OFI March-September 2021 Feedstocks Online Edition by Quartz Business Media

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OILS & FATS INTERNATIONAL ONLINE EDITION MARCH – SEPTEMBER 2021

SOYABEAN OIL A COVID success story

PALM OIL

Riding the price rollercoaster

COCONUT OIL Keeping up with demand

Feedstocks Online Edition Cover March-Sept 2021.indd 1

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CONTENTS

FEEDSTOCKS ONLINE EDITION MARCH-SEPTEMBER 2021 OILS & FATS INTERNATIONAL

Coconut Oil

FEATURES

EDITORIAL: Editor: Serena Lim serenalim@quartzltd.com +44 (0)1737 855066 Assistant Editor: Gill Langham gilllangham@quartzltd.com +44 (0)1737 855157

Photo: Adobe Stock

Soyabeans

SALES: Sales Manager: Mark Winthrop-Wallace markww@quartzltd.com +44 (0)1737 855114

Photo: Adobe Stock

Sales Consultant: Anita Revis anitarevis@quartzltd.com +44 (0)1737 855068 PRODUCTION: Production Editor: Carol Baird carolbaird@quartzltd.com CORPORATE: Managing Director: Tony Crinion tony crinion@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

A COVID success story Sales of soyabean oil globally expanded during the COVID-19 pandemic. Is this trend set to continue?

Keeping up with demand The coconut oil industry is struggling to keep up with a surge in global demand and industry leaders say urgent action is needed to promote a sustainable sector

Camelina

Time to take stock Successful ﬁeld trials have been run in the UK to source omega-3 oil from genetically modiﬁed camelina

Palm Oil

Speciality Fats

Photo: Adobe Stock

A member of FOSFA Oils & Fats International (USPS No: 020-747) is published eight times/year by Quartz Business Media Ltd and distributed in the USA by DSW, 75 Aberdeen Road, Emigsville PA 17318-0437. Periodicals postage paid at Emigsville, PA. POSTMASTER: Send address changes to Oils & Fats c/o PO Box 437, Emigsville, PA 17318-0437 Published by Quartz Business Media Ltd Quartz House, 20 Clarendon Road, Redhill, Surrey RH1 1QX, UK oilsandfats@quartzltd.com +44 (0)1737 855000 Printed by Pensord Press, Gwent, Wales

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Oils & Fats International

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Riding the price rollercoaster Despite the global COVID pandemic, palm oil prices have remained high. Will they maintain their level and what is the outlook for 2021?

Palm Oil

Africa’s oil palm sector Palm oil accounts for some 70% of edible oil consumption in Africa but challenges face companies involved in developing the crop on the continent

Pioneer in exotic butters India’s Manorama Industries supplies speciality fats from tree-borne butter seeds, such as sal and kokum to confectionery companies worldwide

STATISTICS Statistics

Statistical data from Mintec

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Science behind Technolog y

A COVID success story Sales of soyabean oil expanded during the COVID-19 pandemic, with biodiesel use growing in the USA and imports increasing in key markets such as South Korea and India. Is this trend set to continue? Diana Yordanova With global markets and daily consumer habits disrupted for more than a year due to the ongoing global COVID-19 pandemic, some oils and fats sales have grown – and a key example is soyabean oil. This is true worldwide, from North and South America, to Africa, Asia, and Europe. In the USA, where soyabean oil has historically been the largest feedstock for biodiesel in volume and market share terms, this key use expanded still further in 2020. Figures from the US Energy Information Administration (EIA) show that in May 2020, 805M pounds of soyabeans were used as biodiesel feedstock; compared to 659M pounds in May 2019. COVID-19 lockdowns are the reason why. “Declining restaurant traffic and

structurally lower demand in the HRI [hotel, restaurant, institutional food service] sector limited the availability of yellow grease or used cooking oil as a feedstock,” vice president of market intelligence for the United Soybean Board and the US Soybean Export Council (USSEC), Mac Marshall told Oils & Fats International. Waste oil collections were disrupted by the disease and meat plants – major suppliers of biodiesel feedstock – were shut down because of COVID outbreaks. “In the early stages of the pandemic, pork processing was operating at significantly reduced capacity, which limited the availability of white grease as a feedstock,” explains Marshall. William McNair, the director of oil and human proteins at the USSEC, adds that soyabean oil sales have also benefited from a positive reputation for health, especially as the pandemic prompted consumers to make healthy dietary choices. This trend has come as concerns rise over the environmental impact of palm oil, affecting its sales. As a result, soyabean oil prices have risen to levels not seen since 2014. In January 2021, the oil’s US sales price reached a record US$0.45/lb (453g) compared with US$0.24/lb in April 2020 when the coronavirus had started spreading, United States Department of Agriculture (USDA) statistics show.

Photo: United Soybean Board

SOYABEAN OIL

Looking at world soyabean oil demand, the US government reported that 59.6M tonnes were sold worldwide during the October 2019-September 2020 marketing year (MY), compared with 56.7M tonnes for the same period in the previous year. This has been good news for American producers. “Last season (MY2019/2020), the US exported record levels of soyabean oil, primarily to South Korea and throughout Central America,” says Marshall. “Domestically, 2020 was a record year for crush volumes and the production of oil has increased. “Through November 2020, US soyabean oil production is up 2.8% over 2019,” says Marshall. And sales may continue to rise, notes McNair, given that the US and European economies continue to be depressed by COVID-19 while other regions, notably in east Asia, have started living a relatively normal life, with standard consumer consumption.

Fluctuating market in China

The USSEC programme manager for human utilisation focusing on the ‘greater’ China region (including Taiwan), Jinrong Qian, confirms that tight supply has caused the Chinese soyabean oil market in 2020 to ﬂuctuate. In the early stage of the pandemic outbreak, China’s demand and imports u dropped. Demand for biodiesel was

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SOYABEAN OIL u depressed by low crude oil prices due to a price war between Saudi Arabia and Russia. “This hit soyabean oil and palm oil future prices hard,” she says. Delayed South American soyabean imports disrupted by COVID-19 further complicated the situation. “In addition, diplomatic pressures have also disrupted supplies, for instance between China and Canada, over the extradition hearings (at America’s request) in Vancouver of Meng Wanzhou, the CFO of Chinese tech giant Huawei,” says Qian. “As China and Canada are in an awkward relationship, rapeseed imports decreased significantly.” Despite the difficulties, the Chinese government claims it is now controlling the pandemic and is focusing on building up its own soyabean oil production, now approaching peak season. According to the Chinese office of USSEC, in 2020, the average price of China’s refined first-grade soyabean oil was CNY6,659 (US$1,035)/tonne, 15% up on 2019 prices.

Higher demand in South Korea

There is a similar story of increased demand for soyabean oil in South Korea, with imports increasing from 351,000 tonnes in 2019 to 391,000 tonnes in 2020, the USSEC country director for North Asia and Korea, Hyung Suk Lee, told Oils & Fats International. Similarly, South Korean soyabean crushing has also gone up from 1.26M tonnes in 2019 to 1.33M tonnes in 2020. As demand for delivered food and pre-cooked meals that only need to be reheated have been on the rise, mayonnaise production (a key soyabean oil consumer) has also increased, Hyung Suk Lee adds.

Indian imports rise

USSEC’s technical consultant for south Asia, Ratan Sharma, highlights that COVID-19 reduced restaurant capacity and restrictions on social gatherings continue to “keep the consumption levels of edible oils low” in India which “in turn will support the downward trend in their imports.” However, soyabean oils have bucked this trend in south Asia as well – with imports to India increasing by almost 10% to 3.4M tonnes for the past year, 300,000 tonnes more than in 2019.

Optimism in Argentina

Such increases in demand are, of course, good news for major soyabean exporters, such as Argentina, where the industry has kept up with expanding orders and is optimistic about future sales. ?? OFI – MARCH/APRIL 2021

‘During this pandemic, soyabean oil has been a consistent and reliable feedstock ’ The president of the Chamber of the Oils Industry of the Argentine Republic and the Cereal Exporters Center, Gustavo Idigoras, says that the sector reacted quickly once trading partners lifted any COVID 19-linked trade restrictions last year. Today, according to statistics from Idigoras, Argentina’s main worldwide buyer of its soyabean oil-based biodiesel is the EU, with an annual quota of 1.2M tonnes. India is also a crucial market for Argentine soyabean oil, with annual purchases usually exceeding 1.5M tonnes. “Currently the international soyabean market is experiencing good prices, sustained by Chinese demand as well as from southeast Asian countries that are increasing their consumption of vegetable proteins. “Argentina is the world’s leading exporter of soyabean oil and meal, and is therefore in a position to promote itself in this growing market,” Idigoras stresses.

