wrote.

Biofuel groups had been concerned about

Photo: Adobe Stock

IN BRIEF

The US Supreme Court has ruled in favour of small refineries receiving waivers from biofuel blending mandates

the number of exemptions after waivers increased to 35 facilities in 2017, up from seven facilities in 2015, Argus Media said.

New Argentine law to impact soya prices A new law in Argentina which cuts the biodiesel blend mandate by 5% could push up global soyabean prices, The Rio Times reported on 20 July.

The newly-approved biofuels bill reduced the biodiesel mix in diesel fuel from 10% to 5%, and gave the Energy Secretariat the flexibility to increase the blending mandate or reduce it to as low as 3%, depending on market conditions, according to an AgriCensus report on 16 July.

“Reducing the volume of

[soya-based] biodiesel used in fuels locally will decrease consumption of soyabean oil in Argentina,” CIARA-CEC agro exporters chamber head Gustavo Idígoras was quoted as saying. “Then we will have more soyabean oil to export.

This can impact international prices, considering the large share of the international market that Argentina has.”

With the previous 10% rate, Argentina consumed about 1M tonnes/year of biodiesel for

blending. This volume could be halved with the new measure, according to Luis Zubizarreta, the president of biofuels industry chamber Carbio.

The bill stipulates that the new biodiesel regulation will be valid until the end of 2030, according to AgriCensus.

Meanwhile, the bioethanol mandate would remain at 12%, with the Energy Secretariat also able to increase or reduce that level depending on market conditions, the report said. www.ofimagazine.com

28/07/2021 09:09:03

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TRANSPORT NEWS CHINA: China plans to build 10.85M tonnes of storage capacity to increase grain stockpiling, World Grain reported on 12 July. Quoting Reuters’ citing of official media, the report said Sinograin would build 120 storage facilities in 18 provincial administrations this year.

Sinograin produces, processes, trades, stores and transports agricultural products including rice, soyabean, corn, raw sugar, soya meal and other bulk agricultural products.

The World Grain report said China had strengthened its focus on food security and had more than 650M tonnes of grain storage capacity. However, information about the state stockpile was usually difficult to obtain, according to Reuters.

ARGENTINA: Global agribusiness giant Louis Dreyfus Co (LDC) officially opened its US$2.7M expanded grains and oilseeds storage site in Campo Largo, Chaco province, World Grain reported on 7 July.

LDC said the new storage silos and rail bypass allowing the Belgrano Cargas line to enter the plant and transport agricultural products from northern Argentina to port complexes in Gran Rosario would provide more competitive logistics for the transport of soya, corn, wheat and sunflower in Argentina.

It was also aiming to double storage and loading capacity over the next four years.

Port agency takes control of Paraná River network The Argentine government has handed responsibility for the operation of the Paraná River network to the country’s general port administration agency (AGP), AgriCensus reported on 1 July.

Following a presidential decree, AGP would take control of the key waterway for a 12-month period, with potential for an extension, until a long-term international concession could be awarded next year, the report said.

AGP would also be in charge of collecting the tolls paid by bulk carriers using the waterway and use those resources to pay for private dredging work, AgriCensus said.

Belgian firm Jan de Nul and Argentina’s Emepa were still currently in charge of the concession despite their original contract expiring at the end of April, as the government had been forced

to extend the concession for three months, the report said.

Head of the Rosario Grain Exchange (BCR) Daniel Nasini told local newspaper Infobae that it was vital to guarantee the continuity of the service in the short term, especially with the current low water levels in the Paraná.

The Paraná waterway comprises 86 ports and is a key route to export agricultural commodities, such as soyabeans, from Argentina and nearby Paraguay, but it has recently been affected by severely low water levels, which had disrupted transit through the river this year.

The national government was currently working on the technical and economic details of a new concession for the river network, which could have a length of 15 years, AgriCensus wrote.

LDC and Bunge expand transport apps Agribusiness giant Louis Dreyfus Co (LDC) has teamed up with logistics platform Circular to coordinate its grain truck deliveries in Argentina, World Grain said on 17 June.

Circular’s app was already available to producers and carriers who supplied LDC’s General Lagos facility and was expected to be used at all LDC plants, ports and warehouses in Argentina over the coming months, the report said.

The app allowed drivers to schedule delivery times and interact with logistics departments at warehouses and plants.

Meanwhile, Bunge and South American tech firm Target announced on 6 May that they had launched a digitised

Photo: Adobe Stock

IN BRIEF

LDC and Bunge are using freight apps to streamline truck and plant operations in South America

truck freight hiring company in Brazil, following their launch of the Vector app last year. Vector communicates loading and unloading locations, allows freight scheduling and distributes

transport documents.

Bunge said Vector now accounted for 97% of the volume it transported by road in Brazil and the new firm would offer the app to other businesses.

Dry bulk shipping rates reach highs due to strong demand The dry bulk shipping sector posted its best first half performance in a decade with rates for Capesize, Panamex and Supramax vessels topping US$30,000/day, Freight Waves reported on 28 June.

Daily rates for Capesize ships rose to US$33,300, US$32,800 for Panamaxes and US$31,600 for Supramaxes, according to Clarksons Platou Securities.

It was rare for all three size categories to 10 OFI – JULY/AUGUST 2021

Transport news.indd 2

simultaneously top US$30,000 as they had for a two-week period, the report said.

Oilseeds are usually transported on Panamax vessels, which can carry 60,000100,000 dwt of cargo, as well as on smaller Handymax (35,000-50,000 dwt) or Supramax carriers (50,000-60,000 dwt).

Braemar ACM Shipbroking lead dry cargo analyst Nick Ristic told American Shipper that the strength of the market seemed to

be coming from the smaller ships as opposed to Capesizes (above 150,000 dwt).

“Trade on Handie and Supras has been extremely good, but for Capes, it has been fairly average. There are a lot of inefficiencies and regional imbalances as a result of COVID that are keeping these markets tight, so we expect things to cool as we get towards the end of this year and into early 2022.” www.ofimagazine.com

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2/9/212021 1:45 PM11 OFI – JULY/AUGUST

RENEWABLE NEWS

The global oleochemicals market has seen high feedstock prices, logistics hit by COVID restrictions and severe weather, with strong demand expected ahead, the 13th ICIS World Oleochemicals Conference heard on 23-24 June.

Major feedstocks for oleochemicals are palm oil, lauric oils (palm kernel oil and coconut oil), soyabean oil and tallow.

In terms of palm oil production, LMC International head of Southeast Asia Julian McGill said that while droughts in 2019 would continue to have an effect in 2021, 2022 should see high palm oil output if there were no weather shocks.

Weaker production had helped keep prices high, with world crude palm oil (CPO) prices rising from US$800 in November 2020 to as high as US$1,200 now.

Indonesian biodiesel demand has been crucial in mopping up a lot of the country’s palm oil production but the export tax used to fund the biodiesel programme has also meant much lower prices in the world’s largest palm oil producing country, according to McGill.

Export taxes had also altered processing margins by giving huge incentives to refine, changing relative prices (palm olein was now often US$60/tonne cheaper than CPO) and encouraging more processing and exports of fatty alcohol and split fatty acids, he said.

Fatty acids – In terms of the fatty acids market, prices in Europe shot up significantly between fourth quarter 2020 to second quarter 2021, with both tallow and palm oil fractions shooting up in value by €655/tonne on average, Samantha Wright, senior editor manager at ICIS said.

Palm oil-based fatty acid supply was hit by vessel delays from Asia – caused by a lack of ships and workers resulting from COVID-19 restrictions – and extreme hikes in freight costs. Demand for palm-based fatty acids also increased as a result of severe shortages in tallow fatty acid.

The US fatty acid market also saw vessel 12 OFI – JULY/AUGUST 2021

Renewable news July.Aug.indd 2

Source: IP Specialities

Figure 1: US bleachable fancy tallow prices

Source: WSJ Cash Markets

Strong oleochemicals demand forecast

Figure 2: Lauric oil prices

delays and high freight costs from Asia, and low soyabean oil supply.

“Looking forward to third quarter 2021, continued vessel delays are expected and it is unclear when this will ease and imports return to normal. As a result, palm-based fatty acid availability is expected to remain tight.”

Raw tallow production from meat processing may not increase as soon as expected despite restaurants re-opening, due to a backlog of frozen meat, Wright said.

“As biodiesel demand for raw tallow has been rising steadily and shows no signs of abating and as hydrotreated vegetable oil (HVO) gains traction in Europe, we may see snug supply become the norm for tallow-based fatty acids.”

