GLOBOIL INDIA September 2014 Renaissance Mumbai Convention Centre Hotel “Emerging Trends In The Edible Oil Sector – A View From Pakistan.”. By Abdul Rasheed Janmohammed Vice Chairman – Pakistan Edible Oil Refiners Association (PEORA) Chief Executive Officer – Mapak Edible Oils (Pvt.) Limited – JV Project Pakistan-Malaysia.

EDIBLE OIL SCENARIO Per Capita Consumption : 17 kgs. Total Consumption : Around 3.4 Million Tons. Local Production : Million Tons. Import of Edible Oils : Around 2.3 Million Tons. Oil Extracted from Imported Seeds: Around 0.5 Million Tons. Total Import Bill of Edible Oil about US$ 1.8 to 2.0 Billion. Total Import Bill of Oilseeds about US$ 0.5 to 0.6 Billion.

Edible Oil Duty Structure – Pak. Rupees / (M.Tons) Product Import Duty (Malaysia) Import Duty (Indonesia) CEDI.TaxFEDOlein %5.5%1000 RBDPO %5.5%1000 CPO %5.5%1000 Product Import Duty CEDI.TaxFEDCDSBO905016%5.5%1000 After the effectiveness of PTA with Indonesia, the duty structure is now uniform for both Malaysian and Indonesian Origin.

Since there is heavy duty structure and taxes on the import of Edible Oils in Pakistan, I am taking the liberty of quoting the following quotes:

Import of Edible Oils in Pakistan (Basis Arrival) in M.Tons For January-December 2012, 2013 and January-August 2014 Product Jan-Aug 2014 OLIEN752,603979,308664,903 RBDPO749,513998,619739,894 CPO428,352278,11858,492 CDSBO40,50055,21490,249 TOTAL1,970,9682,311,2591,553,538 In the year 2013, Pakistan imported 17% more Edible Oil as compared to 2012.

IMPORT OF PALM OIL PRODUCTS FROM MALAYSIA AND INDONESIA DURING JANUARY-DECEMBER 2012 IN M.TONS (BASIS ARRIVAL) PRODUCTMALAYSIA%INDONESIA%TOTAL OLIEN732, , ,603 RBDPO275, , ,513 CPO415, , ,352 1,423,961506,507 1,930,468 MALAYSIA74% INDONESIA26%

IMPORT OF PALM OIL PRODUCTS FROM MALAYSIA AND INDONESIA DURING JANUARY-DECEMBER 2013 IN M.TONS (BASIS ARRIVAL) PRODUCTMALAYSIA%INDONESIA%TOTAL OLIEN864, , ,308 RBDPO225, , ,619 CPO224, , ,118 1,313,834942,211 2,256,045 MALAYSIA58% INDONESIA42%

IMPORT OF PALM OIL PRODUCTS FROM MALAYSIA AND INDONESIA DURING JANUARY-AUGUST 2014 IN M.TONS (BASIS ARRIVAL) PRODUCTMALAYSIA%INDONESIA%TOTAL OLIEN309, , ,903 RBDPO77, , ,894 CPO58, , ,7451,017,544 1,463,289 MALAYSIA30% INDONESIA70%

PERCENTAGE OF PALM OIL PRODUCTS FROM MALAYSIA AND INDONESIA IMPORTED DURING JAN-DEC 2012,2013 AND JAN-AUG 2014 IN M.TONS (BASIS ARRIVAL) YEARMALAYSIA %INDONESIA % JAN-AUG

IMPORT OF CRUDE PALM OIL (CPO) FROM MALAYSIA AND INDONESIA DURING JAN-DEC 2012, 2013 AND JAN-AUG 2014 IN M.TONS (BASIS ARRIVAL) YEARQUANTITY IN M.TONS , ,118 Jan-Aug ,492

The import of CPO into Pakistan is gradually coming down. The main reasons are the most aggressive prices of RBD Palm Oil being offered from Indonesia and the Export Duty imposed at the origin on CPO. This export duty structure is practically shutting down the Refineries in Pakistan. The decision of Malaysian Government to impose 4.5% Export Duty on CPO over and above MDEX level of RM 2250, has changed the entire complex for the Edible Oil Refineries in Pakistan. Pakistan entrepreneurs invested huge amount in the Physical Refining Plants and now they all are suffering as the dependency was on the Crude Palm Oil as the basic raw material. We are not as fortunate as our Indian friends who convinced their Government to increase the duty on the refined products from 7.5% to 10% when CPO was not workable due to the export duty. This Export Tax on CPO has not only affected the Pakistan Refiners but have also reduced the export quantum of Malaysian origin which is very well reflected from the export numbers.

