Understanding Palm Oil - Mega-thread 🌴
+ Importance: Production, Export, ESG
+ Value chain: Crop, processing, End Market
+ Palm Oil & India
Please retweet if this thread adds value! ♻️
+ Importance: Production, Export, ESG
+ Value chain: Crop, processing, End Market
+ Palm Oil & India
Please retweet if this thread adds value! ♻️
If you've had any packaged FMCG product in your life - there's a good chance you've consumed palm oil. From food to cosmetics to even animal feed, this crop has an unending list of applications.
I was recently analyzing an agro products company that was also into palm oil, so I decided to start from the very beginning - Palm oil - everything from its production and lifecycle, to its economics and end-market!
So pick your hot Monday morning cuppa, and let's get started!
So pick your hot Monday morning cuppa, and let's get started!
Palm Oil is the #1 vegetable oil produced globally - comfortably ahead of its nearest competitor, Soybean - with production growing from 20 mm tonnes at the start of the millenium to 70 mm tonnes+ today.
As a crop that grows best in tropical climates (high rain, sunlight & humidity) - Indonesia & Mayalsia are the top producers and exporters of palm oil.
India and China, with their large population bases are the top importers of palm oil.
India and China, with their large population bases are the top importers of palm oil.
With an average yield ~4x of the nearest competitor - Sunflower, Palm oil is the only viable alternative to feed a growing world population while keeping impacts like deforestation to a minimum.
Palm occupies less than 9% of the global oilseed land and provides 36% of the output
Palm occupies less than 9% of the global oilseed land and provides 36% of the output
Production
The commercial lifecycle of a palm tree is ~25yrs with ~130 grown/hectare. Trees bear fruit 2.5yrs post planting- reach peak yield by yr7. Yield begins to drop by yr 18.
Optimal management during the first 7 years are critical for a good yield through the crop's life.
The commercial lifecycle of a palm tree is ~25yrs with ~130 grown/hectare. Trees bear fruit 2.5yrs post planting- reach peak yield by yr7. Yield begins to drop by yr 18.
Optimal management during the first 7 years are critical for a good yield through the crop's life.
Processing
The fresh fruit is processed within 24hrs in a process that sterilizes and crushes the fruit to derive crude oil.
This crude palm oil is then further refined, bleached and deodorized to get RBD palm oil.
The fresh fruit is processed within 24hrs in a process that sterilizes and crushes the fruit to derive crude oil.
This crude palm oil is then further refined, bleached and deodorized to get RBD palm oil.
End-markets:
Food: Oil, confectionery, ice-cream, biscuits, chips...
Cosmetics: Balms, lipsticks, soaps, detergents
Oleochemicals: Surfactants, lubricants, grease
Biodiesel: Feedstock for biodiesel plants
Animal feed: Palm kernels- cheap high protein animal feed
Food: Oil, confectionery, ice-cream, biscuits, chips...
Cosmetics: Balms, lipsticks, soaps, detergents
Oleochemicals: Surfactants, lubricants, grease
Biodiesel: Feedstock for biodiesel plants
Animal feed: Palm kernels- cheap high protein animal feed
With the global context understood - let's explore India's relationship with palm oil & edible oil in general.
In FY21, India imported 1.33cr tonnes of edible oil (56% of which was palm).
To reduce this exposure, GoI has come up with the National mission on Edible Oils-Oil Palm
In FY21, India imported 1.33cr tonnes of edible oil (56% of which was palm).
To reduce this exposure, GoI has come up with the National mission on Edible Oils-Oil Palm
Under this scheme the govt intends to provide 11K cr+ of assistance via input cost assistance, support price for output, and seed gardens and technological support.
India's leading organization on palm research (IIOPR) has identified 28 lakh hectares for palm oil production - primarily in South & NorthEast India
Top states:
Andhra: 531379ha
Telagana:436325ha
Assam:375428ha
Maharashtra: 162210ha
Tripura:146364ha
Top states:
Andhra: 531379ha
Telagana:436325ha
Assam:375428ha
Maharashtra: 162210ha
Tripura:146364ha
India currently produces palm on 3L hectares of land, and plans to add 6.5L more by FY26.
The adding of hectarage combined with some of our younger plantations coming of age could drive a strong growth in domestic palm oil production.
The adding of hectarage combined with some of our younger plantations coming of age could drive a strong growth in domestic palm oil production.
Our relationship with our import partners is also a delicate balance that sometimes topples. We depend on Malaysia & Indonesia for 60% of our palm- and a recent diplomatic breakdown after the Malaysian PMs comments on Kashmir had led to a 4 month ban of palm oil from the country.
Indonesia is also tightening its Domestic market obligations under which companies will need to sell 30% of planned exports in domestic markets (up from 20%).
India's per capita palm oil consumption sits at ~16kg today, substantially lower than ~67kg for the West. As our affluence and therefore consumption increases - we'll need more palm oil, and it would help to have a good chunk of it grown domestically.
We are analyzing Godrej Agrovet this week under GSN Invest Edge⚡️Do consider joining us to read a detailed analysis of the firm along with 199 other companies!
Edge: easebuzz.in
Edge: easebuzz.in
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