Fats & Oils Market Overview. October 19, 2011 Ann Cromarty

Transcription

1 Fats & Oils Market Overview October 19, 2011 Ann Cromarty

2 Compound Coating Topics Compound Coating Cost Analysis S/D Biodiesel Price Charts CBEs Sustainability Summary

3 Compound Coating Raw Ingredient Cost Analysis % in Priceformula Milk Dark White ICC Dark ICC Milk Cost % of Cost % in formula Cost % of Cost % in formula Cost % of Cost % in formula Cost % of % in Costformula Sugar $ % $ % 60% $ % 60% $ % 43% $ % 40% $ % Oil $ % $ % 33% $ % 25% $ % 50% $ % 50% $ % Dairy $ % $ % 0% $0.00 0% 15% $ % 0% $0.00 0% 3% $0.04 4% Cocoa $2.35 7% $ % 7% $ % 0% $0.00 0% 7% $ % 7% $ % Cost % of Cost Pricing decisions for compounds should consider oil, cocoa and sugar markets. Impact of ingredients vary, but oil is often a higher cost of the compound compared to cocoa In ICC, oil should be the primary market watched to time purchasing decisions

4 Supply/Demand Coconut Oil and PKO World Supply/Demand Balance Sheets (Mil. MT) Oct/ Sep Crop Year Coconut Beginning Stocks Production Imports Total Supply Exports Domestic Consumption 1997/ / / / / / / / / / / / / / /12* PKO 2006/ / / / / /12* Source: USDA Ending Stocks

5 2011/12* Coconut Oil Change in World Stocks from Previous Year Mil MT, Oct-Sept Crop Year / / / / / / / / / / / / / Three years of stock surpluses have been followed by two years of deficits, with a third deficit expected for 2011/12.

6 0.15 PKO Change in World Stocks from Previous Year MMT / / / / / /12* Stocks of PKO are expected to rebound somewhat this year, but still be at a deficit.

7 15 Change in Oilseeds Stocks from 2006/07 to 2011/12* Mil. MT Argentina China Brazil US EU-27 Other Includes Copra, Cottonseed, Palm Kernel, Peanut, Rapeseed, Soybeans, Sunflower USDA Data, * 2011/12 Estimate China s stocks have increased MMT, almost the same amount that the US has drawn down their stocks (11.79 MMT).

8 Change in Crush from 2006/07 to 2011/12 Mil. MT (2011/12 Est.) Argentina China Brazil US EU-27 India Others China has increased their crush by 28% while other major crushers have increased approx. 5%. The US is the only major crusher who has decreased their crush during this time period. (4.7%)

9 Biodiesel If you want to analyze the veg oil market, you need to become a biodiesel economist. (MMT) 2008/ /12 est. % Change Food use % Biofuel % Mandates create biodiesel demand, thru legislation. Subsidies relate to profitability. In US, subsidies go to refiners, but mandates are on Petroleum Industry. When biodiesel gets unprofitable (high soyoil prices or if subsidies go away, the Oil Industry must bid up prices to incentivize biodiesel refiners to keep producing biodiesel, so Oil Industry can meet the govt. mandates. S. America, Asia, et al have a lot of Biodiesel mandates taking place from Brazil will increase to 20% by Indonesia target is to be at 5% by Not just the US and the EU anymore. Canola recently approved for RINS certificates, and now will be used in US to meet biodiesel demand. In US, Palm under study by EPA for GHG calc and land use calc, once approved for that and RINS, can move forward.

10 In order to comply with biodiesel production mandates, the price of biodiesel is being bid up well above the price of soybeanoil AdvancedEconomicSolutions, Inc

11 CBOT Soyoil -BMD CPO Spread cents/lb CBOT Soyoil (Front) - BMD CPO (3rd)

12 Palm vs. PKO Price RBD Palm Oil & PKO Prices (FOB MY) cents/lb Palm Oil PKO

13 PKO Price vs. Coconut Oil Price (CIF Rott.) cts/lb /25/2006 9/25/2007 9/25/2008 9/25/2009 9/25/2010 9/25/2011 Crude PKO, CIF RTD Crude CNO, CIF RTD

14 CBEs Primarily made with Shea butter and palm oil. In EU users permitted to use 5% in chocolate and maintain SOI. In US lose SOI if used in chocolate formula. CBEs now selling at a significant premium to cocoa butter. Some users who switched from CB to CBEs a few years ago, are now investigating switching back to butter. Question are, will current structure (low butter prices) persist, and what will the affect be on butter/powder prices going forward?

15 Sustainability It s not really a choice anymore Palm oil is highest yielding commercial oil crops / acre, and will be relied on more heavily as population increases continue to outpace production increases World Oilseed availability is not responding to the increase in prices anymore. We may have hit the limits of what is possible. (Siegfried Falk -Oil World) As biodiesel use increases in soy growing countries, less is available for exporting. Malaysia has environmental protection commitments to keep 50% of land as original forest and cannot increase palm acreage much. China has secured rights to grow palm for biofuel on 2.8 M Ha in Congo and is negotiating for 2 M Ha more in Zambia. India has done the same in Cameroon. Palm expanding also in I. Coast, Gabon, Ghana, Madagascar

16 RSPO (Roundtable On Sustainable Palm Oil) is the most widely recognized organization with 695 members & SC Assoc., 28 Growers and 123 Mills certified representing 5.2MMT CSPO, 1.95 MMT CSPK, 1.02 M Ha. Also, 114 companies and 226 facilities with SC Cert.

17 Sustainability Options for End Users RSPO Supply Chain System Pre-approved Claims Identity Preserved (IP).. contains only RSPO-certified Sustainable Palm Oil. Segregated (S).. contains only RSPO-certified Sustainable Palm Oil. (IP/S) < 95 %.. contains [x %] RSPO-certified Sustainable Palm Oil. Mass Balance (MB).. advances [or equivalent] the production of RSPO-certified Sustainable Palm Oil (equivalent to [x %] of the palm utilized). Book and Claim (B&C).. advances [or equivalent] the production of RSPO-certified Sustainable Palm Oil (equivalent to [x %] of the palm oil utilized). Supply Chains of customers can be certified by accredited certification bodies at a level that would correspond to the types of claims they want to make. Chain of custody must be certified all the way thru from origin to branded end user. Requires working with your suppliers.

18 Price Drivers Bullish World Consumption of Oilseeds will exceed production resulting in declining stocks Global ES/Use ratio of oil seeds and oils will continue to decline to multi year lows Consumption for biofuels will increase more sharply especially for soy, creating a decline in world exports and stocks Global dependence on palm will continue to accelerate due to insufficient soy and rapeseed oil ergo, any palm oil production increases will be rapidly absorbed, and stocks will not shift to surplus, so world ES/Use ratio will decline Competition for acres for oilseeds and grains will intensify in southern hemisphere in Sept/Jan 11/12 and in northern hemisphere in Feb/Apr 2012, but neither will win Bearish Tight budgets in Europe and USA, et al, may force govts. to reduce biofuel subsidies, reducing demand for oils, fats and corn, unless mandates remain in place. Debt problems and financial turmoil could continue to spill over to oilseed and grain markets and economic slowdown could have bearish impact on demand in 2011/12 World soybean supplies in Sep11-Jan12 are 4Mn T larger than year ago; world crush of sun and rapeseed could cover demand in next few months. World supplies are ample short term. Higher prices and above normal weather may result in larger than expected oilseed plantings and production in S. hemisphere, facilitating higher crush in 2011/12 Oil World Monthly Vol. 54 We recommend having cover in place at current lows thru Q