Soyabean crush up in Europe

Other producers are benefiting and this includes those in Europe. Statistics from FEDIOL, the EU vegetable oil and protein meal industry association, show that soyabean crush volumes in the EU (and the UK), increased from 13.7M tonnes in 2019 to 14.6M tonnes in 2020. FEDIOL director-general Nathalie Lecocq stresses that “the EU oilseeds processing sector is adaptive to market changes. In this case, it has responded to increased demand for soyabean meal in the EU, with increased soyabean crushing, thereby producing more soyabean oil.” Imports to Europe, however, have been steady. EU and UK imports of soyabean oil for 2019 were 1.2M tonnes, worth €833M ($1bn). For January-October 2020, (excluding the UK), imports totalled 958,000 tonnes, worth more than €677M (US$820M). A note from Polish agro-supplies company AGRO-V said in 2019-2020 that the volume of its imports of soyabean oil to Poland significantly increased – up to 33% of all imports handled by the company. But the proportion of trades covered by

deliveries to other EU countries decreased from 45% to 32% of its total sales, adds AGRO-V.

Future growth?

Will this general global expansion of soyabean oil production and sales continue, post-COVID? A majority of market commentators think it will, at least in the shorter term. “If the pandemic has taught us anything, it is the importance of ensuring continued supply throughout the value chain – and during this pandemic, soyabean oil has been a consistent and reliable feedstock,” says Marshall. His colleague, McNair, stresses that soyabean is a versatile crop, also used for meat production, alternative food (non-meat) products and animal feed – so demand is more reliable, encouraging largescale production. This will only be augmented by growing demand for soyabean oil as biodiesel feedstock. And demand for new high oleic soybean oil (HOSO) – with qualities competing with olive oil and offering an extended shelf life – is growing in the USA and Canada, where it is being considered by large fast-food chains. South Korea’s soyabean oil consumption forecasts for 2021 are also positive, says Hyung Suk Lee. And Idigoras stresses that Argentina has sufficient crushing capacity to increase production and exports as internal consumption remains rather low. His country is “in a position to compete in the scenario of better prices and higher demands.” Ratan Sharma is less bullish about demand in India, which will depend on how well the government contains COVID-19. In Europe, however, regulatory issues might restrain biodiesel-based consumption. The revised EU Renewable Energy Directive (RED II) is restricting the manufacture of biofuels from food and feed crops, including soyabean-based biodiesel. And with the directive under review again through the European Green Deal programme of the current European Commission (EC), regulatory controls may tighten further. In October 2020, the European Parliament called on the EC to prohibit products that contribute to the destruction of forests, explicitly mentioning soya. But whether such measures have an impact on soyabean oil trade in Europe remains to be seen. Today, soyabean oil prices are still climbing and demand is robust – it would be a good bet that this market will continue to grow worldwide. ● Diana Yordanova is a freelance journalist

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PALM OIL Despite the global COVID-19 pandemic, palm oil prices have rebounded. Will they remain high and what will 2021 production and demand look like? Serena Lim

Global palm oil landscape

Palm oil accounts for 32% or some 75M tonnes of the 234.4M tonnes of oils and fats produced globally (see Figure 1, below right), said Ng. It also accounted for 57% or 54M tonnes of the 95.5M tonnes of oils and fats traded worldwide in 2019. Indonesia and Malaysia are the main global producers of palm oil, accounting for 58% (43M tonnes) and 26% (19M tonnes) of global production respectively in 2019. Indonesia was also responsible for 55% (29.7M tonnes), and Malaysia 34% (18.36M tonnes) of world palm oil exports in 2019. Global demand is split into 70% for food (52.5M tonnes), 20% for biodiesel (15M tonnes) and 10% for oleochemical and other uses (7.5M tonnes).

immediate impacts on oil palms including fresh fruit bunch (FFB) failure and reduced yield and crude palm oil (CPO) output. “It was also clear that the severity of the water deficit would have a lagged impact on yields 12 months later with lower output frompalm drought-strained trees.” Global oil landscape There were also lower prices in 2019 Others 12% Thailand 4%

Malaysia 26%

and, therefore, less fertiliser application, with an expected effect on later yields. However, a year later in June 2020, floods arrived with rainfall at one point 80% higher than normal, washing away roads and creating logistical difficulties in CPO and FFBs to mills. inmoving 2019 Indonesian production in 2020 fell by u

Production

Others 9%

Exports

Guatemala 2% 75.6m MT

Indonesia (58%) + Malaysia (26%) = 84%

54.0m MT

Malaysia 34%

Indonesia 58%

Imports

Indonesia 55%

Indonesia (55%) + Malaysia (34%) = 89% India 19%

Others 52%

54.4m MT

Weather and rainfall

A key factor for the palm oil outlook is weather and rainfall, McGill said. Rainfall was around 60% below average levels between June-September 2019, with

Photo: Adobe Stock

Riding the price rollercoaster

EU 16%

China 13%

India (19%) + China (13%) + EU (16%) = 49%

Figure 1: Global palm oil landscape, 2019

SOURCE: MPOB, CGS-CIMB RESEARCH

Source: Ivy Ng, CGS-CIMB

The year 2020 has been a remarkable and volatile one for crude palm oil (CPO) prices, Dr Julian McGill, head of Southeast Asia at LMC International, told the Virtual POC2020 conference on 27-28 October. Hovering around US$550/tonne in January 2019, the price drifted slowly downwards for the next six months before rising rapidly due to more severe drought concerns in Indonesia, to hit a level of more than US$700/tonne in January 2020 (see Figure 2, p10). Then came COVID-19 lockdowns, leading to prices bottoming out in April 2020. Surprisingly, however, prices rebounded, reaching almost US$700/tonne in October. CPO prices are on track to record their best year since 2017, added Ivy Ng, regional head of agribusiness research at CGS-CIMB. “We have had a global pandemic that has disrupted everyone’s lives and affected many people’s livelihoods, and yet palm oil prices have remained immune to economic chaos,” McGill said. “The question is whether these high prices are justified, will we face a large price correction or will they persist?”

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u 5% compared to the previous year. Malaysia saw an output similar to 2019’s (see Figure 3, below). McGill said this was the first time Indonesia had underperformed against Malaysia. “We have become used to seeing Indonesian output at a structurally higher Monthly Malaysian crude palm oil price, US$/tonne level than Malaysia.” However, as Indonesia’s palm oil industry

has declined,” McGill said. “This means that in the future, Indonesia is going to rely more and more on yields to determine output growth and we can’t expect to see the year-on-year growth in the way we have seen in the past.” Nonetheless, 2021 would see an improvement in palm oil production because the La Niña weather pattern – which brings higher rainfall – meant there would be no problems with insufficient rain.

had expanded, plantations had moved further south into Kalimantan, south Sumatra and Papua, which were further away from the optimal equator area. Indonesia had also had the benefit of quite large volumes of palm oil coming from new areas reaching maturity. “That growth has now slowed as restrictions to new plantings and low prices have meant that expansion in area

The palm oil price rollercoaster

Source: McGill, LMC International, Virtual POC

Malaysian crude palm oil price (US$/tonne)

750 700 650 600 550 500 450

… has reduced palm oil output substantially 400

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

BMD third position

Year on year change in Malaysian and Indonesian palm oil production

2020 in hindsight – are palm oil prices too high?

25%

Source: McGill, LMC International, Virtual POC

20%

10% 5% 0% -5% -10%

2. COVID-19 only palm 2001 reduced 2003 2005 2007 2009 oil 2011exports 2013 2015 briefly 2017 2019 -15%

Indonesia

Malaysia

Monthly exports of crude and refined palm oil from Indonesia and Malaysia by destination

Figure 3: Year-on-year change in Malaysian/Indonesian palm oil production

2.0

6.0

1.5

4.5

1.0

3.0

0.5

1.5

Jan 18

Jul 18 World

Jan 19

Jul 19

China, India and EU

Production of palm oil in both Malaysia and Indonesia has continued despite COVID-19 lockdowns last year. Malaysia introduced movement control orders from 13 March-28 April but the palm oil industry was allowed to operate as it was considered an essential industry, Ng said. The Sabah state government ordered oil palm estates in up to six districts to suspend operations from 25 March-10 April, with around 75% of estates affected between 1-10 April, leading to an estimated 100,000 tonnes of production loss during the 10 days. More recently, Sabah state was placed under a conditional movement control order from 13-26 October and Selangor, Putrajaya and Kuala Lumpur were also placed under conditional movement control orders from 14-27 October but there was no impact on fresh fruit bunch output (FFB) output as plantation activity was considered essential, Ng said. However, Malaysian producers have been impacted by labour shortages due to a freeze in foreign worker permits. In Indonesia, protocols such as temperature checks and movement controls were introduced to prevent the spread of COVID-19 among workers but there were no plans to reduce workers’ hours or activities.