Fatty alcohols – In terms of fatty alcohols, Lucas Hall, markets editor, ICIS, said the market would face pressure from bullish feedstocks and strong demand.

Martin Herrington, president, North America, IP Specialities, said there had been a steady and relentless increase in lauric oil prices since the second quarter of last year (see Figure, 2 above).

“To make a tonne of C12-14 alcohols, you need 1.7 tonne of PKO. That increase in price from US$700 to $1,500/tonne of PKO is even more extreme when translated into the cost of making fatty alcohol.”

Hall said HVO production was keeping feedstock demand extremely firm. Global HVO capacity was expected to nearly double in the next two years with US policies behind 85% of capacity additions globally.

North American HVO production would grow to 9.5bn litres/year in 2022 from 1.9bn litres/year in 2020.

Hall said the fatty alcohol market had also experienced a tight shipping market which was particularly pronounced in the USA because its production was located furthest from feedstock to plant.

There is only one US producer of fatty alcohols, located on the West Coast, but its feedstock has to be imported by sea,

according to Herrington. Remaining fatty alcohol demand is met by imports coming into New York and New Jersey and a few ports on the Gulf of Mexico. Also on the Gulf were several petrochemical alcohol plants located at Louisiana.

Hurricanes last summer struck the Gulf of Mexico coast, hitting synthetic alcohol plants, fatty alcohol ethoxylate production and the ports bringing in half of the USA’s fatty alcohol and oleochemicals supply.

In February, severe cold weather hit Texas, impacting the surfactants supply chain and disrupting road and rail shipping.

Hall said synthetic alcohol producers Sasol and Shell were still in force majeure following last year’s hurricanes and the country was now coming up against the Atlantic hurricane season, which could impact production.

With demand from the industrial sector and cleaning back in full swing and lagging imports, upward pressure in the third and fourth quarter this year was likely.

Glycerine – In the glycerine market, crude glycerine prices had nearly doubled from around US$300/tonne in January to US$600/tonne in June, said Helen Yan, senior editor at ICIS, adding that more than 60% of crude glycerine resulted from production of biodiesel and 30% from fatty acids.

Brazil was a major exporter of crude glycerine and the slashing of the country’s blending mandate from 30% to 10% in April meant less glycerine supply for the year.

The market would also see strong demand from the epichlorohydrin (ECH) sector, due to outages hitting production of ECH and liquid epoxy resin (LER), the main application for ECH. Outages included US Olin’s force majeure in Texas in February affecting ECH and LER output; Hexion’s LER force majeure in Netherlands in April; China’s Kukdo Chemical (Kunshan)’s LER unit closure since the end of October 2020; Inovyn’s ECH April maintenance in France; and US Olin’s second force majeure in May. www.ofimagazine.com

27/07/2021 12:55:33

RENEWABLE NEWS

Cargill partnering HELM to construct BDO facility Global agribusiness giant Cargill announced on 8 June that it was partnering with German chemicals logistics, distribution and marketing company HELM to build a US$300M commercial-scale renewable butanediol (BDO) facility.

As part of the deal, both companies would invest a combined US$300M to build the BDO facility at Cargill’s existing corn refining operation in Eddyville, Iowa. The plant would initially produce 65,000 tonnes/year of QIRA 1,4 BDO, made through the fermentation of plant-based sugars. It was due to be operational in 2024.

QIRA could be used in the manufacture of spandex and other polyester-based chemical fibres as well as biodegradable plastics, polyurethane coatings, sealants and artificial leathers, Cargill said.

Clean and ef ficient vacuum systems for refining and deodorising

More sustainable surfactants German chemical giant BASF is expanding its range of palmbased surfactants with Roundtable on Sustainable Palm Oil (RSPO) certification, offering European customers more than 150 palm-based surfactants, the company said on 30 June.

“With our expanded range of RSPO-certified surfactants, we are helping our customers meet their ambition to use certified, sustainable palm kernel oil (PKO)-based products and reduce carbon in their value chain,” BASF senior vice president, Home Care, I&I and Industrial Formulators Europe, Soeren Hildebrandt said.

BASF said it had sourced PKO exclusively from RSPO-certified sustainable sources since 2020. By 2025, it planned to extend its voluntary certified sourcing commitment to include significant intermediates based on palm oil and PKO, such as fatty alcohols and fatty acids. BASF produces palm oil-based ingredients for cosmetics, detergents and cleaning agents, and industrial applications. The firm said the majority of its palm products were based on PKO and its derivatives.

• Ice Condensation • Alkaline Closed Loop both systems with clean cooling tower

IN BRIEF INDIA: Swiss speciality chemicals company Clariant has finalised its joint venture with India Glycols (IGL) to manufacture renewable ethylene oxide (EO) derivatives, Clariant announced on 1 July. The 51-49% joint venture, originally announced in March, would operate under the name Clariant IGL Specialty Chemicals Private Limited. IGL manufactures green technology-based, speciality and performance chemicals as well as oleochemicals such as fatty acids, fatty alcohols, fatty amines, castor oil and hydrogenated castor oil ethoxylates.

EUROPE/JAPAN: Finnish renewable fuels producer Neste and leading plastics, chemicals and refining company LyondellBasell (LYB) have agreed a long-term deal to make polymers and chemicals from renewable feedstocks, Neste announced on 17 June.

LYB would process Neste RE, a feedstock made from bio-based sources such as waste and residue oils and fats, into polymers at its Wesseling plant in Germany.

Neste also announced on 20 May that it would supply Japan’s Mitsui Chemicals’ Osaka works site with its RE hydrocarbons, allowing it to produce renewable ethylene, propylene, C4 fraction and benzene, and process them into basic chemicals such as phenol, or plastics such as polyethylene and polypropylene. www.ofimagazine.com

Renewable news July.Aug.indd 3

OFI – JULY/AUGUST 2021

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27/07/2021 12:55:33

BIOTECH NEWS

Bayer and BASF face new lawsuits German chemical giants Bayer and BASF are facing new lawsuits over dicamba weedkiller, DTN reported on 4 June.

Arkansas-based honey producer Coy’s Honey Farm filed a lawsuit against Bayer in the US District Court for the Eastern District of Arkansas on 25 May, claiming dicamba drift had destroyed vegetation the farm’s bees relied upon, reducing the farm’s honey production and bee populations since 2018, according to the report.

Following this, a group of Texas wine grape growers filed a lawsuit in Jefferson County District Court in Texas on 4 June against both Bayer and BASF, alleging 57 vineyards had suffered hundreds of millions of dollars in damage to their grapes from dicamba volatilisation and drift starting in 2016, DTN wrote.

The new lawsuits came as both compa-

WORLD: US agricultural biotech company Cibus announced on 7 July that it was teaming up with Argentine soya research firm GDM to develop trait products for soyabean farmers.

Cibus said the global planted area for soyabeans now exceeded 121M ha and farmers needed crop protection traits that could help control weeds, diseases and pests, while moving towards more sustainable farming practices.

Cibus uses it own gene-editing technology, the Rapid Trait Development System, as a new breeding technique to accelerate crop trait development.

GDM tests over 1.5M soyabean plots a year and has specialised in soya, wheat and maize in the last 40 years.

Meanwhile, Argentine agriculture biotech start-up Bioheuris announced on 29 June that it had partnered with GDM to develop high yielding soyabeans.

Bioheuris also uses gene editing and has worked on corn, soyabeans, cotton, rice, sorghum and alfalfa crops.

14 OFI – JULY/AUGUST 2021

Biotech news July.Aug.indd 2

chemicals firm Monsanto (bought by Bayer for US$63bn in 2018) had released its dicamba-tolerant cropping system in 2016 and the accompanying herbicides had joined the market in 2017.

Dicamba applications on surrounding cotton fields in the High Plains had since caused major damage to the grape-producing industry, the lawsuit alleged.

In response, Bayer said it stood behind the safety and utility of its XtendiMax herbicide and there were many possible reasons why crop losses might occur including extreme winter weather conditions that could have particularly devastating effects on perennial crops like vineyards.

BASF’s e-mailed statement to DTN also suggested that weather and other factors had been more to blame for the Texas grape growers’ losses.

Calyxt technology to create seedless hemp US biotech company Calyxt Inc announced further expansion of its hemp breeding platform on 8 July with the addition of triploid breeding technology to create seedless hemp.

“Like seedless watermelon, seedless hemp can offer significant advantages in crop management and harvest potential,” the company said.

