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AN ANALYSIS OF BIOFUELS AND THEIR IMPACT ON PALM OIL PRICES
Chris de LavigneGlobal VP of ConsultingFrost & Sullivan
1
OVERVIEW OF FROST & SULLIVAN
2
CON
SULTIN
G W
ITH A FO
CUS O
N G
ROW
TH.
OVERVIEW OF FROST & SULLIVAN – “WE ACCELERATE GROWTH”
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CLIENT PORTAL & E- BROADCASTS
1 2 3
04/18/23
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5 YEARS OF “O
N TH
E MO
NEY” FO
RECASTS. KEY Q
UO
TES…..
POC 2006 PREDICTION
POC 2008
MAY 2007 – INDONESIAN CONFERENCE
POC 2010
« PRICES OF RM 1900 WILL BE LONG GONE. PRICES WILL BE
HIGHER MOVING FORWARD »
« PRICES WILL REACH $1000 BY YEAR END»
« PRICES WILL REACH RM 4500 BEFORE WE BAT AN EYELID»
« PRICES WILL REACH RM 3500 »
04/18/23
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WHAT INFLUENCES THE PRICES OF VEG OILS/ PALM OIL?
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5 YEARS OF “O
N TH
E MO
NEY” FO
RECASTS. KEY Q
UO
TES…..
FUNDAMENTALS SPECULATION
FUNDAMENTALS HAVE BEEN IMPACTED DUE MANY THINGS:
USED TO BE ABOUT STOCK TO USAGE RATIO
NOW…
IS INCREASINGLY ABOUT UNDERSTANDING :
- « NEW MARKET DYNAMICS »
SPECULATION HAS TAKEN A FAR MORE IMPORTANT ROLE DUE TO :
- GLOBAL CRISIS- WEATHER PATTERNS- LACK OF CONTROLS- INELASTIC PRICES
- MONEY, MONEY, MONEY
04/18/23
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COM
PLEXITY AND
THU
S VOLATILITY ARE KEY
THEM
ESESSENTIALLY WE LIVE IN AN INCREASINGLY MORE COMPLEX MARKET WITH SO MAY INTER-RELATED ASPECTS
04/18/23
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• World oil & fat, supply and demand (stock to usage ratio)• Substitution (lowest cost oil vs. intrinsic use)• Feed energy costs (floor price fat vs. grain)• Logistics (freight rates, shipping delays, JIT etc.)• Weather (big influencer, often overlooked!)• Economy• Politics - import tariffs/ duties• War and crude oil prices• Biosecurity – BSE, non GM markets• Biodiesel and Bioethanol• Inter-relationship between crops• Speculation
A LOOK BACK AT HISTORY – WHAT WERE THE KEY INFLUENCERS?
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BIOD
IESEL HAD
A BIG IM
PACT ON
THE PRICES
2006 ANALYSIS OF PALM OIL PRICES
04/18/23
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SOURCE : BURSA MALAYSIA
PALM OIL PRICES : 2006 (DAILY SPOT PRICE)
MALAYSIA AWARDS 97 BIODIESEL LICENCES
BIORTH
ANO
L HAD
BIG IM
PACT + COM
MO
DITIES
2007 ANALYSIS OF PALM OIL PRICES
04/18/23
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SOURCE : BURSA MALAYSIA
PALM OIL PRICES : 2007 (DAILY SPOT PRICE)
SOY PRICES STARTED TO RISE BASED ON TIGHTNESSINDIA REDUCES TARIFFS
CRUD
E OIL, G
FC, SPECULATIO
N H
AD M
AJOR RO
LES2008 ANALYSIS OF PALM OIL PRICES
04/18/23
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SOURCE : BURSA MALAYSIA
PALM OIL PRICES : 2008 (DAILY SPOT PRICE)
CRUDE OIL, GFC, SPECULATION, PUSHED IT UP THEN DOWN
BIODIESEL PROFITABLE AGAIN
SOY PRICES TIG
HT (W
EATHER/STRIKES), BIO
DIESEL
2009 ANALYSIS OF PALM OIL PRICES
04/18/23
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SOURCE : BURSA MALAYSIA
PALM OIL PRICES : 2009 (DAILY SPOT PRICE)
SOY PRICES STARTED TO RISE BASED ON TIGHTNESS
ECON
OM
Y, WEATH
ER AND
CRUD
E OIL PLAY IN
20102010 ANALYSIS OF PALM OIL PRICES
04/18/23
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SOURCE : MPOB
PALM OIL PRICES : 2010 (MONTHLY AVERAGE)
EUROPEAN CRISISWEATHER, QE2, OIL
ALL FACTORS H
AVE PLAYED AT O
NE PO
INT O
R OTH
ERESSENTIALLY WE LIVE IN AN INCREASINGLY MORE COMPLEX MARKET WITH SO MAY INTER-RELATED ASPECTS
04/18/23
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• World oil & fat, supply and demand • Substitution (lowest cost oil vs. intrinsic use)• Feed energy costs (floor price fat vs. grain)• Logistics (freight rates, shipping delays, JIT etc.)• Weather (big influencer, often overlooked!)• Economy• Politics - import tariffs/ duties• War and crude oil prices• Biosecurity – BSE, non GM markets• Biodiesel and Bioethanol• Inter-relationship between crops• Speculation
SO WHAT OF BIOFUELS SPECIFICALLY AND THE FUTURE?