Jan 20

Jul 20

Demand and exports Total palm oil exports (million tonnes)

7.5

0.0

COVID impact on production

2020 in hindsight – are palm oil prices too high?

2.5

0.0

Rest of World

Source: McGill, LMC International, Virtual POC

Year on year change in output

15%

Indonesian and Malaysian exports of palm oil by destination (million tonnes)

PALM OIL

COVID-19 initially impacted palm oil demand due to lockdowns and the decline in eating out. However, palm oil exports only fell briefly, McGill said. China, India and the EU were the main markets for palm oil, and exports to these three countries fell more dramatically, with India and China’s strict lockdowns and restaurant closures hitting palm oil use in frying and catering (see Figure 4, left). India’s imports of palm oil products (RBD palm oil, CPO + CP olein + CPKO) fell to a low of 335,000 tonnes in March 2020 compared with 802,000 tonnes in March 2019 but rebounded to 734,000 tonnes in August 2020, Ng added. However, consumption returned once

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PALM OIL Rising share of biodiesel in palm oil usage (m tonnes) 100.0

10-year CAGR : 5.6%

40.0 20.0

42.6

37.7

10-year CAGR : 18.0%

2007

2008

2009

2010

9.0

7.0

4.9

4.1

3.4

2.3

1.4

59.5

57.8

52.4

47.9

46.4

45.2

71.5

2011

2012

Total palm oil usage

2013

10.1 2014

2015

2016

14.3

11.1

10.7

8.6

2017

2018

40% 28%

30% 25% 20% 15% 10% 5% 0%

14% 4% 2007

16%

2008

32%

16%

17%

2013

2014

29%

31%

17%

2016

2017

22%

21%

13%

10%

2009

2010

2011

17.7 2019

Palm oil used as biodiesel feedstock

45% 35%

77.6

Source: Oil World, CGS-CIMB, Ivy Ng, Virutal POC

60.0

65.3

62.6

60.9

2012

Palm oil's share of feedstock used for biodiesel

14%

2015

35%

20%

2018

39%

23%

2019

Palm oil used in biodiesel as a % of total palm oil consumption

SOURCE: OIL WORLD, CGS-CIMB RESEARCH

Figure 5: Rising share of biodiesel in palm oil usage

Global palm oil production prospects 68.3

80.0 70.0 60.0 50.0 40.0

63.1 1.2 2.4 3.9 2.1

33.5

30.0

59.5

1.6 2.6 4.8 2.6

1.4 2.5 4.1 1.8

36.8

74.3

75.7

1.3 2.7 5.0 2.8

1.3 2.7 5.1 3.1

74.7 1.3 2.7 5.2 3.0

77.4 1.4 2.8 5.3 3.1

43.0

43.7

43.0

45.0

32.4

20.0 10.0

20.0

17.3

19.9

19.5

19.8

19.5

19.8

2015

2016

2017

2018

2019

2020F

2021F

Malaysia

Indonesia

Thailand

C&S America

Africa

Others

SOURCE: MPOB, OILWORLD, CGS-CIMB RESEARCH

Figure 6: Global palm oil production prospects (million tonnes)

u lockdowns were lifted and India and China also resumed imports in order to replenish stocks. India also started buying palm oil from Malaysia again in May after a four-month diplomatic row over Indian government policy on Muslims, McGill said. “In addition, food use is not the only use for palm oil,” McGill said. “There is biodiesel as well.” According to Ng, the use of palm oil in biodiesel as a percentage of total palm oil consumption has risen from 4% in 2007 to 23% in 2019 (see Figure 5, above). “COVID-19 lockdowns dramatically reduced travel, resulting in much lower demand for jet fuel, gasoline and diesel,” said McGill. As biofuels were mostly blended with transport fuel, this reduced biofuel demand worldwide. While jet fuel demand remained low, the fall in diesel demand was not so dramatic as the fuel was used in heavy goods vehicles which continued deliveries. “In a surprising twist, the reduced availability of waste feedstocks (such as used cooking oil and animal fats) in

the USA and EU meant that demand for vegetable oil methyl esters actually increased,” McGill said. When looking at feedstocks for US biodiesel, for example, corn oil fell because it is a co-product of ethanol production, which also decreased. The availability of yellow grease or used cooking oil (UCO) declined because people were not eating out as much. Animal fat feedstock also declined due to COVID-19 outbreaks at slaughterhouses and meat packing plants. “The remarkable impact has been that soyabean oil use in biodiesel has increased,” McGill said. The situation in Europe was similar but more extreme because of the EU’s policy of double-counting waste biodiesel feedstocks. Because UCO became less available due to the fall in eating out, 1M tonne of UCO biodiesel feedstock needed to be replaced by 2M tonnes of vegetable oil, increasing demand for vegetable oil for biodiesel, and palm oil usage, McGill said.

Source: MPOB, Oil World, CGS-CIMB, Ivy Ng, Virutal POC

80.0

Biodiesel effect

Another key factor in determining future palm oil demand will be the price spread between crude petroleum oil prices and vegetable oil prices. With diesel prices down and CPO prices high, it becomes uneconomical to blend palm oil into biodiesel, according to Ng. Indonesia expanded its biodiesel mandate to a 30% blend from 20% effective 1 January 2020. “B30 could translate to an incremental demand of up to 2.5M tonnes for CPO, or 6% of Indonesia’s output. Something to watch out for is whether B30 can be sustained, as the CPO funds to support Indonesia’s biodiesel programme may not be sufficient due to the wider CPO premium over gas oil,” Ng said. McGill added that Argentina and Brazil had already lowered their biodiesel mandates because they could not fund their biodiesel programmes at such high costs.

Future prospects

Despite the huge shock from COVID-19 on people’s eating habits and livelihoods, vegetable oil prices rallied from June 2020, said McGill. “COVID-19 reduced palm oil demand, but only in China and India and during a period of relatively low CPO availability. Once the lockdowns eased, demand returned.” The virus also led to lower diesel, and therefore, biodiesel usage but the use of vegetable oils in the USA and EU rose to compensate for the lower availability of waste feedstocks. “Droughts in 2019 followed by floods in 2020 have meant lower Indonesian palm output while droughts in the Black Sea region have also limited sunflower and rapeseed production. The result of this has been to keep prices elevated.” As for 2021, Ng expects Indonesian palm oil production to recover by 2-3M tonnes (see Figure 6, above left). “Overall, we project global palm oil supply will be lower by 1M tonnes in 2020 before recovering by 2.7M tonnes in 2021.” A rebound in global GDP post COVID-19 and low stocks in consuming countries boded well for palm oil demand in 2021. Ng said demand was expected to drop by 2M tonnes in 2020 before growing by 3M tonnes in 2021. A widening CPO price discount against other edible oils supported demand, with Chinese imports and Indonesian usage of palm oil for biodiesel being key factors to watch out for, she concluded.  Serena Lim is the editor of OFI

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PALM OIL

Africa’s oil palm sector

Long before palm oil ﬂourished in the humid tropics of Malaysia and Indonesia, West Africa was home to the crop, according to former Roundtable on Sustainable Palm Oil (RSPO) CEO Datuk Darrel Webber. Evidence of palm oil’s use as a staple food crop dates back as far as 5,000 years. “Palm oil provided a vital food source for local communities and was one of the region’s earliest traded commodities.” Throughout the 1800s, British traders imported African palm oil, using it for a growing number of products, from soap to margarine to candles, according to National Geographic. Once scientists discovered how to isolate glycerine from the oil, its applications multiplied to take in pharmaceuticals, photographic ﬁlm, perfume and even dynamite. By the turn of the 20th century, oil palms had been shipped to Malaysia and Indonesia, and commercial plantations began to take hold there. Today, the two Asian countries are the largest palm oil producers in the world, while the oil palm sector in Africa remains largely overlooked.