“For hemp fibre production, a seedless crop can improve fibre quality and increase yield.

“For hemp protein and oil derivatives, production can also be enhanced with a breeding programme based on controlled pollination, effectively eliminating the threat of rogue pollinators that can

Photo: Adobe Stock

IN BRIEF

nies were fighting to overturn a US$265M jury verdict (later reduced to US$75M) against them for dicamba injury to a peach orchard in Missouri, the report said. Both companies have appealed the ruling.

Meanwhile, Bayer was working through a settlement for injury to non-dicamba tolerant soyabean fields, according to DTN. The company had agreed to make US$400M available to resolve multi-district litigation in the US District Court for the Eastern District of Missouri over dicamba injury claims to soyabean fields from 2015 to 2020, the report said. The claims period for that settlement had closed on 28 May. In the Texas lawsuit, four grape processors and 57 vineyards claimed that dicamba damage had never been an issue to the state’s grapevines until US agro-

Calyxt says seedless hemp offered improved yields and quality

sub-optimise yields.”

Calyxt uses its TALEN gene editing technology to develop plants with improved traits.

In its development pipeline

are high oleic, low linolenic soyabeans, low tetrahydrocannabinol (THC) hemp, high fibre wheat, and alfalfa with improved digestibility.

Brazil set to import GM corn from USA for feed The Brazilian government is opening its doors to genetically modified (GM) corn imports from the USA as the failure of the country’s second corn crop raises concerns about domestic feed availability, AgriCensus reported the country’s agriculture minister Tereza Cristina as saying on 14 June.

The import of the GM corn would need to be authorised by the country’s Biosecurity National Technical Commission as it was not grown in Brazil, according to AgriCensus.

Reduced expected yields due to late planting and dry weather conditions had led Brazilian food agency Conab to downgrade corn production estimates by 10M tonnes, AgriCensus wrote,

raising concerns about a lack of animal feed against a backdrop of rising meat exports and domestic consumption.

• Mexico is delaying import permits for GM corn saying it intends to apply a ban on GM grain used in animal feed, Reuters reported on 11 June.

Among hundreds of permits awaiting a resolution were at least eight for GMO corn although the ban was not set to take effect for three years.

Mexican President Andres Manuel Lopez Obrador issued an executive order last year phasing out GM corn and glyphosate by 2024, arguing that the country must attain food self-sufficiency without using toxic chemicals, Reuters wrote. www.ofimagazine.com

27/07/2021 10:37:53

DIARY OF EVENTS 26 August 2021 Soybean & Meal Market Premier Hotel, Odessa, Ukraine www.apk-inform.com/en/conferences/ soybean_and_meal_market_2021/about 2-3 September 2021 8th High Oleic Congress (Online) http://higholeicmarket.com/hoc-2019 8 September 2021 Asia Grains & Oils Conference Tashkent, Uzbekistan www.apk-inform.com/en/conferences/ AsiaGrainsAndOils2020/about 9 September 2021 Black Sea Oil Trade 2021 Premier Palace Hotel, Kiev, Ukraine https://ukragroconsult.com/en/ conference/black-sea-oil-trade-2021/ 21-23 September 2021 Processing of Cannabis/Hemp Plants and Refining of CBD Oil: Market, Regulations and Applications (Online) www.smartshortcourses.com/CBDoil2/ CBDoil.html 22-23 September 2021 Future of Surfactants Summit North America Boston, Massachusetts, USA www.wplgroup.com/aci/event/ surfactants-summit-america 22-24 September 2021 International Specialized Exhibition ‘Oil and Fat Industry’ 2021 Kiev, Ukraine https://oil.agroinkom.com.ua/ 23-25 September 2021 Globoil India 2021 Taj Convention Centre, Goa, India www.globoilindia.com 30 September 2021 Middle East Grains and Oils Congress Cairo, Egypt www.apk-inform.com/en/ middleeast2021/about 5-6 October 2021 Future of Biofuels 2021 Copenhagen, Denmark https://fortesmedia.com/future-ofbiofuels-2021,4,en,2,1,13.html www.ofimagazine.com

Diary July.Aug with promo.indd 1

18th Euro Fed Lipid Congress online The 18th Euro Fed Lipid Congress and Expo will take place on 18-21 October online.

“We hope this event will help keep participants up to date with the latest scientific developments in the field via oral and poster presentations and allow them to network with peers and exhibitors,” says Euro Fed Lipid, a federation of 13 scientific lipids, fats and oils associations representing 2,000 individuals and companies.

Conference topics will include analytics; bioeconomy and green deal; bioscience and biotechnology; contaminants; dairy and animal lipids; deep frying; health and nutrition; insect lipids; lipidomics; lipid oxidation; marine and algae lipids; oleochemicals; olive oil and authenticity; plant lipids and vegetable oils; physical chemistry; and processing and sustainability.

For further information, contact Euro Fed Lipid: Tel: +49/69 6860 4846, E-mail: info@eurofedlipid.org https://veranstaltungen.gdch.de/tms/frontend/index.cfm?l=10713&sp_id=2 5-7 October 2021

2-4 November 2021

Palmex Indonesia 2021 Medan Indonesia http://palmoilexpo.com

World Ethanol & Biofuels Brussels, Belgium https://informaconnect.com/worldethanol-biofuels/

12-14 October 2021

8-10 November 2021

Plant Protein Science & Technology Forum Chicago, USA https://plantprotein.aocs.org/attend/ save-the-date-for-2021

AOCS Australasian Section Meeting Newcastle, Australia www.aocs.org/attend-meetings/ industry-events

18-20 October 2021

9-10 November 2021

GrainCom 21 Event President Wilson Hotel, Geneva, Switzerland www.graincomevents.com

5th International Symposium ‘Dietary Fat and Health’ Frankfurt, Germany https://veranstaltungen.gdch.de/tms/ frontend/index.cfm?l=9072

18-21 October 2021

17-20 January 2022

18th EuroFed Lipid Congress and Expo (Online) https://veranstaltungen.gdch.de/tms/ frontend/index.cfm?l=10713&sp_id=2

National Biodiesel Conference & Expo Las Vegas, USA https://www.nbb.org/

18-23 October 2021

27-28 April 2022

North American Renderers Association Annual Convention 2021 Greensboro, Georgia, USA https://nara.org/about-us/events/

10th European Algae Industry Summit Reykjavik, Iceland https://www.wplgroup.com/aci/event/ european-algae-industry-summit/

19-20 October 2021

1-4 May 2022

Biofuels International Conference & Expo Brussels, Belgium www.biofuels-news.com/conference/ biofuels/biofuels_index_2020.php

AOCS Annual Meeting & Expo Atlanta, Georgia, USA https://www.aocs.org/attendmeeting?sso=True

For a full events list, visit: www.ofimagazine.com Information subject to change OFI – JULY/AUGUST 2021

15

27/07/2021 11:17:40

INTERNATIONAL MARKET REVIEW

Adjustment of market?

Like cereals and several other food commodities, oils have enjoyed a massive boost in value since the year began, extending a renaissance that started around mid-2019. Are current prices – more than doubling over the period – backed by fundamentals? Or will the rally weaken as they did after the record spike of 2007 as supplies improve and speculative froth blows away?

What is remarkable about the oilseed complex is how prices stayed so cheap for so long in terms of the US dollars in which most commodities are traded internationally. From the turn of the millennium, the dollar had a cumulative inflation rate of over 56.33%.

Some revaluation was clearly justified, to keep farmers growing the crops and crushers crushing. The rock bottom prices paid for surplus palm oil over the last decade were arguably a key factor, prompting top producer Indonesia to create its biodiesel programme and sucking supplies away from the food sector.

The factors that sent oil values spiralling in recent times have been well documented in these and other journals but might be summed up as: • Stagnation in expansion of rapeseed supplies after years of growth.

• Slowed sunflower oil supply growth with lower than expected yields last year.

• Production of top globally traded palm oil falling well short of expectations, partly due to weather and partly from COVID lockdowns affecting harvest/ collection.

While soyabean oil output has continued to expand, helping to push world total vegetable oil production in 2020/21 just ahead of the previous record season, there have been some weather upsets earlier this year in Brazil and Argentina, their impact heightened in the wake of 2019’s US soya crop shortfall.

