Palm Oil Quality Standards for Trading

Tan Yew Ai MPOB

PORAM Course on Operational and Commercial Aspects of Palm Oil Trade 27 & 28 May 2013

Global importance of palm oil

Most heavily consumed oil in the world Average world demand has grown by 3% yearly in the past 30 years Used in almost half of all processed foods and cosmetics One in ten supermarket products contains palm oil

Presentation outline
Palm oil quality and characteristics Palm oil trade Specifications Standards Ethical trading Conclusion

PALM OIL: QUALITY AND IDENTITY CHARACTERISTICS

Definition of Quality
Conventional ability to satisfy stated or implied needs Current implications on security, safety, human health, accountability, environment, etc.
e.g. Sustainable production of palm oil

Oil Palm/Palm oil supply chain

Smallholders Dealers

Plantations
Mills
Export

Refineries Contract Buyers

Consumers

Chemical & physical characteristics

To assess: Purity or authenticity of the product; Quality and stability, and Foreign substances and impurities

Palm Oil Characteristics

Identity Characteristics Chemical
FAC TAG IV Carotene Chlorophyll Tocols Sap. Value Unsap. Matter

Physical
SMP SFC Apparent Density Viscosity Refractive Index

Quality Characteristics
PV E233 & E269 AnV DOBI Fe, Cu, P FFA OSI M&I Contaminants

Components in Palm Oil

Triacylglycerols Monoacylglycerols Diacylglycerols Free fatty acids

Phospholipids
Sterols Pigments Tocols Minerals

Glyceride Composition
Triacylglycerols (TAGs) make up about 90 % of the components in oils and fats CPO contains about 4.7% diacylglycerols (DAGs) and 0.1 0.3% Monoacylglycerols (MAGs)

Fatty Acids
TAGs 3 fatty acids

DAGs 2 fatty acids

MAGs 1 fatty acid
Fatty acid 2 Glycerol Fatty acid 3

Fatty acid 1

Saturated fatty acids

stable fatty acids with single bonds

Unsaturated fatty acids

Fatty acids with one or more double bonds

Fatty Acid Isomers

Isomers are defined as compounds with
the same molecular formula but different molecular structure

Most common isomers are the cis and

trans isomers

Cis & Trans Fatty Acid Isomers

Cis H C H H C H H C C H

Trans H C
H C H C C H H

Free Fatty Acids (FFAs)

Fatty acids which are not attached to a
glycerol molecule
FFAs are obtained when glycerol is split from the TAG in a reaction termed as hydrolysis True metabolites of TAGs and thus can occur naturally in trace amounts Also result from the breakage of the bound fatty acids from MAGs, DAGs or TAGs

FFA Content
Presence of large quantities indicative of
lipolytic activity in damaged fruits

Average quality crude palm contains less

than 5%

Refined palm oil contains less than 0.1%

FFA versus AV
The acidity of the oil is expressed as FFA content or acid value (AV) In instances where a blend of oils is involved, uncertainty as to which acid to use for calculation arises and the acid value is used to define the acidity of the sample To convert %FFA as oleic acid, lauric or palmitic acid to AV, multiply the %FFA by 1.99, 2.81 or 2.19 respectively

Non-glyceride Components
Make up less than 5% of crude
vegetable oils

Most are largely removed or broken

down during refining of vegetable oils

Pigments - Carotenoids
Orange-red colour of CPO due to 500-700
mg/kg carotenoids

a - and b - carotene are important provitamin A compounds

Partially removed from CPO by earth

bleaching, while deodorization breaks them down into colourless or light coloured components

Pigments - Chlorophylls
Impart greenish colour to crude rapeseed and olive oil They are photosensitizers which activate photooxidation in oils Their presence adversely affects oxidative deterioration, hydrogenation and bleachability

Tocopherols & Tocotrienols

These are natural antioxidants known as Vitamin E The 3 important forms are a-, b- and gtocopherols and tocotrienols 600-1000 mg/kg in CPO

Minerals
Present only at trace levels in oils Phosphorus from residual phosphatides Sodium soaps left from alkali refining Iron & copper Trace nickel in hydrogenated fats

PALM OIL TRADE -STANDARDS -SPECIFICATIONS

CPO before mid 1970s Refined palm oil after 1980s

General trading terms

Good Merchantable Quality (GMQ)
conformation to a minimum standard, suitable for the purpose for which it was bought

Fair Average Quality (FAQ) the

average quality of agricultural produce based on samples taken from bulk

Quality specifications
Guarantee of parameters such as
FFA Moisture & Impurities IV Colour SFC

Others aspects of quality

Quality monitoring of palm oil traded using:

Standards

Specifications
Regulations/Legislation

Standards
Set criteria expected in a particular product
MS, CODEX, ISO

Unless incorporated into legislation or regulations, they have no legal validity A product meeting a standard is at once identifiable as a quality product

Specifications
Stipulate criteria demanded by the buyer of a particular product or consignment May be above or below those in a standard or may be concerned with criteria not covered in a standard Variations from a standard are usually the subject of price negotiations for the product

Regulations/Legislation
Define minimum legal requirements governing the sale of a product May incorporate a standard Standards and specifications will conform to regulations which must be met before the product may be legally sold

Standards and specifications in trade

Define uniform and accepted descriptive terms to facilitate palm oil trade Provide tools for the market to create incentives to improve overall oil quality

Palm specifications MS 814

Scope both crude and refined oil Definition crude, neutralised, neutralised and bleached, etc. Identity and quality characteristics Hygiene, packaging, certification Sample preparation and testing,