Outdated views

“What comes to mind when you think of palm oil in Africa?” Akwaaba Ventures director Ranveer Chauhan asked delegates at the International Palm Oil Congress and Exhibition (PIPOC) in 2019. He said some outdated views included: • The oil palm sector does not even exist • Maybe there are just natural groves and all palm oil is imported • Africa is too primitive for sustainability initiatives • The continent is not ready for investments or partnerships Africa, however, is not only the original

Photo: Ranveer Chauhan, PIPOC 2019

Palm oil accounts for some 70% of edible oil consumption in Africa, with around 22M ha of land available to convert to oil palm plantations. However, challenges face companies and communities involved in developing the crop on the continent Serena Lim

home of the oil palm tree (Elaeis guineensis), it is the only consumer of the unreﬁned red palm oil, Chauhan said. “Palm oil is the largest edible oil produced, imported and consumed in African markets today.” Palm oil accounts for around 70% of edible oil consumption in Africa and it is estimated that up to 22M ha of land in West and Central Africa could be converted to oil palm plantations by 2021, says Webber. According to Chauhan, there are 19 countries lying in the equatorial zone where palm oil can be produced (see map, p16). Eleven of these countries are best suited for foreign direct investment (FDI), having enough suitable available agricultural land, rural labour, and existing markets serviced through imports. The countries marked in dark green on the map indicate where foreign investment can be made while light green nations show where local investment should be boosted. Of the 19 countries, Nigeria is the biggest producer and consumer of palm oil. Nigeria produces around 1M tonnes/year of palm oil. Its government announced in June 2019 that it was planning to invest 180bn naira (US$500M) to increase palm oil production to 5M tonnes/year by 2027 by oﬀering low interest loans to farmers and erecting barriers on crude palm oil imports, a Bloomberg report says.

Nigeria ranks third in the world in terms of land area planted with oil palm but it is only the ﬁfth largest palm oil producer due to low yields as much of its oil palm cultivation is grown by smallholders. The policy aims to double the oil palm planted area from 3M ha to 6M ha to meet all of the country’s domestic palm oil demand by 2027. Nigeria spent about US$500M importing 600,000 tonnes of palm oil in 2018, Bloomberg says. Africa also imports much of its edible oil needs, consuming some 10-12M tonnes/ year and producing around 4M tonnes/ year, Chauhan told the PIPOC 2019 conference. This level of consumption is “dangerously low” and the market should be consuming some 25M tonnes/year to achieve healthy levels, he said.

Investment challenges

Factors supportive of edible oil consumption growth in Africa are its urban population growth of 50% and its upward GDP per capita growth. “Africa also has the fastest population growth in the world today,” Chauhan said. However, as Africa becomes the new frontier of industrial palm oil production, many challenges remain for the companies and communities involved. “Investment and expansion in palm  oil is growing – and growing fast – in

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AFRICA: THE OIL PALM SPACES PALM OIL

10 Deg N

Guinea Bissau

Nigeria Togo Central Ivory Sierra African Coast Benin Leone Ghana Republic Liberia Cameroon Equatorial Ghana Guinea Rep. of Congo Gabon Dem. Rep. of Congo

Ethiopia Uganda

Tanzania

10 Deg S Source: Ranveer Chauhan, PIPOC 2019

 Africa,” the Guardian newspaper reported Abraham Baffoe, Africa regional director of NGO Proforest, as saying back in 2016. “If palm is planned and implemented very well, then it has the potential to provide Deg N – but if jobs and economic 10 development planning and implementation is poor, it has the potential to create deforestation, loss of habitat and loss of livelihood in local communities.” In Africa, an estimated 3M ha of land “traditionally used or inhabited by local communities” – covering both forest and farmland – have been acquired by palm 10 Deg S Kuyek, oil companies, according to Devlin a researcher with non-profit farmers organisation GRAIN. That is in line with an Economist report in 2014 which said that in the past decade, politicians in West Africa and countries of the Congo basin had leased out around 1.8M ha of land for palm oil plantations, with interested companies including Wilmar International, Olam International, Sime Darby, Golden Veroleum Liberia (GVL) and Equatorial Palm Oil, according to a March 2019 report published by non-profit media outlet Ensia. Negative reports have included those from Liberia’s Sinoe County, where residents say that since the palm oil company GVL arrived in 2010, crops have been destroyed, shrines desecrated, burial grounds and grave sites denigrated, rivers diverted or dammed, and precious wetland areas polluted, the Ensia report said. In Sierra Leone, a court ruling in November 2018 ordered Singapore-based palm oil company Siva Group to return land to the community and pay hundreds of thousands of dollars in unpaid rent. Yet also in Sierra Leone, an outgrower model has been developed in which a company operates some land as a plantation but also provides smaller plots of land on which local farmers can cultivate palm trees independently. And while the 2004-established RSPO has come under criticism for not being effective enough, the organisation does serve as a check on companies, says Daniel Krakue of Social Entrepreneurs for Sustainable Development, a non-profit organisation in Liberia. Baffoe said in the Guardian report that the concept of Free Prior and Informed Consent (FPIC) is at the heart of the sustainability agenda for the palm oil industry. The principle – that a community has the right to give or withhold its consent to proposed projects that may affect lands that they customarily own, occupy or use – is now a key doctrine in international law and central to the RSPO’s principles and criteria.

Zambia

AFRICA: THE OIL PALM SPACES Olam International’s palm oil operations in Gabon have been cited as evidence that sustainable palm oil operations can be implemented in Africa.

Olam in Gabon

Olam operates three oil palm plantation areas in the Central African nation of Gabon in a 60:40 joint venture with the government. Situated on the Equator and on Africa’s west coast, more than 76% of Gabon is covered in forest, with 11% of its land area protected in national parks. Recognising the conﬂicting demands on its land, the government embarked on a project few other nations had ever tried – a national land-use plan, National Geographic wrote. Gabon National Parks Service (ANPN) director Professor Lee White oversaw the process of mapping the country’s land and wildlife and determining which areas should be developed for agriculture. In 2011, the government formed a joint venture with Olam, granting it two new oil palm concessions and later selling it an existing plantation in 2016. “Africa had not seen sustainable, large-scale palm developments until OPG successfully planted 31,500ha across two sites (Awala and Mouila) in Gabon,” says Supramaniam Ramasamy, Olam’s president and global head of palm and rubber plantations. “The area planted was even more notable considering that many other palm development projects in the wider

region had suffered major setbacks due to political risks, difficulty in securing large land banks without encumbrances, community issues and unclear policies.” In November 2019, Olam announced that its Makouke plantation was its fourth to become RSPO certified. “The certification strengthens Olam’s leadership as the largest certified producer in Africa with production capacity of 92,000 tonnes of certified sustainable palm oil (CSPO), 16,866 tonnes of certified sustainable palm kernel (CSPK) and 6,500 tonnes of certified sustainable palm kernel oil (CSPKO),” Olam said at the time. Today, the Olam Palm Gabon (OPG) partnership has 112,455ha of RSPO certified oil palm plantations and 99,000ha of High Conservation Value forest, wetlands and savannah permanently protected, according to Olam’s 2019 annual report. The company is committed to no further development or expansion of new plantations until all its plantations achieve full RSPO certification this year. OPG also operates two palm oil mills, one kernel crushing plant and an edible oil refinery producing cooking oil and soap, sold to Gabonese consumers. “What we’re trying to do in Gabon is find a new development path where we don’t cut all our forest down but keep a balance between oil palm, agriculture and forest preservation,” Prof White told National Geographic.  Serena Lim is the editor of OFI

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COCONUT OIL The coconut oil industry is struggling to keep up with a surge in global demand and industry leaders say urgent action is needed to promote a sustainable sector Gill Langham Coconut oil has a wide range of uses in the food, personal care and industrial sectors and the growing adoption of virgin coconut oil (VCO) in food and drink production is driving the market. As well as being a food ingredient, VCO also has the potential to be used as an immune system booster against COVID-19, according to the International Coconut Community (ICC), an intergovernmental organisation of coconut producing countries. “The COVID-19 situation has increased the demand for VCO in the Philippines, in particular among those with mild infections,” says Dr Fabian Dayrit, chairman of the ICC Scientific Advisory Committee on Health. The global virgin coconut oil market stood at US$2.7bn in 2018 and was forecast to reach US$4.7bn by 2024, an industry report by Report Buyer says. Meanwhile, coconut oil prices were hovering around US$1,000/tonne in September 2020, according to Index Mundi, and a Market Watch report projected that the global coconut oil market would reach US$5.5bn by 2026 from US$4.3bn in 2020. However, the coconut sector is struggling to keep up with global demand. Coconut farms tend to be monoculture and increasing tree senility raises concerns for the future. In terms of coconut oil, global production in 2019/20 is projected at 3.62M tonnes, according to forecasts by Statista. This figure has remained relatively unchanged since 2017 when production was 3.61M tonnes, according to the ICC. “The market is expanding at an exponential rate, especially for high value products, and production is decreasing,” said Dr Pons Batugal, chairman of the ICC’s Technical Working Group and president and board chair of the Farmers Community Development Foundation International (FCDF). Speaking at a webinar hosted by the Coconut Coalition of the Americas (CCA) on 8 October 2020, Dr Batugal joined a panel of industry experts to discuss

Keeping up with d the current status of the sector and the challenges it faces. “The industry and coconut farmers both need to be urgently assisted to make the coconut industry sustainable,” he said. “Any actions we take to improve the sustainability of the industry should be science-based, technically feasible, financially viable for the user, socially acceptable and environmentally safe.” The objective of such initiatives should be to help farmers increase yields and productivity, reduce production costs, reduce field losses and help them to obtain a fair market price, he said.