Strong consumption growth

On the demand side, there has been strong consumption growth, especially in 16 OFI – JULY/AUGUST 2021

John Buckley July.Aug.indd 2

NB: Crude vegetable oil, apart from refined palm oil

Figure 1: Vegetable oil prices retreat from 13-year highs (US$/tonne, monthly averages) China, which has consumed 6M tonnes or 16.5% more vegetable oil than it did just four years ago.

Indonesian vegetable oil consumption has grown at an even faster rate than China’s – 29% or 4.3M tonnes over the same period, in which the USA also added 2M tonnes and Europe another 1M tonnes of demand. Global consumption growth would have been even larger if second largest country consumer India’s demand had not stagnated amid tighter supplies, rising costs and COVID lockdowns.

In total, the 2% average global growth rate for the 2019/20 and 2020/21 seasons actually lagged behind the 2018/19 level of 3.5%.

However, global stocks (see Figure 2, p18) still fell, tightening the stock/use ratio that economists like to cite as an arbiter of whether prices rise or fall – and managed funds read as a green signal for commodity investments. This ratio fell from 12.3% two or three years back to 10.5% and may go lower still in 2021/22, depending on how crops perform.

‘Outside’ investors have already been putting more money into a strengthening commodity sector, hoping their bets on further price rises will bring them big winnings and, for the time being at least, sometimes helping that process on its way.

The trend has been manifest across the food and industrial raw material markets, fed by ideas that demand growth is picking up from COVID-restrained levels.

Graph: John Buckley

Do market fundamentals support high vegetable oil prices or will the market rally weaken?

John Buckley

Soya and palm oils are expected to make the biggest contributions to supply growth in the 2021/22 season ahead (starting 1 October). Along with moderate increments to supplies of sunflowerseed and rapeseed – and a collective contribution from coconut, palm kernel, cottonseed and groundnut oils – world vegetable oil production is forecast by the US Department of Agriculture (USDA) to grow by 4.3%, against a lower consumption rate increase of 2.7%.

Soya supply news

Recent supply news have cut both ways.

Top soyabean supplier Brazil’s 2021 crop was a record one, at 137M tonnes. The USA has just sown a potentially large 120M tonnes crop for late summer harvest and is currently getting mostly favourable weather. Argentina has had some issues with weather, government disincentives and shipping disruption, with a smaller 2021 crop expected (see Figure 3, p18).

Lingering hot dry weather amid lowerthan-expected US planted area and June stock updates from the USDA initially lifted Chicago Board of Trade (CBOT) soyabean futures in June.

Better rainfall then sent prices down again but with crop ratings lower than last year, a bullish undertone persists as we went to press.

The USDA’s US crop forecast is not high enough to really replenish low stocks. u However, amid early forecasts of Latin www.ofimagazine.com

28/07/2021 09:00:38

EMEA Av. del Acero 14-16,19200.

Azuqueca de Henares, Guadalajara. (Spain) AMERICA Camino a Puremin 1100, 76700.

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Figure 2: World vegetable oil stocks (million tonnes) u American crops expanding sharply in 2021/22, CBOT soya futures could come under more upside restraint. (Prices hit eight-year highs in May, briefly trading at over US$16/bushel).

Some caution is demanded by US moves to ease biodiesel blending mandates for smaller players. (Biodiesel accounts for about 47% of US domestic use of soyabean oil). Brazil’s 2021/22 crop is forecast at 144M tonnes and Argentina’s at 52M tonnes.

Soya has continued to draw underlying support from China continuing to buy US soyabeans even as Brazil’s giant crop starts to flow seriously to export markets.

As we went to press, China had ordered almost 36M tonnes of US soyabeans for delivery in 2020/21, compared with under 16M tonnes this time last year.

Globally, soyabeans can meet an estimated 29% of world vegetable oil consumption of 213M tonnes.

Palm oil production picking up

Palm oil production does seem to be picking up and is entering its seasonal peak period under fairly normal weather conditions. Against that, the sky-high cost of this normally cheapest oil has been denting demand, especially in the developing world where most demand lies. As a result, stocks may start to build, requiring cheaper prices to rebuild consumption.

At the moment, all eyes are on top palm oil consumer India, where shortages have doubled domestic cooking oil prices, prompting an import tax cut that gave a boost to palm oil markets in late June/July.

After record imports of 9.2M tonnes in 2018/19, India bought less in the last two seasons of constantly rising prices and COVID lockdowns encouraging a shift in home consumption to soft oils. However, 18 OFI – JULY/AUGUST 2021

John Buckley July.Aug.indd 3

Figures: John Buckley

INTERNATIONAL MARKET REVIEW

Figure 3: Top soyabean producers’ crops (million tonnes)

in the first half of 2021, India has imported three times as much palm oil from Malaysia as in the same period last year.

Prices had been under pressure after Indonesia confirmed it would cut its export duty, threatening Malaysian exports but potentially reducing Indonesia’s revenue for its palm biodiesel subsidies.

Indonesia itself uses over 15M tonnes/ year of palm oil, about a fifth of world demand, much of it in its biofuel sector.

Indonesian exports had earlier dropped sharply as its overseas customer backed away from high prices.

Recently there has been talk of China needing more palm oil to replenish low stocks. Its imports of Malaysian palm oil are down 40% on the year but it did import a lot more over the past two months. The EU has also imported 25% less Malaysian palm oil in the first half of 2021, contributing to a 9%-plus drop in the country’s total January-June exports.

The USDA sees world palm oil output rising 3.1M tonnes in 2021/22 after the last two years of stagnation, but not much stock replenishment.

Rapeseed/sunflowerseed crops

This summer’s rapeseed/canola crops are expected to improve in Europe (17M tonnes against 16.3M tonnes last year).

Canada – the other key world supplier of this oil – has boosted plantings but is in deep trouble with drought and record heatwaves and will probably miss a forecast +20M tonnes crop.

Ukraine expects a much better crop (3.1M tonnes versus 2.75M tonnes), along with Australia, which forecasts a bumper +4M tonnes crop for a second year.

Depending on Canada, rapeseed output could be up, but carry-in stocks are low and demand growth is likely to push them

lower still by summer 2022, keeping prices higher than normal.

Meanwhile, sunflowerseed production is seen rising by 13.5% or 2.6M tonnes to a record 21.8M tonnes with large crops expected in Russia (16.5M tonnes against 15.3M tonnes last season), Ukraine (16.7M tonnes versus 14.2M tonnes) and the EU (10M tonnes against 8.85M tonnes).

With prices for this ‘premium’ oil recently coming off their highs on the crop outlook, any extra supplies are likely to get consumed rather than loosen stocks.

Impact of biofuels

Weather is usually the wild card in market forecasts but another grey area this year is biofuels. COVID’s destruction of transport fuel use cooled things down considerably in this previously fastgrowing sector, especially in the key area of palm oil for biodiesel within Indonesia (the world’s largest palm oil consumer as well). Depressed fossil fuel prices also undermined confidence in other countries.

However, crude petroleum oil prices have recently been rising strongly, reaching three-year highs. If that trend persists, it does suggest a renewed stimulus to the biofuels sector.

Factors to watch in the next few months include the degree of seasonal growth in Asian palm oil production and export demand for this oil at still high prices; the success or otherwise of the US soyabean crop; and summer production of rapeseed and sunflower crops.

By the northern hemisphere autumn, the market will find out if the balance is shifting to looser supply and cheaper prices and, no less importantly, what oil crops southern hemisphere producers will be planting. ● John Buckley is OFI’s market correspondent www.ofimagazine.com

28/07/2021 09:00:43

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OFI – JULY/AUGUST 2021

19

OILSEEDS

A new approach to dehulling A novel approach to rapeseed dehulling utilises screw pressing of the hulls in order to raise oil yield and reduce the amount of anti-nutritional substances in the resulting rapeseed cake Michal Kaválek Rapeseed is the world’s third most commonly grown oilseed, mainly popular for its canola cultivars low on erucic acid that can produce canola oil for human consumption.

Today, rapeseed/canola cultivation is widespread, especially in central and western Europe, Scandinavia, Canada, China and Australia.

Canola oil stands out for its low content of saturated fatty acids and a high content of unsaturated fatty acids.

Thanks to its mono- and polyunsaturated fatty acids ratio of 2:1, canola is a popular edible oil consumed for its cardiovascular and other health benefits.

For years, rapeseed products such as press cake or extracted rapeseed meal have also been utilised in the nutrition of cattle.

Since the ban on feeding meat and bone meal to livestock in the late 1980s/ early 1990s to prevent the spread of bovine spongiform encephalopathy (BSE) or ‘mad cow’ disease, the EU has seen a surge in the use of extracted rapeseed meal (RM) in animal feed.