Since Pakistan is unable to import CPO due to Export Duty imposed at the origins and higher duty at the destination, I am taking the liberty of following quote:

Production of Major Oil Seeds Crop Production Production (P) Oil Seed Oil Oil Oil Cotton Seed Rape Seed Sunflower Canola Total Source : Pakistan Oil Seed Development Board / Economic Survey of Pakistan (000 Tons)

Product Import Duty FED Sales Tax Adv. I.Tax Canola / Rapeseed 1 % Rs. 400 PMT 16 % 6 % Sunflower Seed 1 % Rs. 400 PMT 14 % 6 % Soybean Seed 1 % - 17 % 6 % Oil Seed Duty Structure – Pak. Rupees / (M.Tons)

Import of Oil Seeds in Pakistan (Basis Arrival) in M.Tons For January-December 2012, 2013 and Jan-Aug 2014 Product Jan-Aug 2014 Rapeseed / Canola 713,828543,384778,520 Sunflower10,572185,98537,957 Soyabean Seed Total724,400729,369825,571 This Table will reflect that till August 2014, Pakistan already received quantity of 825,571 MT Oilseeds which is more than what we used to import in the entire year.

OILSEEDS TSUNAMI IN PAKISTAN Pakistan extremely overbought Oilseeds in the year 2014 as if there will be no Oilseeds available in the World in coming years. Quantity of 825,571 MT already arrived till to-date which is higher than the average import per annum of 725,000 MT. For the remaining part of the year, according to the rough estimate, Pakistan have imported another around 400,000 MT (Black Sea Rapeseed and Sun Seed) till the end of the year shipments which will make our import for the year 2014 around 1.2 million ton. This huge import has not only raised logistic issues but have also affected the market very badly. While it was an extremely wrong planning on the part of our importers, they were perhaps misguided by a recent experience in the first quarter of 2014 when supply of Canola Seed was extremely difficult from Canada due to their logistical problem. However, Oilseed Industry perhaps underestimated the huge production in the Black Sea area and were under impression that Ukraine problem will multiply. This Oilseed Tsunami will have very negative effects on the Oilseed Industry at least till December 2014.

MARKET FACTS Let us see where the Market could head on the basis of following facts: 1.Malaysian Palm Production was (M) tons in 2013 against (M) tons in 2012 and expected to be (M) tons in Indonesian Palm Production was around (M) tons in 2013 against around (M) tons in and expected to be around (M) tons in (Indonesian figures can never be accurate as no official data available). 3.US Soyabean Crop was around (M) Tons in 2013 against (M) Tons in 2012 and expected to be around (M) in Argentina Soyabean Crop was around (M) Tons in 2013 against (M) Tons 2012 and expected to be around (M) Tons in 2014, 5. Brazilian Soyabean Crop was (M) Tons in 2013 against (M) Tons 2012 and expected to be around (M) Tons in Malaysian Stocks of Palm Oil in August 2014 were 2.05 (M) Tons. 7.Indian import was million tonnes of edible oil during against 9.98 million tonnes in and expected to be around (M) Tons in

8.The year 2014 has been very vulnerable year for all Edible Oils. With due respect, all forecasts did not proved right as perhaps everyone under estimated the supplies. The highest we have seen on MDEX was RM 2916 on 11 th March 2014 and the lowest we have seen was RM 1914 on 2 nd September 2014 i.e. the variation of 34% during Jan-Sep. All the Bulls were expecting El nino to come but perhaps it did not materialized and so far the Bears win the race. 9.The Oilseed Crop of Rapeseed and Sunflower Seed has been extremely good in the year 2014 particularly in the Black Sea region. This huge crop combined with extremely huge crop of Soybean put enormous pressure in the market. 10.Crude Oil performance was rather steady inspite of various geographical problems. Crude Oil prices did not go up which perhaps did not give opportunity to Edible Oils to find home in the Bio diesel Industry. 11.Since the threshold price of RM 2250 was broken, Export Duty was exempted by Malaysian Government for the Export of Crude Palm Oil. This has enabled Malaysia to have better export numbers. 12.Since production is multiplying in Indonesia, this origin will not only remain very competitive but will be an aggressive seller in terms of quantity particularly for Refined Palm Oil. Pakistan is perhaps the safe home for Indonesian Refined Palm Oil and this is the reason that prices of RBD Palm Oil remain much lower as compared to Olien for Indonesian origin. This will put additional pressure on the prices of PFAD as well being by-product of RBD Palm Oil.

The market facts being deliberated do give us certain direction. In the current year 2014 most forecasts proved incorrect as supply remained extremely large and exceeded all expectations. While there is no doubt that supply still remain huge particularly of Soya Oil and Oilseeds, there is a general belief that prices have already come down a lot. Palm Oil prices have slide too much more in sympathy of Soft Oils rather than its own fundamentals. We have seen in past that Malaysia have the capacity to take care of their 2.00 million tons stocks without any problem, but this year even at the stocks of 1.6 million tons, markets were coming down purely on sentiments. After observing huge increase in production figures in the month of August 2014, there is a perception that September production figures of Palm in Malaysia will not be very good. We will now be entering into the low production months commencing from November Based on the above market facts, it is my belief that Palm prices may not go below RM 2000 and has the potential to go upto RM 2250 by December For the first quarter 2015, I feel market has the potential of even improving better than the last quarter of FORECAST

I would like to conclude my Presentation with famous quotes :

Thank You