Global challenges

Lower production is mainly due to palm senility (the global average of ageing palms is about 50%), typhoons, pests and diseases, drought and a lack of quality materials. “If we don’t replace our senile coconut palm, there is going to be a further decrease in production in the next five to 10 years,” said Dr Batugal. Action needed to rebalance the world coconut situation included replanting 655M senile palms, increasing yields and farm productivity and expanding coconut hectarage, Dr Batugal said. To increase

yields, large-scale replanting was needed using early-bearing, high yielding and disease resistant varieties.

The market

Coconut palm is grown in over 90 countries on around 12.1M ha of land, producing around 69M nuts/year, according to the ICC. The global export value of coconut products in 2019 reached US$11.6bn. The coconut is predominantly a smallholder crop with 92% of businesses run as small operations with farmers growing less than two hectares per family, the ICC said. The Philippines and Indonesia are the world’s largest producers of coconuts and exporters of coconut-based products. Other producers include Malaysia, India and Vietnam. In terms of coconut oil, the Philippines produced more than 1.3M tonnes and exported 951,353 tonnes in 2018, while Indonesia produced 1M tonnes and exported 677,699 tonnes, according to figures in the ICC Coconut Statistical Yearbook 2018. The area under coconut in the Philippines was 3.63Mha in 2018 with an estimated 347M bearing coconut trees. In

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COCONUT OIL

Photo: Adobe Stock

The coconut is predominantly a smallholder crop – 92% of businesses run as small operations, with farmers growing less than two hectares per family

h demand Indonesia, the coconut plantation area has declined from around 3.65Mha in 2013 to 3.42Mha in 2018.

Palm/coconut debate

Coconuts are a multi-product resource, have a low environmental impact and do not generally require pesticides and herbicides. However, the sustainability of the coconut industry has been the subject of recent debate after a study stating that coconut oil production posed a threat to biodiversity five times greater than palm oil. This sparked a heated discussion on social media. Critics of the paper, published in Current Biology in July 2020, accused the authors of promoting dubious statistics and attempting to whitewash palm oil production. The study said around 12.3ha of land were used to cultivate coconut palms compared with 18.9M ha for palm oil. However, coconut oil had a much better reputation, according to lead author Erik Meijaard, who directs Brunei-based consulting company Borneo Futures and chairs the Palm Oil Task Force of the International Union for Conservation of Nature (ICUN). That reputation wasn’t deserved,

Meijaard and others wrote in the twopage document. The authors calculated the number of species under threat from the cultivation of seven vegetable oil crops and divided those by the global oil production for each crop. Coconut threatened 20.3 species for every 1M tonnes of oil produced, they reported, while for olive oil and palm oil, the figures were 4.1M and 3.8M species respectively. Later the figure for coconut oil was revised to 18.3. “The outcome of our study came as a surprise,” Meijaard said. The reason was that coconuts were primarily grown on tropical islands, “many of which possess remarkable numbers of species found nowhere else in the world,” he said. In its response to the article, the ICC said the paper was limited as its conclusions were based only on commercially-traded coconut oil and ignored the fact that a significant amount of the coconut harvest is used locally in food, drink and other household products. “The coconut is a smallholder crop. Thus, unlike other large-scale plantation crops, there is no need to destroy forests that kill indigenous crops and animals to establish crops,” the ICC statement said. According to the ICC’s Dr Dayrit, the comparison between coconut and palm oil was a “false comparison”. “I do not doubt that the palm tree is very productive but comparing it with the coconut based on oil production alone is misleading and plays into the hands of the palm industry,” he said.

Working together

All the speakers at the CCA webinar agreed that collaboration across companies and countries was the key to sharing sustainability solutions. “It’s about building a coalition of leading brands and buyers of coconut products that want to support sustainability and transparency,” said Keith Agoada, co-founder and CEO of digital global marketplace Producers Market. The ICC is active in R&D networking and knowledge and technology transfer programmes. A number of global companies have launched schemes with other businesses and organisations to improve the sustainability of the coconut oil sector. One such partnership between BASF, Cargill, Procter & Gamble (P&G) and the Deutsche Gessellschaft für Internationale

Zusammenarbeit (GIZ) developed a project for certified sustainable coconut oil production in the Philippines and Indonesia. The Sustainable Certified Coconut Oil (SCNO) production scheme trained more than 4,100 coconut farmers in Good Agricultural and Processing Practices (GAP) as well as Farm Management practices between November 2015 and October 2019. About 1,600 farmers also received additional training and had been certified against the Rainforest Alliance Sustainable Agriculture Standard. Certified coconut farmers harvested more and productivity was 26% higher in comparison to non-involved farmers. The first Rainforest Alliance Certified coconut oil was produced in 2018 with the support of the SCNO partnership. “We have reached an important milestone on the way to establish certified sustainable supply chains and improve the livelihoods of smallholder farmers,” said Ina Boos, BASF project manager, sustainable certified coconut oil. Coconut oil is an important ingredient for leading chocolate and cocoa product company Barry Callebaut Group which is aiming to have 100% sustainable ingredients in all its products by 2025. “Sustainability in the coconut sector is an important concern to us. This is why we initiated the Roundtable on Sustainable Coconut and Coconut Oil, with our partner USAID Green Invest Asia in 2019,” the company’s director of global ingredients sustainability Oliver von Hagen said. “A key result of the roundtable is a Sustainable Coconut Charter, a common approach to sustainability in the sector.”

The future

The ICC says it will continue to work with its members to improve the sustainability of the entire coconut sector. Initiatives include inter-cropping, improving yields, coalitions, educational schemes and the creation of coconutbased ecotourism sites. Dr Batugal stressed that the benefits of any sustainability schemes should benefit the farmers as well as the wider industry. “The coconut farmers are the foundation of the industry. We need to develop a holistic approach and integrate all the interventions, if possible, within the farming communities.” ● Gill Langham is the assistant editor of OFI

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Photo: Rothamsted Research

CAMELINA

Time to take stock With global fish stocks dwindling, researchers have intensified their efforts to find alternative sources of fish oils. A team at Rothamsted Research in the UK has run successful field trials sourcing omega-3 oil from genetically modified camelina Gill Langham

The rise in demand for fish oils, with the sector currently estimated to be worth more than £5bn/year globally, is driving research into new sources of fatty acids. Omega-3 long chain polyunsaturated fatty acids (LC-PUFAs), specifically eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA), have been shown to be beneficial for human health and help protect against coronary heart disease. The primary dietary sources of EPA and DHA are marine fish, from wild stocks or farmed fish (aquaculture). Fish, like humans, do not produce these oils but accumulate them through their diet in the wild or through fish meal and fish oil in farmed fish. Around 80% of all fish oil is consumed by the aquaculture sector. The aquaculture industry is seeking new sources of omega-3 LC-PUFAs to ensure its production practices remain sustainable and to nurture the essential aquatic food web. One potential approach is to engineer a crop plant with the capacity to synthesise the fatty acids. The team at Rothamsted Research,

led by Omega-3 Flagship leader Prof Johnathan Napier, has spent nearly two decades working to meet this demand.