With sufficient supply of RM and a goal of reducing dependency on imported soyabean meal, rapeseed meals have become widely used in dairy cow nutrition.

Today RM is a common component in feed mixtures and is distinguished by its high protein applicability which makes it, 20 OFI – JULY/AUGUST 2021

Farmet.indd 2

in many respects, a better feed choice than soyabean meal.

To a lesser extent, rapeseed products are also used in the nutrition of monogastric animals (pigs and poultry).

This is mainly because they have a high content of fibre and digestibility-reducing substances such as glucosinolates.

Intensive dehulling process

Czech oilseed technology firm Farmet has an innovative rapeseed processing technology which focuses on eliminating the negative properties of rapeseed products.

The core of this technology consists of dehulling and expeller-pressing with extrusion. While all these technologies have been around for a number of years, the novelty lies in approaching the byproduct – the seed hulls.

In Farmet’s technological solution, seed hulls are also processed through screwpressing, which leads to a more intensive and efficient dehulling process.

The rapeseed goes through dehullers where the kernels and hulls are separated by being thrust against the stator of the dehuller. In the next step – the screen sorter and aspiration chamber – the hulls are separated out.

A high dehulling intensity results in a very clean main product. The kernels are distinguished by a high protein (≥ 50% in a defatted sample) and fat content, and a

low amount of dietary fibre.

This product is subsequently pressed via a two-step pressing technology with extrusion. Apart from valuable oil, the other final output is a high-protein press cake, a valuable addition in compound feeds for monogastric animals (pigs and poultry). The cake resembles soyabean meal in its nutritional composition.

The hull fraction still contains a considerable amount of oil as a result of trapping some airborne kernels during aspiration and separation. However, this residual fat is by no means an issue.

In Farmet’s processing set-up, this fraction further enters a single-step pressing with extrusion technology. While the press cake coming out of this route does not reach the protein levels of the standard rapeseed press cake (see Table 1, following page), it represents a valuable feed source for ruminants, notably due its high content of soluble fibre and by-pass oil. There is also a considerable fraction of by-pass proteins.

The use of extrusion serves mainly to raise oil yield, reducing the amount of anti-nutritional substances and lowering the solubility of fibre. All of this increases the usability of the nutrients in rapeseed products. The technology thus yields three basic products: raw vegetable oil, a highprotein cake for monogastric nutrition, and a low-protein cake for ruminant nutrition.

www.ofimagazine.com

22/07/2021 09:28:19

OILSEEDS Rapeseed cake

DM = dry matter

High protein cake Fraction size Protein Fat Fibre

44% 47% DM 8% DM 13% DM

Low protein cake 18% 26% DM 8% DM 28% DM

Crude vegetable oil 38% – – –

Table 1: Approximate values of fraction amounts and content ratios for nutrients in rapeseed products

Source: Farmet

The practical experience of Russian edible oil and feed producer Sibirskaya Oliva has shown that utilising the higher residual fat content in rapeseed cake compared to rapeseed meal is no disadvantage; it is actually beneficial due to the cake’s higher energy value.

Moreover, the oil from the first pressing step is of a quality on a par with coldpressed oils, with a low phospholipid content and a high level of antioxidants and other valuable nutrients.

While the use of rapeseed press cake requires specific attention when planning feed doses, this approach promises to better utilise rapeseed/canola, as shown by field results shown in Table 1.

Farmet’s technology offers flexibility in rapeseed/canola processing, yielding a range of products ready to be fine-tuned according to the needs of particular livestock. This makes it easier to use locally-grown commodities for feed production, an increasingly important aspect of sustainable agriculture, which promotes local consumption of locallyproduced commodities.

Michal Kaválek is R&D project manager at Farmet, Czech Republic

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TOLSA, S.A. Parque Empresarial TOLSA, S.A. Mercedes C/ Núñez deLas Balboa, 51 C/28001 Campezo, 1, Ed. -4,Spain Pl. 2ª Madrid 28022 Madrid Tel.: +34 913 220 100 Tel.: +34 913 220 100 industrial@tolsa.com info@tolsa.com OFI – JULY/AUGUST 2021

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10/12/2018 11:18 22/07/2021 09:28:25

OILSEEDS

Photo: Adobe Stock

Castor on the rise The castor oil market is forecast to expand against a backdrop of increased demand from the pharmaceutical and cosmetics industries Gill Langham

Extracted from castor seeds, castor oil is a non-edible vegetable oil that is mainly used in preservatives, medicines and lubricants.

India is currently the largest producer of castor seeds and accounts for over 80% of global production, followed by China and Brazil, according to MarketWatch.

The worldwide market for castor oil is expected to grow at a CAGR of approximately 4.1% between 2019 and 2024, a report by 360 Research says.

Asia Pacific is the largest consumer of castor oil and is expected to retain the higher growth rate during the next few years due to strong growth in the pharmaceuticals and cosmetics industries, according to the report.

China and India are major players in the production and consumption of castor oil in the Asia Pacific region.

Meanwhile, the castor oil market in Europe was growing on the back of rising demand of bio-based cosmetic production.

Castor conference

The global castor industry and emerging trends were among the topics discussed at the Global Castor Conference 2021 organised by the Solvent Extractors’ Association of India (SEA) on 24 February.

An update was also given on the SEA’s Model Castor Farms and Water 22 OFI – JULY/AUGUST 2021

Castor draft Gill.indd 2

Conservation projects, which are helping farmers achieve higher productivity.

The Indian castor oil industry has emerged from the COVID-19 pandemic in a strong position, according to SEA president Atul Chaturvedi.

The country’s castor oil exports in 2020 reached a record 650,000 tonnes compared to 545,000 tonnes the previous year, according to the SEA. “We are meeting after almost a year and during that period the world has changed dramatically due to coronavirus,” Chaturvedi said at the opening of the event. “In the calendar year 2020, India’s castor oil exports have shown a remarkable resurgence.”

In 2020, China alone imported more than 300,000 tonnes of castor oil from India, the highest import value recorded, Vivian Patel, of leading sebacic acid producer Hengshui Jinghua Chemical Company, said.

Record exports

The record level of castor oil exports from India recorded in 2020 followed a growth trend of between 8%-9% between 2009 and 2020, according to Adani Wilmar general manager Shailesh Baldha who spoke about the country’s castor dynamics at the conference.

“Looking ahead, with a similar growth level, we can expect exports to reach

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OILSEEDS 700,000 tonnes in 2021,” he said.

However, despite the record level of castor oil exports from India in 2020, Thomas Mielke, editor of Oil World, said a global production deficit in castor seed and oil could be developing worldwide in October/September 2021/22.

This was mainly due to reduced plantings and production in India, the key player, which accounts for more than 95% of world exports of castor oil, he said.

Castor seed had lost attractiveness relative to edible oilseeds and other crops, according to analysis provided by Mielke.

“Unless castor seed prices appreciate sufficiently in April/July this year, Indian farmers will, most likely, reduce castor plantings,” he added.

personal care to rubber, plastics, coatings and textiles – according to Andrew Pollack, castor derivatives specialist from Alnor Oil Company.

In his presentation about the US market for castor oil, Pollack explained how the 3.5% contraction in the USA’s GDP had been the country’s worst economic performance since 1946.

However, the economy had increased by about 4% in the fourth quarter of 2020, he said, and US President Joe Biden had launched a US$2tn stimulus plan.

“Economists are all positive for the

future with estimates giving a forecast for future GDP of around 4.2% growth in 2021,” he said.

“Projections are for a big recovery this year and lubricants are expected to get back on track with castor bulk imports seeing an increase in December. The outlook looks good going forward.”

EU sector

Castor oil consumption in Europe in 2020 was 149,000 tonnes – 11% down on the previous year and 20% lower than in 2018, according to Eurostat data.

The drop in consumption was linked to u

China view

An overview of the castor sector in China was given at the webinar by Hengshui Jinghua Chemical Company’s Patel.

In contrast to most other major countries, China had made a relatively rapid post-COVID recovery with its GDP growing by 2.3% in 2020 and forecast to touch 8% this year, she said.

However, due to the falling prices of castor oil in domestic and international markets, China’s castor plantation would be minimal in 2021, according to Patel.

China held between 45% and 50% of the castor oil market and had become the largest global consumer of sebacic acid – a castor oil derivative, she said.