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MARKET SU
MM
ARY ANALYSIS
MARKET DISTRIBUTIONBIODIESEL ACCOUNTS FOR 18 MT IN 2010 (12.5% VEG OILs)
04/18/23
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•~50% of this biodiesel is in Europe•~50% is outside of Europe, mainly Brazil and Argentina
•US making a bit of a comeback•Asia almost no-existent
•Supply is not keeping up with demand!!!!
Biodiesel
12.5
%
FUTURE FORECASTS
•Bioethanol demand is 100 bn litres•On current paths both biofuels could grow by 50% in 5 years
BIOD
IESEL SETS FLOO
R AND
IS DEFEN
SIVE MECH
ANISM
EFFECT BIODIESEL HAS ON THE MARKETS
04/18/23
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SOURCE : MPOB
PALM OIL PRICES : 2010 (MONTHLY AVERAGE)
BIODIESEL SETS A FLOOR PRICE FOR PALM OIL
IS THU
S SUSTAIN
ABLE IN SH
ORT, M
ID, LO
NG
RUN
?AGAINST FOR
04/18/23
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•Food inflation
•Not environmental
•Need alternatives
•Supply not keeping up
•Food prices on par with 1971 – would need to go very high to stop biofuels and politcal mandates.
•Rice prices are steady
•Who says not environmental?
•Alternatives are coming
•Plant more, improve yields
•Can you take over 1bn barrels equivalent out of the system so easily?
WHAT TO WATCH FOR IN 2011?
19
SOY ID
TIGH
T AND
WILL AFFECT TH
E MARKET
ESSENTIALLY WE LIVE IN AN INCREASINGLY MORE COMPLEX MARKET WITH SO MAY INTER-RELATED ASPECTS
04/18/23
20
• World oil & fat, supply and demand (SOY IS TIGHT!!!!)• Substitution (lowest cost oil vs. intrinsic use)• Feed energy costs (floor price fat vs. grain)• Logistics (freight rates, shipping delays, JIT etc.)• Weather (big influencer, often overlooked!)• Economy• Politics - import tariffs/ duties• War and crude oil prices• Biosecurity – BSE, non GM markets• Biodiesel and Bioethanol• Inter-relationship between crops• Speculation
CONTACT FROST & SULLIVAN
21
http://twitter.com/frost_sullivan
FOLLO
W FRO
ST & SU
LLIVAN O
N TH
E WEB
http://www.facebook.com/pages/Frost-Sullivan/249995031751?ref=ts
http://www.linkedin.com/companies/4506
http://www.slideshare.net/FrostandSullivan
FOR AD
DITIO
NAL IN
FORM
ATION
Donna JeremiahCorporate CommunicationsAsia Pacific+603 6204 [email protected]
Carrie LowCorporate CommunicationsAsia Pacific+603 6204 [email protected]
Jessie LohCorporate CommunicationsAsia Pacific+65 6890 [email protected]
Chris de LavigneGlobal VP of Consulting+65 9615 [email protected]