Promising results

In the trials, the Rothamsted team isolated the genes in marine microorganisms responsible for biosynthesis of omega-3 and identified Camelina sativa, one of Europe’s oldest oilseed crops, as a plant host. Recently published peer-reviewed results have been promising, showing that the accumulation of EPA and DHA in the seed oil of Rothamsted’s GM camelina is stable, and importantly, the crop performs well in different environments and geographical locations. “Current sources of EPA and DHA, the omega-3 long chain polyunsaturated fatty acids found in fish oils are at the maximum sustainable levels, yet the demand for these fatty acids is ever-increasing, mainly due to the needs of aquaculture. “We have developed a GM plant which makes EPA and DHA and believe it could fill the gap in omega-3 supply and demand,” says Prof Napier. “Our current plant lines already produce u

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CAMELINA

The use of GM

Rothamsted has been running field trials since 2014, and these have been getting progressively bigger each year. For example, in 2017 trials totalling over 40,000m² were carried out in the UK, the USA and Canada. In 2019, the UK trial was over 4,500m², compared with less than 200m² in 2014. GM technology was used for the oilseed, explains Prof Napier, as there are no plants that normally make EPA and DHA – although many plants make other forms of omega-3 fatty acids, such as ALA. “Unfortunately, ALA does not have the same beneficial properties as EPA and DHA and can’t substitute for them in either aquaculture or human nutrition. “For this reason, we had to use GM technology to enable plants to now make EPA and DHA, by taking the genes from marine algae (which makes EPA and DHA) and putting them in our camelina.” The GM plants were made by using a bacterium called Agrobacterium tumefaciens to add the algal genes to the camelina. Agrobacterium is a natural genetic engineer, since it moves some of its genes from itself into plants, and we take advantage of this to add in our genes to camelina. “We can then select for plants that are making the EPA and DHA omega-3 fish oils in the seed oil and propagate these plants. “The nature of the genetic modification is stable, meaning that seeds from plants have the fish oil trait – as do their offspring, and subsequent generations,” explains Prof Napier. In some plants, the GM trait (the extra

Photo: Rothamsted Research

u over 20% EPA and DHA in their seed oil, and we are continually improving these levels. One potential target would be to have the same EPA/DHA levels as found in a high-quality Southern Hemisphere fish oil and we are already close to achieving that.” The research represents one of the most significant discoveries from the institute in the last 50 years, according to Prof Napier. “If we can successfully make fish oils in plants, as opposed to having to take them from the oceans, this will be a big step forward in further improving the sustainability of aquaculture. “Moreover, because our technology would harness the power and scalability of agriculture, the current constraints on the availability of fish oils would be removed. This means that many more people could have access to these health-beneficial fatty acids.” The Camelina sativa plant has been identified as a source of omega-3 fatty acids, with Rothamsted Research in the UK running successful field trials of its genetically modified line of the oilseed

genes from the algae to make EPA and DHA) were combined with gene-editing (GE). In this case, the aim was to improve the fatty acid composition of the plants by using GE to block a pathway which competes for substrate in the synthesis of polyunsaturated fatty acids.

Rigorous assessments

Rothamsted has not experienced any significant opposition to its GM field trials or its research, according to Prof Napier, but it recognises that some people are opposed to GM technology in general. “One could argue that such opposition is misplaced, given the prevalence of GM in medicines and other aspects of everyday life, but we believe it is a mistake to not respect such views and attempt to better understand them. “We strongly advocate public dialogue as a mechanism to help explore opposing positions and the identification of common ground. In general, many of the concerns relating to GM plants are associated more with globalisation and corporatisation of the food chain, as opposed to specific objections to genetic technologies per se.” As part of the approval process to carry out GM field trials, Prof Napier explains that rigorous independent assessments are undergone to monitor any potential risk to either the environment or human health. “Our GM and GE camelina have undergone such evaluations and are

considered to not pose a risk to the environment,” Prof Napier adds.

A marketable product

The sustainability credentials of a plantbased source of omega-3 fish oils are likely to be superior to those produced by other means, either wild capture of fish or fermentation of algae, says Prof Napier. “A land-based source of these fatty acids would not only reduce the impact on marine fish stocks (such as Peruvian anchovy) which are harvested for these oils, but also reduce the environmental footprint on the oceans. Given the concerns about overfishing and pollution in our oceans, we believe that this is a significant benefit.” However, although the results from the Rothamsted trials are promising, there is still considerable work to be done to move this viable product from the experimental to the commercial phase. “In reality, we are still several years away from being in a position to commercialise this technology. Whilst these experimental field trials are significant advances which serve to validate and de-risk our technology, a major step lies ahead with securing regulatory approval for full-scale cultivation and use as a feed and food. “This would likely be sought in North America, since the regulatory system is well-established and much agriculture in that region already uses GM crops.” ● Gill Langham is the assistant editor of OFI

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SPECIALITY FATS

Pioneer in exotic butters India’s Manorama Industries supplies speciality fats sourced from tree-borne butter seeds, such as sal and kokum, to leading confectionery and cosmetics brands worldwide Serena Lim It might be surprising for consumers buying a skin cream from L’Oréal or a chocolate from Ferrero Rocher to discover that a key ingredient in them may have been supplied by a little-known company in the central Indian state of Chhattisgarh. That company – Manorama Industries – supplies cocoa butter alternatives or speciality fats to some of the biggest players in the confectionery, chocolate and cosmetic markets. "We are the only company in the world that sources sal, mango kernel, mowrah and kokum seeds, plus shea nuts from West Africa, and exports exotic speciality fats and shea- and sal- based cococa butter equivalents," says president Ashish Saraf. The exotic butter seeds are picked from trees or collected from forest floors by the firm’s network of tribal communities. “Manorama pioneered the use of seeds extracted from the fruits lying on the forest floor, which otherwise would have become forest waste,” says chairman K N Agrawal. “We have millions of tribal people – the majority of them women – spread across various states like Chhattisgarh, Jharkhand, Madhya Pradesh and Odisha collecting seeds,” adds Saraf. While the raw materials that Manorama sources come mostly from the forests across five Indian states, the company’s speciality fats find their way to countries worldwide including Australia, China, Denmark, France, Germany, Italy, Indonesia, Japan, Malaysia, the Netherlands, Russia, Saudi Arabia, Singapore, the UK and the USA. Among its list of customers are Italy’s Ferrero and Unigra; France’s Olvea

Manorama has a network of mostly women collecting tree-borne butter seeds from forest ﬂoors spread across various Indian states Photo: Manorama Industries

Vegetables Oils; Germany’s Walter Rau; Japan’s Fuji Oil, Adeka Corp and Mitsui, and Mondelez International. It also supplies cosmetics companies including the Body Shop, L’Oréal, ActivOn, Naturasante LeafMotiv, Gustav Hess, Hallstar, Jedward International, Stearinerie Dubois, FILS and the Kerfoot Group. Exports account for around 43% of Manorama’s sales and increased by 58.45% in the company's 2019/20 financial year. Along with Indian tree-borne butter seeds, Manorama also sources palm kernel oil (PKO) and palm mid fractions (PMF) from Malaysia, and shea nuts from West Africa, through Manorama Africa Ltd (MAL). Located in Tema, Ghana, MAL procures shea nuts in Ghana and also purchases shea nuts from Benin, Burkina Faso, the Ivory Coast, Mali and Togo. In addition, Manorama plans to set up shea processing facilities in Africa to process larger volumes of shea nuts and to make its African operations a 100% subsidiary.

Cocoa butter alternatives

According to Manorama's 2019/20 annual report, worldwide consumption of chocolates is growing and global market leaders include Ferrero, Hershey, Lindt & Sprüngli, Mars, Mondelēz and Nestlé. Europe is the largest regional consumer with 11kg/capita of annual consumption.

Cocoa butter accounts for around 20% of chocolate by volume but 80% of the value, Manorama says. “If 5% of cocoa butter is replaced by a cheaper equivalent, raw material costs will reduce significantly by 6-8%. This would result in a massive cost saving for chocolate manufacturers.” This is why speciality fats or cocoa butter alternatives, which cost around half the price of cocoa butter, are used in an extensive range of bakery, chocolate, confectionery and ice cream products. Manorama says the speciality fats and butter market is expected to set a CAGR of 6.6% (2018–2026) to reach a market value of US$142.1bn by 2026, with high growth expected in the AsiaPacific region. India is also one of the most important CBE markets, with a likely projected consumption of nearly 20,000 tonnes by 2022. "The Indian chocolate market has seen a gradual shift in consumer preference from traditional Indian sweets to contemporary substitutes, of which chocolates are a prominent one. Six of the top 10 global chocolate manufacturers have already entered the Indian chocolate market," Manorama says in its annual report. "Moulded chocolates continue to be the favourite due to their rich taste and ease of availability in neighbourhood kirana shops and convenience stores. u "The increasing tradition of chocolate

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ANNUAL REPORT 2019-20

SPECIALITY FATS

Process Chart are a choice ingredient for manufacturing moulded chocolates which require tempering. In addition, CBSs are preferred in tropical and subtropical countries due to their better heat stability compared to pure chocolate.

Raw Materials Sal / Mango / Shea / Illipe & Other Exotic Seeds

Raw Materials Shea / Illipe

Raw Materials Sal / Mango / Others

Expeller

Cake

Refinery Process

Solvent Extraction Process

Crude Oil

De-oiled Cake (Cattle Feed)

Byproducts / Gums

Refined Butter (NBD Butter)

Fractionation Process Palm Mid Fraction (PMF)

CBE (Cocoa Butter Equivalent)

Blending Process

Stearin

Figure 1: Manorama’s production process for speciality fats ugifting and the fear of adulteration in traditional sweets is also expected to be a major driver for the speciality fats industry." India approved the 5% use of cocoa butter equivalents based on sal, mango and kokum in chocolate in January 2018 and Manorama says it is confident that the government will increase this 5% limit, spurring further industry growth.