In 2020, around 160,000 tonnes of castor oil were used to produce sebacic acid in the country – the lowest figure in recent years, Patel added.

Hengshui Jinghua Chemical Company consumed between 82,500-90,000 tonnes of castor oil in 2020 and produced 41,000 tonnes of sebacic acid but expected to increase production to 46,000 tonnes in 2021.

The market demand for sebacic acid is expected to be between 85,000-90,000 tonnes in 2021 (compared to 76,000 tonnes in 2020), according to Patel.

It was forecast that China would import 340,000 to 350,000 tonnes of castor oil this year, she said.

Other growth areas for castor included green chemicals, adhesives and polymers.

With the price growth in petrochemical products alongside a global sustainability drive, castor oil applications had increased substantially in recent years in all sectors such as resins and adhesives including sebacic acid, Patel explained.

US outlook

In the USA, the economy is the main driver for castor oil demand – from www.ofimagazine.com

Castor draft Gill.indd 3

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OILSEEDS Hengshui Jinghua Chemical Co

Figure 1: Castor oil consumption in China 2010-2021 (KT)

2020

2021

Carry over Import Domestic production

25 240 20

40 300 21

76 350 10

Sebacic acid 12HSA Others Total consumption

160 19 66 245

160 35 90 285

190 40 120 350

40

76

86

Carry over

Figure 2: Castor oil consumption in China in 2021 – estimate (KT)

Agriculture Organic fertilisers Food Surfactants Viscosity reducing additives Flavourings Food packaging Paper Flypapers Defoamers Waterproofing additives Electronics & Telecommunications Polymers for electronics & telecommunications Polyurethanes Insulation materials Textile chemicals Textile finishing materials Dyeing agents Nylon, synthetic fibres & resins Synthetic detergents Surfactants, pigment wetting agents

Plastics & Rubber Polyamide 11 (Nylon) Plastic films Adhesives Coupling agents

Polyols Synthetic resins Plasticisers

Cosmetics & Perfumeries Perfumery products Polishes Lipsticks Emulsifiers Hair tonics Deodorants Shampoos Pharmaceuticals Antihelmintic Anti-dandruff Cathartic Emollient

Emulsifiers Encapsulants Expectorant Laxatives & purgative

Paints, inks & additives Inks Paint strippers Plasticisers for Adhesive removers coatings Wetting & dispersing Varnishes additives Lacquers Lubricants Hydraulic fluids Lubricating grease Heavy duty Aircraft lubricants automotive Jet engine lubricants Greases Racing car lubricants Fuel additives Corrosion inhibitors

Figure 3: Main applications for castor oil and its derivatives in Europe 24 OFI – JULY/AUGUST 2021

Castor draft Gill.indd 4

The future

Looking ahead, SEA president Chaturverdi said the consensus from the conference seemed to be that demand from China this year might be stable or possibly a little lower than in 2020.

According to COFCO’s Denis Ginter, China would not import as much castor oil in 2021 as it was sitting on considerable stocks.

European demand was likely to remain stable and a similar outlook was expected In Thailand, Japan and some other countries.

However, domestic consumption of castor oil could increase in India if edible oil prices remained high.

Delegates also heard how there were signs of developing castor plantations in Africa and Southeast Asian countries.

The general view was that castor was still achieving low prices compared to most other crops and, as the responsiveness of farmers to price was high, the next sowing season could be lower unless castor prices increased.

“Castor is one of the cheapest commodities today in India and as prices are low, farmers are planting other crops,” said COFCO’s Ginter.

Outside factors

Source: Loiret & Haëntjens

Consumption

2019

Hengshui Jinghua Chemical Company

China is the biggest global consumer of castor oil and is expected to consume 350,000 tonnes in 2021.

Castor oil

u the effects of the COVID-19 pandemic on the European economy, according to Rabah Djennane, a trader from Loiret & Haëntjens, who spoke about the castor oil market in Europe.

For example, in 2020 less than 10M cars were sold in Europe.

However, the European chemical industry had not seen a deep drop in production, he said.

“There are some positive signs for all the oleochemical products and especially the castor industry.

“We expect a rebound on demand - of approximately plus 8.8% in 2021 – but less than in 2019 due to COVID,” he said.

The main applications for castor oil in Europe include agriculture, polymers and cosmetics, according to Djennane.

External factors could also influence the castor sector in the near future.

Possible influences include the continuing COVID-19 situation in India and worldwide, the monsoon pattern, global economic trends and supply chain bottlenecks.

In the long term, a general shift from petroleum-based products to plant-based products globally could benefit castor, attendees heard. ● Gill Langham is the assistant editor of OFI www.ofimagazine.com

28/07/2021 09:24:20

SUB-SAHARAN AFRICA than the region can supply on its own (see Figure 1, below).

The region’s largest oils and fats producer – Nigeria – only produced 1.1M tonnes in 2019 while South Africa produced 700,000 tonnes. The region’s supply shortfall is met with imports from major oil crop growers such as Malaysia, Indonesia, Brazil and the EU. In 2019, the SSA region imported approximately 6.5M tonnes of oils and fats, of which 83% was palm oil.

Palm oil market

Sub-Saharan African countries lie south of the Sahara desert Map: Adobe Stock

Palm oil opportunities Sub-Saharan Africa (SSA) consists of all countries and territories that lie fully or partially south of the Sahara desert, and is distinct from North Africa.

The United Nations lists 46 of Africa’s 54 countries as ‘sub-Saharan’ and the region has more than one billion people.

In terms of oils and fats production, the Sub-Saharan region mainly produces palm oil in West Africa, and soyabean and sunflower in southern and east Africa respectively.

Major palm oil producing countries include Nigeria, Ghana, Côte d’Ivoire, and Cameroon. South Africa produces sunflower and soyabean oils while Tanzania produces sunflower oil.

Nigeria is the largest oils and fats consumer in the SSA region, at 3M tonnes/year, followed by South Africa at 1.4M tonnes/year, Tanzania at 871,000 www.ofimagazine.com

Sub saharan africa.indd 2

tonnes/year, and Ghana at 734,000 tonnes/year.

Most of the oils and fats produced in the SSA region is for local consumption and domestic requirements are greater

Source: Oil World, MPOC estimates

Sub-Saharan Africa has more than one billion people and while the region produces around 3M tonnes/year of palm oil, it relies on imports to meet its edible oil demand Iskahar Nordin, Fazari Radzi, Karthigayen Selva Kumar

Sub-Saharan Africa’s palm oil market has grown substantially in the last 10 years. In 2019, African countries produced around 2.79M tonnes of palm oil, not enough to meet local demand of about 7.31M tonnes. As a result, imported palm oil plays a major role, increasing from more than 3M tonnes in 2010 to some 5.5M tonnes in 2019, a CAGR of 6.02% over that period.

Major palm oil importing countries include Nigeria, Kenya, Tanzania, Angola, and South Africa.

Malaysia and Indonesia compete to supply palm oil to SSA (see Figure 2, p26) and their market shares have fluctuated in the past decade. In 2010, Malaysia had a market share of 41% and Indonesia 33%.

In 2019, Malaysia’s share dropped to 36% and Indonesia’s rose to 43%.

Malaysian CPO exports to SSA increased from just 63,000 tonnes in 2011 to almost 1M tonnes in 2018.

In 2020, the SSA region will register around 2.62-2.66M tonnes of Malaysian palm oil imports, a 30-35% increase compared with 2019 and overtaking a record high of 2.43M tonnes in 2017 (see Figure 3, p26), according to Malaysian Palm Oil Board (MPOB) and Malaysian Palm Oil Council (MPOC) estimates. In terms of value, this was an increase of 61.2% from RM4.348bn (US$1.05bn) to RM7.011bn (US$1.68bn). The rise u is due to major buyers such as Kenya,

Figure 1: SSA oils and fats production, consumption, imports (‘000 tonnes) OFI – JULY/AUGUST 2021

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u

Figure 2: Sub-Saharan palm oil importing countries (‘000 tonnes)

Source: Oil World, MPOB

Figure 3: Malaysian CPO/CPL exports to Sub-Saharan Africa (tonnes)

Source: Oil World, MPOB

SUB-SAHARAN AFRICA

u Mozambique, Nigeria, Ghana, Togo and Madagascar importing more crude palm oil (CPO) and crude palm olein (CPL).

Kenya was the top importer of Malaysian palm oil with a 119.8% increase from just 187,479 tonnes in 2019 to 412,152 tonnes from January-November 2020.

