MICROECONOMICS ASSIGNMENT Demand & Supply of Lauric Oil
TABLE OF CONTENTS 1. Introduction 1.1 What is lauric oil? And what are its applications? Page 3
Factors affecting demand 2.1 2.2 2.3 2.4 Population and food demand Crude oil and biodiesel Prices of palm and other vegetable oil Important events of Year 2011 Page 4 Page 5 Page 6 Page 7
Factors affecting supply 3.1 3.2 3.3 Climate Incremental supply forecast for 2011 – 2012 New policy highlights Page 8 Page 8 Page 10
Analysis 4.1 4.2 Past record for Lauric oil prices Demand and supply analysis Page 10 Page 12
INTRODUCTION 1.1 What is lauric oil? And what are its applications?
Lauric oil is the common name of coconut oil and palm kernel oil, both are derived from species of palms and are distinguished from other fats by their high content of lauric acid (44 to 52 percent) (Codex Stan, 2009). Because of the low molecular weight of their acids, these fats feature a very low degree of unsaturation and a relatively low melting point. These oils are highly resistant to oxidation. Coconut oil is obtained from coconut copra, which is dried coconut meat (Fife Bruce, 2005). Palm kernel oil is obtained from the kernel of the fruit. Both products are available in different grades (Peter KV Kurain, 2007). Crude Coconut Oil known as CNO is used in the manufacture of amines and industrial soaps. It typically has higher free fatty acid content than ordinary vegetable oils. Edible Coconut Oil has been refined, bleached and deodorized (RBD). It is an important feedstock for oleochemicals and a component for resins. Surfactants produced from coconut oil are used in soaps, detergents, shampoos and emulsifiers. In the edible field, it can be found in ice cream, ice cream coatings, popping oil and as spray oil. Hydrogenated Coconut Oil is used as a shortening, in coffee whitener, whipped dessert toppings and in confectionery products. (Mike Foale, 2003) Palm Kernel Oil known as PKO, its availability is more reliable than coconut oil because the biggest producing country Malaysia does not suffer from the droughts and typhoons which plague the Philippines and other coconut oil producing countries. The two oils can be used interchangeably, although PKO has a higher iodine value and higher content of unsaturated acids. Industrially, it is used mainly in soaps. Edible uses include margarine and confectionery products. (Rajah Rasiah & Azmi Shahrin, 2006) Both CNO and PKO are considered as commodities and it’s getting more and more important in the international market due to the widely usage for many applications both in edible and non-edible products (Thomas H. Applewhite, 1994).
FACTORS AFFECTING DEMAND 2.1 Population and food demand
It is becoming increasingly difficult to satisfy the rising global demand for food in a sustainable manner. Main reason contributes to the uncertainty in our ability to meet the food demand is the world population growth. Each day 200,000 more people are added to the world food demand. The world’s human population has increased near fourfold in the past 100 years (Robert Engelman, 2011); it is projected to increase from 6.7 billion at 2006 to 9.2 billion by 2050, as shown in below Figure 2.1. Every new people added each day, which will need lots resources, especially food and food related resources.
Figure 2.1 Global Population Estimates and Projections (Source: http://www.grida.no/graphic.aspx?f=series/rr-food-crisis/figure04.jpg)
Crude oil and biodiesel
High crude oil prices signal the world that substitute transportation fuels are needed, and for the time being, the primary source of substitute fuel is biodiesel, which a truly renewable resource and burns clean, keeps our skies and soil clean. Biodiesel is a kind of blended fuel made from animal fats, advanced non-food alternative crops and natural...
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