Palm oil trading contracts

PORAM 1 Domestic Contract for CPO PORAM 2 FOB Contract for processed palm oil and palm kernel oil products PORAM 7 FOB Contract for CPO and CPKO FOSFA 81 CNF/CIF Contract for palm and palm kernel oil products FOSFA 80 CNF/CIF Contract for crude palm kernel oil, crude and refined palm olein and palm stearin

Trade association contracts

Aim to protect quality by stipulating
Quality on shipment Standards of transportation
Storage Handling

Contracts, standards and quality

FOSFA and NIOP contracts previous ship cargo must not be from banned list of substances Efforts to continuously upgrade quality through improvement of standards Codex Alimentarius executes food safety programme standards, codes of practice, guidelines, recommended measures

Codex Standard for named vegetable oils CX-STAN 210

Essential composition and quality factors FAC, slip point Food additives antioxidants, flavours, Contaminants pesticide residues, Pb & As (0.1 mg/kg) Hygiene Labelling Methods of analysis

Contract specifications CPO futures

Moisture & impurities <2.5% FFA:
Into Port Tank installation <4% From Port Tank installation 5%

DOBI
Into Port Tank installation 2.5 minimum From Port Tank installation 2.31 minimum

Other quality requirements

Free from solid particles, adulterants, sediments, foreign matter, added colouring or flavouring substance Free from mineral oils, toxic matter, other oil of vegetable or animal origin Odourless and bland in taste

Analyses for quality control

MPOB Test Methods MS Methods

ISO Methods
BSI Methods

AOCS Recommended Methods

IUPAC Methods

Ideal Quality Targets

Parameter FFA, % M & I, % Colour, 5 inch Lovibond PV, meq/kg Carotene, mg/kg
DOBI Anisidine value
* Minimum

CPO, max 3.5 0.25 1.0 500 -800 2.5* 5

RPO, max 0.05 0.02 2.5 R

0 2

MS CHARACTERISTICS Identity Apparent density (50C) FFA Quality

Refractive index (50C)

Saponification value Unsaponifiable matter Fatty acid composition Iodine value Slip melting point Total carotenoids

Moisture & Impurities

Peroxide value Anisidine value Colour DOBI

PORAM Specifications
Parameters FFA (as % palmitic acid, max) Moisture & Impurities (% , max) Melting point (C) Iodine value (min) Colour (5 inch Lovibond, max) Refined palm oil 0.1 0.1 33 - 39 50 - 55 3 Red Refined palm olein 0.1 0.1 24 56 3 Red

STC specifications
Grading factors FFA (as % palmitic acid, max) CPO (Edible grade) 5.0 Refined Palm olein 0.1

Moisture & Impurities (% , max) Melting point (C, max) Iodine value (min)
Colour (5 inch Lovibond, max)

0.5 37

0.1 24 56
3 Red

CHINA AQSIQ CIRCULARS ON EDIBLE IMPORT

CHINA ENHANCING FOOD SAFETY IN THE COUNTRY

TWO CIRCULARS WERE ISSUED BY THE CHINA AQSIQ ON EDIBLE OIL ( July 2012)
AQSIQ CIRCULAR NO. 229: Requirement to Further Strengthen the Import of Edible Vegetable Oil Inspection and Supervision

AQSIQ CIRCULAR NO. 80: Requirement for the Imports of Vegetable Oil in Bulk to China

China: GB 15680-2009
Grading factors Crude Palm Oil Acid value (mg KOH/kg, max) 10 Moisture & volatile matter (% , max) Insoluble impurities (%, max) Melting point (C, max) Fe (mg/kg, max) 0.2 0.05 33 - 39 5 Refined Palm Oil 0.2 0.05 0.05 33 - 39

Cu (mg/kg, max)
Peroxide value (meq/kg) Colour (5 inch Lovibond)

0.4

10 3 R 30Y

Settling commercial disputes

Litigation before courts
Arbitration Conciliation Mediations

Commercial settlements

Reasons for arbitration

Failure to deliver cargo Dispute over price Payment Quality Letter of credit Cargo readiness Dispute over contract

Additional analysis for quality

Contaminants and environmental pollutants (3-MCPD, afflatoxin, benzopyrene, hydrocarbons, dioxin) Additives (Antioxidants, anti-foaming agents) Pesticide residues

ETHICAL TRADING

Ethical Trading
Ethical sourcing Workplace conditions Workers welfare Sustainable agriculture More than 50 regulations/legislation in place to ensure sustainable practices in the oil palm sector

Roundtable on Sustainable Palm Oil (RSPO)

Independent global initiative Promote sustainable palm through cooperation within the supply chain Established principles and criteria for certification of sustainable palm oil

Malaysian Sustainable Palm Oil (MSPO)

National interpretation of RSPO MSPO covers smallholders, plantations and mills. Why do we need MSPO? No Malaysian Standard for Sustainable Palm Oil Production As an alternative to RSPO which is costly As a tool to brand Malaysian palm oil

The MSPO draft consists of 4 parts

MSPO 1: General Principles for Malaysian Sustainable Palm Oil MSPO 2: General Principles for Independent Smallholders MSPO 3: General Principles for Oil Palm Plantations and Organized Smallholders MSPO 4: General Principles for Palm Oil Mills

MPOBs Codes of Practice

Conclusion
Challenges - the industry needs to overcome issues related to changing regulations, new trade obligations Competitiveness Mistaken notion on nutritional aspects Development on peatlands (GHG emission) Sustainability - environment, economy, social aspects Invisible trade barriers