Indonesian palm oil exports to SubSaharan Africa overtook Malaysia’s in 2013 but dipped between 2015-2018 before regaining the upper hand in 2019 to total some 2.4M tonnes.

Because the country has to fulfil its domestic requirements and biodiesel mandate, as well as meet demand from importing countries such as India and the EU, it has not been able to export CPO to several African countries.

Sub-Saharan Africa also imports palm oil from West African countries, totalling an estimated 2.8M tonnes in 2019.

Nigeria was the biggest palm oil producer in Africa that year, with 1.22M tonnes of production. Other palm oil producers in the region including Ghana, Côte d’Ivoire, Cameroon and a few others with minimal production. Among these smaller producers, the only net exporter is Ivory Coast with 510,000 tonnes of production and 282,000 tonnes of exports in 2019, according to Oil World.

Palm oil imported by countries like Benin and Togo are re-routed to neighbouring 26 OFI – JULY/AUGUST 2021

Sub saharan africa.indd 3

West African countries due to a favourable tax structure. Palm oil imported by Kenya and Mozambique is also re-routed to the neighbouring land-locked countries in the East Africa and southern Africa regions.

Shifting palm products demand

In the past 10 years, the refining industry in SSA has expanded rapidly due to increasing demand from a growing population and better economic conditions.

Crude palm oil (CPO)/crude palm olein (CPL) and refined, bleaching and deodorised (RBD) palm olein are the major Malaysian palm oil exports to the region.

Imports of Malaysian CPO/CPL constituted just 3.8% of total Malaysian palm oil imports in 2011 but CPO imports have increased to more than 40% of total palm oil imports in the past few years.

In contrast, imports of other palm oil products – especially packed cooking oil – have fallen from a high of 483,000 tonnes in 2011 to just 107,000 MT in 2019.

Sub-Saharan Africa’s import volume of Malaysian CPO/CPL jumped substantially by more than 127% from 691,603 tonnes in Jan-Nov 2019 to 1,28M tonnes in the Jan-Nov 2020 period. This surge can be attributed to the higher import duty imposed on processed palm oil compared with CPO/CPL in some countries, especially those that have large refining

capacities, such as Nigeria, Ghana, Kenya and Mozambique.

Other countries – such as Benin, Togo, Angola and South Africa – prefer to import RBD palm olein. Tanzania which used to be a major CPO importer, has completely switched to RBD palm olein after the government increased the CPO import duty from 10% to 25% due to pressure from local oilseeds producers.

Mozambique and Togo have considerably increased imports of Malaysian palm oil.

From an import volume of just 522 tonnes in 2013, Mozambique’s imports have grown to some 150,000 tonnes in the past two years. Some of Mozambique’s palm oil imports are re-routed to neighbouring landlocked countries such as Malawi, Zimbabwe, and Zambia. Togo also channels palm oil to neighbours such as Nigeria, Niger, Burkina Faso, and Senegal.

Madagascar also shows great import potential. Its imports of Malaysian CPO/ CPL have risen, driven by growing domestic demand and the expansion of its food processing industry.

Major players Nigeria: With a population of some 206M, Nigeria is the most populous nation in Africa and has the largest economy.

The country produced around 1.91M tonnes of oils and fats in 2020, of which 67% or 1.28M tonnes was palm oil, 362,000 tonnes was groundnut oil and 104,000 tonnes was soyabean oil.

Nigeria is also the largest importer and consumer of oils and fats in Sub-Saharan Africa. The nation imported 1.4M tonnes and consumed approximately 3.27M tonnes of oils and fats in 2020, with palm oil consumption accounting for 79% or 2.59M tonnes of total consumption (see Figure 4, p28).

Along with Malaysian palm oil, Nigeria also imported a substantial amount of Indonesian palm oil and oil from neighbouring West African countries such as Benin, Togo and Ivory Coast.

Nigeria is the biggest importer of Malaysian palm oil, with CPL about 89% of total intake. In the past six years, the country imported an average of 1.39M tonnes/year of palm oil, with Malaysian imports averaging 260,000 tonnes/year, giving it a 19% market share.

Nigeria’s palm oil market is growing, driven by a booming population and rising processed food and fast-food consumption.

The country imposed a ban on vegetable oil imports in 1986 but replaced it with a high import duty in 1995. From 2002- u

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SUB-SAHARAN AFRICA

Figure 5: Kenya – palm oil consumption and Malaysian palm oil imports

Source: MPOC

Figure 6: South Africa – Oils and fats, palm oil & Malaysian palm oil imports (tonnes)

Source: MPOC

Figure 4: Nigeria – total palm oil imports and Malaysian palm oil imports (tonnes)

Source: MPOC

Malaysia, Indonesia and other neighbouring West African countries continue to rise despite the 35% import duty.

u 2008, the government again imposed a total ban on vegetable oil imports. It removed the ban on CPO imports in December 2008, imposing a duty of 35% instead. This duty only applies to edible oil imported from Economic Community of West African States (ECOWAS) nations.

Packed vegetable oil products imports remain banned. The import policy has increased the prices of locally produced palm oil but has not been successful in 28 OFI – JULY/AUGUST 2021

Sub saharan africa.indd 4

attracting new investment in large oil palm plantations.

In the 10-year period between 20102019, the oil palm plantation area in Nigeria only increased by 110,000ha from 430,000ha in 2009 to 540,000ha in 2019. Palm oil production increased from 780,000 tonnes to 1.22M tonnes during that period, while demand has increased from 1.63M tonnes to 2.57M tonnes. As a result, Nigeria’s palm oil imports from

Kenya: With a population of around 53.7M people, Kenya is one of the fastest growing economies in Sub-Saharan Africa, averaging more than 5% GDP growth over the last decade. The country is the regional financial and transport hub of East and Central Africa due to the size of its market, its geographical location and improved connectivity.

Kenya is a significant buyer of CPO in the East Africa region. The country meets almost all of its oils and fats consumption (which reached 760,600 MT in 2019) through imports, 96% of which consisted of palm oil in 2019.

Kenyan palm oil imports have risen by 43.6%, from 694,900 MT in 2016 to an estimated 1M tonnes in 2020.

Malaysia’s market share has averaged around 24% between 2016-2019 but more than doubled to an estimated 51.3% in 2020, making Kenya the largest market for Malaysian palm oil in SSA. The increase was mainly due to Malaysia’s waiver of its CPO export duty, combined with Kenya’s own CPO import duty of 0%. Although Malaysia’s CPO export duty exemption is no longer in place, demand in Kenya is expected to remain strong, driven by its favourable import duty regime and the growth in food demand, especially in the FMCG sector, which benefits palm as the most competitively priced vegetable oil.

This year will see challenges to the Kenyan economy as the country eases out of its COVID-19 restrictions. The Port of Mombassa is expected to be busier than usual, with some 1M tonnes of noncontainerised cargo expected to move through the port in 2021 alone, compared to 800,000 tonnes in 2020. This will pose challenges in terms of port clearings, freight time and costs.

Another challenge facing the country will be lower purchasing power, as a result of the weakening Kenyan shilling against the US dollar, and the re-instatement of VAT tax at a rate of 16%.

However, Kenya will continue to be one of the major markets for Malaysian palm oil in Sub-Saharan Africa.

Although most of the imported palm oil is consumed locally, some is rerouted to neighbouring countries such as Burundi, Rwanda, and Uganda, posing an opportunity to position Kenya as a reexport destination.

A policy change in neighbouring Tanzania has also contributed to Kenya’s surging CPO imports. Ever since the Tanzania u

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SUB-SAHARAN AFRICA u government increased its CPO import duty to 35% in July 2018 to assist local oilseed producers, the role of Kenya as an East African regional palm oil hub has grown more significant.

Ghana: With a growing population which stood at 30M in 2019, Ghana’s oils and fats consumption has been on the rise, at a current per capita rate of 20.7kg and domestic consumption of some 560,000 tonnes in 2019.

Ghana is the second largest palm oil producing country within Sub-Saharan Africa after Nigeria, with 537,000 tonnes/ year of production on average in the last three years and 560,000 tonnes in 2019.

As consumption of palm oil is higher than production, Ghana imports palm oil from other countries to meet local demand.

While Malaysia holds the largest market share, Ghana also imports palm oil from Indonesia and neighbouring countries like Côte D’Ivoire.

Ghana has a 20% import duty on CPO and 35% for finished products but there is no duty imposed on edible oil originating from ECOWAS member countries.

