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The Impact Of President Xi’s Call To Stop Food Wasting On Palm Oil Demand

Call from President Xi to stop food wasting

On 11 August 2020, China’s President Mr. Xi Jinping made important instructions to curb the situation of food wasting. He pointed out that the phenomenon of food wasting is shocking and heart-breaking! He also quoted from a Chinese poem which says “Every grain that we enjoyed during our meal doesn’t come easy”. Hence, despite the continuous bumper harvest of grain production in China in the past 16 years with record output charted in 2019, China must always have a sense of crisis regarding food security, where the outbreak of COVID-19 has alerted all of us of this importance.

Hence, the President has raised the need to enhance legislation and supervision, with effective measures, and establish a long-term mechanism to stop food wasting. Besides that, it is necessary to further enhance the public awareness of the food-wasting issue, and effectively cultivate thrifty habits and foster a social environment where wasting is shameful and praise prudence spending!

Food wastage in China

Food wastage includes wastage through losses during processing, and also wastage during meals. According to a report entitled “Food Wastage Footprint – Impact on Natural Resources” released by the Food & Agriculture Organization (FAO) in 2013, one-third of the food was wasted or lost annually, or approximately 1.3 billion MT! If 25% of this wastage is being avoided, it is enough to feed 870 million people that are living in hunger globally.

For China, the food lost and wastage is also very significant. In 2018, the Institute of Geographical Sciences and Resources of the Chinese Academy of Sciences released a report of the survey conducted in 2015 on 366 restaurants in 4 cities, including Beijing, Shanghai, Chengdu, and Lhasa. It was found that the per capita food waste in the catering industry was 93g per meal, with a wasting rate of 11.7% (Chart 1). The rate of wastage is even higher during bigger banquet functions at 38%.  According to estimates, in 2015, the amount of food wasted on dining tables alone in the urban catering industry in China was as high as 17 million to 18 million MT, equivalent to the total amount of food for 30 million to 50 million people a year.

Chart 1: Various types of food wastage in 4 cities in China

Another special ongoing research project initiated in 2015 entitled “Research on Investigation and Evaluation Technology of Grain Postpartum Loss and Waste”, which is led by Prof. Cao Baoming, Dean of the School of Grain and Materials, Nanjing University of Finance and Economics, and jointly undertaken by China Agricultural University, and several other major tertiary institution, and government departments, also carry out comprehensive investigation and evaluation of the losses and wastes in various links of grain which include harvest, and post-harvest processes such as drying, storage, transportation, processing, sales and consumption throughout the country.  The research project found that grain lost post-harvest (excluding consumption) was as high as 15.7%.

In terms of consumption, the loss in oils & fats was as high as 44.0% and food wastage among the rural household and urban catering sector were at 2.4% and 11.7% respectively, while wastage of packed food at universities is as much as 12.1%.

To further give the reader a clearer picture of the food wastage in the catering sector in China, another study carried out back in 2015 found that the food wasted in the urban catering sector was as high as 1.7-1.8 million MT, which is equivalent to the annual demand of food for 30-50 million Chinese.

Measures Taken To-date

To echo the call by President Xi to cut down the food wastage (primarily at the consumption level which involves all local Chinese & foreigners staying in China), some experts have proposed the government to come out with a law such as the “Anti-Food Waste Law” to cut down food wastage more effectively. While waiting for local and central government to come out with the law, various Ministries, government agencies, airlines have started putting up instruction, campaigns, and measures to stop food wastage internally.

The various measures being carried through advocating “take as much as you need, or a small amount for many times”, “eat in a civilized way, put an end to waste” and refuse “leftover” banquets, and carry out the “clear your plate” campaign, etc.

On top of the government agencies, the China Federation of Commerce, China Cuisine Association, China Hotel Association, and several other catering related bodies jointly launched the “Proposal on curbing food waste and cultivating saving habits” on 12 August. Among the measures proposed in this proposal includes suggesting that the restaurant should remind customers not to over-order, whether it is before the meal or halfway through; avoid customer taking too much food at the buffet which might not be able to finish by informing in advance of the need to charge the meal fee or service fee for any wastage, etc. Some catering operators have also set up half-portion meal or small-portion meal (from the standard serving offered before this), and control leftover food at the buffet. Besides that, there are catering operators given out e-meal vouchers or discount coupons to customers who finished all their foods ordered.  Different from rewarding the customers, a restaurant in Guangzhou started “punishing” the customer by charging RMB20/50g leftover food.

Impact on Palm Oil Demand

Based on the various measures taken by the various entities in China and expecting more to come, it seems that the determination of curbing food wastage at the consumption level is very strong. It is also expected that there would be the law to be put in place to support President Xi’s plea to assure the long term food security in China.  This means, the quantity of food prepared and sold is foreseeable to drop in China, and predominantly from the catering sector.  Consequently, the demand for ingredients will fall at the same time, including cooking oil.

It is estimated that the cooking oils used in China’s catering (HORECA) is around 7.0 million MT annually. Hence, if there is any drop in catering sales quantity, it will directly lead to the drop in cooking oil demand, be it in small or medium pack cooking oil. Among the various types of vegetable oils used in the catering sector, palm oil particularly RBD Palm Olein accounted for 1.2-1.5 million MT annually depend on the price discount against soybean oil.

Chart 2: Palm Oil Applications in China (2019)

Source: Market Info and MPOC Estimates

It is difficult to estimate how much wastage could China curb under this campaign at this stage, but judging from the wastage of 11.7% in the report released by the Institute of Geographical Sciences and Resources of the Chinese Academy of Sciences, it would mean the maximum saving in oil in catering sector would be around 820,000 MT if the wastage is fully curbed. As such, this would translate into the cut of 140,000-175,000 MT annually in palm oil demand from this campaign.  Nevertheless, besides cutting down on food ordered, food wastage also could be curbed by encouraging the people to finish food ordered or pack the leftover foods. In another word, the saving or cut-down in oil usage may not be as high as estimated, and the impact on palm oil demand may not up to 100,000 MT per annum.P

Prepared By:   Desmond Ng 

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