ahead

annual growth of 2.9M tonnes in the decade to 2020, he said.

“Area expansion has slowed down considerably and insufficient replantings and management constraints are keeping yields below potential,” he added.

In addition, Mielke said palm oil exports from top producer Indonesia were also set to decline this year due to the country’s ambitious biofuel mandate.

Meanwhile, Mielke also expected the “incredible” increase in canola production to slow down in 2022/23.

Although there had been a significant increase in global production of oils and fats, with consumption expected to jump by 5M tonnes in April/September, he was concerned that the vegetable oils sector was moving into a production deficit in the second half of this year (see Figure 2, below).

“Global vegetable oil supplies are currently sufficiently large with world stocks about 3M tonnes above a year earlier, but this is likely to change from July or August onward,” he said.

The Argentine soyabean crop, which could be as low as 25M tonnes, was also a concern, he said.

“Severe dryness in South America has tightened world soyabean supplies in early 2023, with at least 20M tonnes lost so far in Argentina and 3M tonnes in Brazil.

"At the moment, palm, rapeseed and sunflower oils can compensate Argentine losses, but for how long?” Mielke added.

Biofuels

Mielke also expressed concern that the biofuel market was being over-stretched, with some countries too ambitious and with no temporary reductions of mandates imposed at times of limited supply.

“Fulfilment of the current biofuel targets would contribute to a bullish scenario shaping up for the second half of 2023 as well as for 2024,” he said.

According to UR Unnithan, co-founder and CEO of DIBIZ, global biodiesel production and consumption will increasingly shift to the use of waste oils and used cooking oils (UCO) as feedstocks.

EU RED II restrictions would see palm methyl ester (PME) exports to EU decline further with a more than proportionate increase in UCO/Waste oil exports, he added.

“The world is seeing rising HVO [hydrotreated vegetable oil] capacity but sourcing sustainable raw materials will be the big challenge especially if RED III takes away ‘double counting’ for UCO,” he said.

Malaysian exports of UCO jumped to their highest level in December – an 18% year-on-year increase – due to strong demand from the EU to meet increasing usage of UCO in biodiesel blending.

However, biodiesel shipments from Malaysia fell by around the same pace as plant-based feedstocks were increasingly being reduced due to the impact of the EU RED II directive, he said.

In 2020, Europe had the largest HVO capacity worldwide, at 3.5M tonnes, followed by North America with 1.9M tonnes, according to data published by Statista presented by Unnithan. HVO capacity in North America was forecast to surpass Europe, reaching 12.6M metric tonnes by 2025.

Indonesian outlook

In his presentation, Dr Mohamad Fadhil Hasan, director of corporate affairs at PT Asian Agri, spoke about the outlook for the Indonesian palm oil sector this year amid a world economic recession.

Indonesian palm oil production was expected to show a downward trend between 2005-2025, with growth of 10% between 2002-2010 declining to 7.4% in 2010-2015 and dropping further to 3.2% in 2015-2020, he said. In the last three years, growth had been in negative figures.

Production reached 51.6M tonnes in 2021, comprising 46.9M tonnes of crude palm oil (CPO) and 4.4M tonnes of palm kernel oil (PKO). Production in 2022 was more or less stagnant.

Meanwhile, yields had been declining in Indonesia since 2010, Hasan said.

While exports from Indonesia were on a downward trend, domestic consumption showed a considerable increase from 2015-2020 due to the country’s mandatory biodiesel blending programme, he added.

Overall, there had been a shift in Indonesia from an export-orientated sector to more domestic consumption, with consumption’s share of the market now around 34%, according to Hasan.

The government’s move to increase the biodiesel blending policy to 35% (B35) in February and plans to further increase this to 40% in June/July, would mean an additional 2M-2.5M tonnes of CPO would be consumed domestically, he said.

Conclusion

Although palm oil production has been declining, the sector has been resilient with labour shortages improving compared to last year and demand increasing, analysts agreed.

On a positive note, Godrej's Dorab Mistry pointed out there had been a recovery in rapeseed production in 2022/23, driven by Canada, palm oil imports to India were rising again and China was seeing a return to higher consumption and growth although vegetable oil stocks there remained high.

“China demand has not been buoyant and we need to wait for an upturn, which will come,” he said.

Global food demand for vegetable oils was growing at a steady 3M tonnes/year, according to Mistry.

However, sustaining the palm oil sector would involve finding high-value niche markets and automating plantation work to make it more appealing to the local workforce, the conference heard.

In Malaysia, for example, the palm oil sector employs more than 500,000 plantation workers and contributes more than 3.06% or MYR45.9bn (US$10.4bn) to the country’s annual Gross Domestic Product (GDP), the country’s Deputy Prime Minister and Minister of Plantation and Commodities Fadillah Yusof said. ● Gill Langham is OFI's assistant editor