In October 2002, the government announced a Presidential Special Initiative (PSI) for the development of the oil palm industry as part of its programme of accelerating economic growth, wealth generation, and employment in the rural area. The long-term objective of the PSI is to develop large oil palm plantations to fill the demand gap in Ghana and neighbouring West African countries.

However, this initiative has not been able to attract significant foreign investment.

The oil palm plantation area has only increased from 270,000ha in 2010 to 370,000ha in 2019. Growth in acreage is constrained by the difficulty of acquiring land for development as ownership is fragmented, with many owners having small plots of land. With an oil palm yield of less than 2 tonnes/ha, Ghana has increased its palm oil production from 400,000 tonnes in 2010 to 560,000 tonnes in 2019, resulting in imports of 350,000 tonnes in 2019.

South Africa produces sunflower and soyabean oils, with a total oils and fats production of 726,200 tonnes in 2019.

The country also imported 846,900 tonnes of oils and fats to cover growing domestic consumption, which reached 1.45M tonnes that year. A total of 59% or 500,000 tonnes of imports was palm oil. ● This article is based on reports produced by the Malaysian Palm Oil Council (MPOC) and written by Iskahar Nordin, Fazari Radzi and Karthigayen Selva Kumar 30 OFI – JULY/AUGUST 2021

Sub saharan africa.indd 5

Investment and trade agreements With investments of US$19bn, Malaysia was Africa’s most important Asian investor in 2011, ahead of China and India in terms of the size of its foreign direct investment.

However, by 2020, the country’s investment in the region has fallen behind neighbours such as Indonesia and Singapore.

Singaporean food processing and investment holding company Wilmar International, for example, has oils and fats operations in African countries ranging from oil palm plantations, mills, refineries and food manufacturing.

Indonesian food company Indofood’s Indomie instant noodle, which uses palm oil as an ingredient, has become a household name in Nigeria. PT Indofood Sukses Makmur partnered with Nigerian food company Dufil Prima Foods in the late 1980s to open the country’s first instant noodle factory. Today, the company runs the largest instant noodle factory in Africa, generating more than US$600M/year.

Palm oil operators wishing to capture more market share in the region’s oils and fats business will need to consider setting up joint ventures, or investing in storage, bulking and manufacturing facilities. The hotel, restaurant and catering (HORECA) sector is another area that is fast growing and could yield a high return.

Free trade agreements Free trade agreements have grown in importance and scope throughout the years and do not just reduce and eliminate tariffs, but also help address barriers that would otherwise impede the flow of goods and services.

The Indonesian government signed a Preferential Trade Agreement (PTA) with Mozambique in 2019, removing tariffs for hundreds of products to boost trade volume between the two nations. In addition, Indonesia is negotiating with the Southern African Customs Union (SACU), which includes South Africa, over a possible PTA designed to lower tariffs. South Africa is also open to exploring the possibility of forming a PTA with Indonesia if the progress of the Indonesia-SACU PTA encounters obstacles.

In contrast, Malaysia does not have free trade agreements with any African countries.

African Continental Free Trade Area (AfCFTA) AfCFTA is a free trade agreement set to be the largest in the world, with 54 out of 55 African countries having signed the agreement.

AfCFTA will cover more than 1.2bn people and over US$3tr in GDP. According to the World Bank, with the implementation of AfCFTA, trade facilitation measures to cut red tape and simplify custom procedures will drive US$292bn of the US$450bn in potential income gains.

Negotiations on the tariff schedule for AfCFTA are still ongoing and it is foreseeable that implementation could be postponed due to the COVID-19 pandemic and with only 35 out of 54 countries having ratified the agreement as of February this year.

With the introduction of the agreement, palm oil consumption could increase as trade barriers intra-Africa are removed and new market opportunities emerge, especially the export of palm oil into land-locked countries.

Countries such as South Africa, Côte d’Ivoire, Togo, Benin, Kenya and Senegal are expected to become major re-export destinations in the region due to low import tariffs and easy accessibility via land borders.

According to McKinsey, 100 cities in Africa are expected to have populations of one million by 2025 and the total population of the continent could double from the current 1bn population by 2030. The surge in population as well as the introduction of the agreement will greatly boost the demand for Fast-Moving Consumer Goods (FMCG) products, which could enjoy booming demand as trade barriers intra-Africa are removed.

Goods produced under the umbrella of Special Economic Zones (SEZs) could also enjoy the full benefit of the agreement provided that companies adhere to local customs requirements and regulations.

This presents a good opportunity for palm oil refining and re-exports to neighbouring countries. Examples of SEZs located in Sub-Saharan Africa are the Dakar Integrated Special Economic Zone (Senegal), Coega Special Economic Zone (South Africa), and Kigoma Special Economic Zone (Tanzania).

Malaysian Palm Oil Council www.ofimagazine.com

28/07/2021 09:35:31

STATISTICS STATISTICAL NEWS Rapeseed oil prices The Mintec benchmark price for EU rapeseed oil rose 11.9% month-on-month to €1,165/tonne on 14 July while the EU rapeseed price rose 8.4% month-on-month to €535/MT. This was a significant recovery from earlier price volatility (due to continued uncertainty over COVID resurgence) shaking confidence in the rapeseed market.

Rapeseed oil prices were down to €1,015/tonne on 21 June, the lowest level since the first week of March.

Rapeseed production is expected to grow year-on-year in the 2021/22 marketing year, which commences in July for the EU and August for Canada.

The main drivers for rapeseed demand continue to be COVID recovery-related, in line with vaccine rollouts.

China’s demand for rapeseed meal to fuel its hog herd recovery will also support prices.

EU rapeseed oil and vegetable oil prices (€/tonne)

Global soyabean supply and demand

The Mintec benchmark price for EU soyabean oil (Netherlands) climbed 1.7% m-o-m to €1,190/tonne on 14 July, while prices for US soyabeans fell 2.48% to US$496/tonne over the same period.

Prices have fallen since mid-May, following volatility in the wider vegetable oils sector after a rise in global coronavirus cases since second quarter 2021.

Prices had previously climbed after US president Joe Biden’s announcement aiming to halve US greenhouse emission by 2030. Many market participants had questioned the viability of this target due to vegetable oil prices surging over the past year. In June, the US Supreme Court also gave smaller refineries exemptions from biofuel blending requirements, in turn reducing demand for soyabeans and soyabean oil, key feedstocks for biodiesel production. The ruling has weighed on the market accordingly. Chinese demand for soyabean meal to feed its recovering hog herd will counteract some of the current demand weakness over the coming months.

On the supply side, a significantly larger crop volume is expected in the 2021/22 marketing year, with global production forecast to climb 6% y-o-y to 385M tonnes, which will limit the upside for soyabean and soyabean oil.

Global soyabean supply and demand (million tonnes)

Castor seed and oil prices

Castor seed and oil prices (Indian rupees/tonne)

Prices of selected oils (US$/tonne) Soyabean Crude palm Palm olein

Jan 21

Feb 21

Mar 21

Apr 21

May 21

Jun 21

1,053.2

1,075.1

1,222.0

915.9

974.0

1,045.5

1,369.2

1,427.1

1,352.6

1,000.1

1,128.9

1,021.8

875.1

911.6

985.5

921.6

1,046.6

943.8

Coconut

1,458.2

1,435.0

1,528.0

1,554.0

1,633.9

1,580.5

Rapeseed

1,092.5

1,131.6

1,218.2

1,339.1

1,386.6

1,302.0

Sunflower

1,298.5

1,385.9

1,637.6

1,589.4

1,595.0

1,314.5

Palm kernel

1,345.2

1,335.7

1,434.2

1,430.4

1,464.1

1,355.0

Average

1,148.0

1,178.0

1,296.0

1,315.0

1,383.0

1,267.0

272.0

279.0

307.0

312.0

328.0

300.0

Index

32 OFI – JULY/AUGUST 2021

Stats July.Aug.indd 1

The Indian castor seed spot price rose 2.84% m-o-m to INR54,250 (US$723)/ tonne on 14 July, while the Indian castor oil price climbed 2.76% to INR111,500 (US$1,486)/tonne over the same period. Prices were supported by strong export demand during second quarter 2021, which has exacerbated tighter supply (down 3% y-o-y) in the current marketing year. Prices are likely to remain flat to slightly higher over the next month.

Mintec provides independent insight and data to help companies make informed commercial decisions.

Tel: +44 (0)1628 851313 E-mail: sales@mintecglobal.com Website: www.mintecglobal.com

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27/07/2021 11:14:57

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