Unique chemical composition

Cocoa butter has unique chemical and physical properties which endow chocolates with special edible qualities. It remains hard and brittle at 30˚C and yet melts fully at 35˚C. This rapid transformation is due to cocoa butter’s unique chemical composition, which contains a high proportion of saturated fats, as well as monounsaturated oleic acid. Cocoa butter comprises about 80% symmetrical triglycerides. These are palmitic-oleic-palmitic (POP); palmiticoleic-stearic (POS); and stearic-oleicstearic (SOS) triglycerides. However, as well as its high cost, cocoa butter also has a low milk fat tolerance, lacks stability at elevated temperatures and has a tendency to bloom due to improper storage or age, giving chocolate a whitish appearance on the surface.

Olein

Source: Manorama Industries

Crude Oil

Cocoa Butter Replacers (CBRs) are a confectionery fat formulated from fractionated vegetable fats. They can be used to impart gloss retention and a sharp meltdown to the final product without tempering, and have a high tolerance (up to 20%) for cocoa butter. A CBR can be mixed with cocoa liquor to produce a compound chocolate. CBRs are mainly used in compound coatings and can be used in combination with cocoa butter to product compounds suitable for both coatings and moulding.

Cocoa butter alternatives can improve the physical properties of the fat fraction in chocolate. There are three types of cocoa butter alternatives or speciality fats – cocoa butter equivalents (CBEs), cocoa butter substitutes (CBSs) and cocoa butter replacers (CBRs). Cocoa Butter Equivalents (CBEs) are Manorama’s core product. CBEs behave like cocoa butter in all respects and are able to mix with cocoa butter in any proportion without altering the melting rheological and processing characteristics of cocoa butter. The principle advantages of incorporating CBEs are the reduction in production costs as CBEs are cheaper than cocoa butter. CBEs also offer improved milk fat tolerance and improved stability of chocolates in tropical climates. Cocoa Butter Substitutes (CBSs) are produced by static dry fractionation and total hydrogenation of good-quality palm kernel stearine. They are a nontempering fat with a very sharp melt profile and a high heat cycling stability, melting at around 34˚C with low viscosity in the molten state. Due to the high solid fat content, CBSs have excellent snap, brittleness and good flavour release. They

Cocoa Butter Improvers (CBIs) or Extenders can be formulated from Indian exotic fats to resemble cocoa butter in both physical and chemical properties and are used to increase the hardness of chocolate. They are compatible with cocoa butter and share a similar crystallisation and melt profile. CBIs can be used as a replacement for cocoa butter at any ratio, with added heat resistance and melting characteristics. They can be used to increase the heat-resistant properties of cocoa and chocolate. Filling fats can be made from lauric and non-lauric sources and are produced by fractionation and hydrogenation. Filling fats melt in the mouth at body temperature, which helps enhance the creamy flavour of confectionery items. That is why they are often added as a filling in cookies, wafers, chocolates, bakeable fillings, spreads and dressings.

Expanding capacity

Manorama manufactures its speciality fats at its plant in Birkoni, near Raipur, Chhattisgarh, close to its sourcing centres. It has expanded production capacity with the setting up of a fully integrated plant that incorporates crushing, extraction, refining, fractionation, interesterification and blending. The company now has annual capacities of 15,000 tonnes in refining, 15,000 tonnes in fractionation, 15,000 tonnes in interesterification, 15,000 tonnes in deodorisation, 30,000 tonnes for packing and blending, and 60,000 tonnes for seed milling. A second phase solvent extraction plant has also been proposed for 2021. "The key process of fractionation commercially started in March 2020. With this achievement, we expect to achieve optimum production levels in 2020/21."

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of the model have continuously been adapted to meet our stakeholders’ needs.”

SPECIALITY FATS

Sustainable Tree-Borne Seed Supply Chain Mango butter or mango kernel fat

Assam West Bengal Jharkhand Chhattisgarh Maharashtra

Orissa

Goa Karnataka

Raw material supply

Manorama sources its raw materials mainly from the central and western areas of India (see map, above).

Photo: Manorama Industries

Sal butter

The sal tree (Shorea robusta) grows in the evergreen regions of central India, which has the largest sal forests in the world. Sal forests occupy around 116,000km2 or 14% of India’s total forest area. The sal fruit contains seeds which have around a 14%-15% butter content. The collectable potential amount of sal butter is about 125,000-150,000 tonnes/year. Sal fat is greenish brown in colour and its typical fatty acid composition is C16 (4%), C18 (47%), C18:2 (0.5%) and C20 (2.8%). A 2-stage acetone fractionation process gives a sal mid-fraction (45% yield). Sal fat is used as a CBE and CBI in confectionery, and in products such as cosmetics, coatings and fillings. Sal stearine is fractionated from sal fat and be used as a CBE and CBR. It is harder than cocoa butter and is used in the manufacture of plain chocolates. Sal oleine is liquid at room temperature and effective as an emollient, finding use in skincare products and other cosmetics. It can be interesterified with hard fat to produce a zero trans fat for ice-creams, bakery products and hydrogenated vanaspati.

Photo: Adobe Stock

Bihar

Photo: Adobe Stock

Nepal

Photo: Manorama Industries

Uttarakhand

Madhya Pradesh

The lemon-sized dark purple fruits are beaten with sticks to separate the rind from the seeds, which account for 2023% of the fruit’s weight. On average, a tree yields 60-80kg of seeds. The yield of kokum butter from kokum seed kernels is about 32-35%. It is a semi-deciduous, gregarious tree, The fat is produced from the seeds after usually with a height of 18-30 feet, which crushing in a solvent extraction plant. grows mainly in moist evergreen regions Refined fat is obtained after conventional of India which covers 14% of the total chemical refining. Kokum fat increases the hardness forest area spread across the states of of chocolates and is used in various Chhattisgarh, Orissa, Jharkhand, West confectioneries. It is a very important Mango butter or mango kernel fat Bengal, Madhya Pradesh, Uttrakhand, Assam component for fillings and is used as an is obtained from and Bihar.  the seed kernels of alternative fat in cosmetics. It is also used mangoes, a seasonal fruit available from in the manufacture of soap, cosmetics, June-July. At 5M tonnes/years, India candles and ointments. When mixed with is one of the world’s largest mangomowrah stearine and palm mid fractions, producing countries and the potential kokum fat can be used to produce CBEs. availability of mango kernels is around Kokum butter has a fatty acid 500,000 tonnes, which can yield about www.manoramagroup.co.in 43 composition of C16 (3.4%), C18 (67.4%), 40,000 tonnes of mango kernel fat. C18:1 (28.1%), C18:2 (0.6%) and C20 Manorama collects mango kernels (0.3%). It has a very high symmetrical through its supplier network across states SOS content (83.4%), allowing direct including Chhattisgarh, Maddhya Pradesh blending with palm mid-fractions without and Odisha but is looking at sourcing fractionation for preparing CBEs. the kernel from the Indian pulp industry, where mango seeds are considered a Mowrah/Mahua butter waste product. The mango seed has a white kernel, which contains 7-11% of greyish-white fat. The fat is solid, closely resembling cocoa butter in physical and chemical characteristics, and is therefore used as a CBE or cocoa butter extender. Refined mango butter is suitable as a confectionery fat and in cosmetic formulations. The major fatty acids in mango fat are oleic (33-53%) and stearic (24-49%) but the fatty acid composition varies considerably due to the wide variety of The mowrah or mahua (Madhuca latifolia) mangoes grown in India. tree is commonly found in Central and Mango stearine is produced by solvent South India and the monsoon forest of the or dry fractionation of mango butter and Western Ghats mountain range. is mainly used in CBEs and CBRs. The mahua fruit is rich in sugar (73% Mango olein is also produced by solvent content) and can be used to manufacture or dry fractionation of mango butter and jam or fermented to produce an alcoholic is mainly used by the cosmetics industry. drink. The orange-brown berry contains one to four seeds, which can be separated Kokum/Dhupa butter from the fruit wall by pressing. Each seed contains two kernels, and the kernels contain about 50% butter. The estimated potential of mowrah kernels is 1.11M tonnes, and the possible butter potential is 400,000 tonnes, assuming an average 36% yield. Mahua seeds contain 35% butter, which is solid at ambient temperature. Depending on the application, the crude fat is refined in different ways. For CBS and cosmetic uses, the fat is refined by conventional chemical refining. For use The kokum (Garcinia Indica) or dhupa tree in vanaspati, it is physically refined by an is found in the evergreen forests of India's expelling process. Mowrah butter is used u Western Ghats mountain range.

Sal (Shorea Robusta) is the most famous of all the species of Shorea (Dipterocarpacceae) abundantly found in India.

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SPECIALITY FATS

The phulwara (Aisandra butyracea) tree is generally found on hill slopes and valleys in the sub Himalayan tract, such as in the states of Sikkim, Uttaranchal and northern parts of Bengal. The tree is also known locally as chiuri, kaeleb or butter nut. The trees begin to bear fruit when they are five to nine years old, up to 50-60 years. Ripened fruits are collected by hand or by beating the plant with long bamboo sticks and the harvested fruits are dried in the shade for 8-12 days. The seeds constitute 20% of the fruit and can be manually or mechanically separated. Seeds are cleaned and then dried, and have a thin coat (20% of the weight) which can be easily decorticated to give an 80% yield of white kernels. The butter content of the kernels is 60%. Phulwara fat is light yellow to white in colour. Refined phulwara butter is marketed as phulwara ghee. The fatty acid composition of phulawara fat is C16 (60.8%), C18 (3.2%), C18:1 (30.9%) and C18:2 (4.9%). It is rich in palmitic acid and contains 62% symmetrical POP triglyceride. It is possible to obtain a POP-enriched fraction suitable for blending with SOS fractions to prepare a CBS.

Shea butter

Photo: Whitney Cranshaw, Colorado State University, Bugwood.org

The shea tree is spread over West Africa, chiefly in Benin, Burkina Faso, Central African Republic, Ghana, Mali, Senegal, Togo and Uganda. Africa produces about 1.76M tonnes/ year of raw shea nuts from its wild trees, mainly in the Savannah and Sahel regions, but producers harvest and process only about 35% (about 600,000 tonnes) for export as butter or nuts. The fresh nut contains 43-68% moisture by weight and as much as 3045% of the kernel can be recovered. Shea butter has a high proportion of unsaponifiable matter and, unlike cocoa butter, contains a high proportion of diand tri-unsaturated glycerides, which give it a softer consistency. The unsaponifiable fraction makes shea butter a widely used ingredient in cosmetics as a moisturiser or lotion. Shea butter is also edible and its stearine fraction can be used in conjunction with other vegetable fat fractions to produce an ingredient with a chemical composition almost identical to that of cocoa butter. The olein fraction is used for margarine and baking.

The simaruba (Bursera simaruba) tree is native to parts of Central and South America and has recently been cultivated in some areas of India.

Palm kernel oil The oil palm produces crude palm oil (CPO) from its fibrous mesocarp and crude palm kernel oil (PKO) from

Simaruba butter

Photo: Adobe Stock

Phulwara butter

Simaruba butter contains mainly palmitic (10-12.5%), stearic (25-27%) and oleic (55-59%) fatty acids. The butter is used to manufacture vanaspati, vegetable butter and/or margarine. The refined, bleached and deodorised (RBD) butter is further fractionated to separate the liquid and solid fractions. The liquid fraction with a very high oleic acid content (about 85%) is comparable to olive oil in its chemical composition. The solid fraction is rich in stearic and palmitic acids and can be used as a CBS or cocoa butter extender in confectionery and bakery applications. The palmitic stearine fraction is also useful in the preparation of ice cream and mayonnaise.

Photo: Adobe Stock

u for cooking, soap and candle making and to manufacture cosmetic creams.

its kernels. CPO is chemically and nutritionally different from PKO. Refined, bleached and deodorised (RBD) palm oil is a popular cooking oil. The palm mid fraction (PMF) or palm stearine is the more solid fraction obtained by fractionation of palm oil after crystallisation and is a co-product of palm olein. PMF is the major ingredient for CBE and CBS manufacturing and is a very useful fully natural hard fat component for products such as shortenings, pastries and bakery margarines. PKO, palm kernel olein and palm kernel stearine find applications in margarine, confectioneries, coffee whiteners, biscuit creams and coating fats – with little or no further processing required.

Going for growth

Manorama has grown from a small company to making its first listing on BSE Ltd (the former Bombay Stock Exchange) in October 2018, raising Rs64 crore (US$8.5M). It reported Rs49.8 crore (US$6.65M) in EBIDTA in 2019/20 compared with Rs31.92 crores (US$4.26M) in 2018/19, and revenue of Rs188.24 (US$25.1M) in 2019/20 against Rs102.4 (US$13.7M) the previous year. "We expect to achieve optimum production levels in 2020/21 and further progress our ambition to become one of the leading Indian manufacturers in the global CBE and speciality butter and fats market," the company says in its annual report. Executive director Kedarnath Agarwal adds that the COVID-19 pandemic and resulting economic slowdown have created an unprecented challenge for the company and businesses around the world. "It is difficult at this stage to assess the exact impact of COVID-19 on our performance for the whole of 2020/21. However, we see strong and encouraging upward direction in our user markets and we remain cautiously optimistic."  Serena Lim is the editor of OFI. Information on cocoa butter alternatives and tree-borne butters has been supplied by Manorama Industries

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STATISTICS

Lipsa February 2021 report/Reuters

STATISTICAL NEWS

Vegetable oil reference prices

Strong price rises in vegetable oils continued in February, driven by slower palm oil production recovery in Asia, a delayed soyabean harvest in Brazil, very dry weather in Argentina and tight sunflower oil availability in the Black Sea region, according to Lipsa’s February market report. Sunflower oil prices are at their highest level for nine years, due to a significant 5M tonnes sunflowerseed production loss (equivalent to 2M tonnes of oil) mainly in Ukraine and Russia, which represent more than 60% of global sunflowerseed production.

Palm oil production

Soyabean crops in top producing countries (million tonnes)

UFOP, USDA, AMI

Palm oil production – Indonesia, Malaysia, world (tonnes)

Lipsa February 2021 market report

A recovery in palm oil production is expected in late Q2/ early Q3 2021, mostly led by Indonesia, according to Lipsa’s February market report. China’s demand is expected to be better in Q1 than Q2 and slightly better for all of 2021. India has increased its oil stocks and CPO has lost competitiveness against other oils with the country’s new tariffs, although its imports are expected to grow in 2021 against the record low level in 2020. Europe is expected to import less CPO during 2021, Lipsa says.

Prices of selected oils (US$/tonne)

Mintec

Sep 20

Oct 20

Nov 20

Dec 20

Jan 21

Feb 21

Soyabean

872.4

869.1

946.9

1,001.7

1,053.2

1,075.1

Crude palm

740.7

752.9

855.6

918.4

915.9

974.0

Palm olein

723.1

723.2

811.8

873.6

875.1

911.6

1,037.5

1,105.8

1,396.2

1,491.5

1,458.2

1,435.0

Rapeseed

924.3

913.4

988.0

1,040.0

1,092.5

1,131.5

Sunflower

977.3

985.6

1,117.7

1,185.1

1,298.5

1,385.9

Palm kernel

818.8

830.7

1,104.9

1,246.5

1,345.2

1,335.7

Average

871.0

883.0

1,032.0

1,108.0

1,148.0

1,178.0

Index

206.0

209.0

244.0

263.0

272.0

279.0

Coconut

Soyabean production in top producing countries

Brazil is set to harvest a record 133M tonnes of soyabeans in the current crop year, an increase of around 7M tonnes against last year, according to a US Department of Agriculture (USDA) report. Drought-related planting delays at the end of 2020 have caused delays in harvesting but are unlikely to lead to reductions in yields, the report says. Brazil has consolidated its number one soya position ahead of the USA based on a 1.7M ha expansion in planted area. The US soya harvest was completed at the beginning of November 2020, amounting to around 113M tonnes, a rise of 16M tonnes year-on-year. Third largest soyabean producer Argentina is expected to have a lower harvest for a second year running – at 48M tonnes – due to poor weather conditions, as well as lower yields, UFOP quoted the USDA report as saying. Brazil, the USA and Argentina produce more than 80% of the world’s soyabeans. Lipidos Santiaga (Lipsa), Spain, produces vegetable oils and fats for food, animal feed, technical and biofuel applications The Union for the Promotion of Oil and Protein Plants represents companies and associations involved in the production, processing and marketing of oil and protein plants in Germany Mintec provides independent insight and data to help companies make informed commercial decisions. Tel: +44 (0)1628 851313 E-mail: sales@mintecglobal.com

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OFI March-September 2021 Feedstocks Online Edition

Articles inside

Stati sti cal data from Mintec

Pioneer in exoti c butt ers

Africa’s oil palm sector

Keeping up with demand

Time to take stock

A COVID success story

Photo: Adobe Stock