Ministry identifies two measures to reduce CPO stocks - Uggah

BINTULU: The Plantation Industries and Commodities Ministry has identified two measures to reduce the crude palm oil stocks, said Minister Datuk Amar Douglas Uggah Embas.

He said the stocks as at October 2015 were 2.83 million tonnes.

"The first measure, which will be presented to the Cabinet, involves the increase in the use of B10 biodiesel from B7," he said.

He said the second measure would be the launch of RM100mil Oil Palm Replanting Scheme Incentive (SITS) 2015 (SITS 2015).

Uggah said this to reporters after officiating Smallholders' Transformation Programme in Bintulu on Thursday.

Also present were Malaysian Palm Oil Board director-general, Datuk Dr Choo Yuen May, and state assemblyman for Kemena, Datuk Dr Stephen Rundi Utom.

The B10, a blend of 10% palm-based biodiesel and 90% petroleum diesel, is set to replace B7.

On SITS 2015, Uggah said: "We have allocated the money to encourage the plantations to replant.

"Our target is the replanting of 83,000ha of the trees which are old and unproductive. If SITS 2015 is successful, we hope to reduce the production of CPO to 250,000 tonnes." - Bernama

Source : The Star - See more at: http://www.mpoc.org.my/Ministry_identifies_two_measures_to_reduce_CPO_stocks_-_Uggah.aspx#sthash.G2iMLR8S.dpuf

Possible earnings setback for plantation players

PLANTATION firms have reason to cheer lately given the emergence of catalysts that are set to prop up crude palm oil prices (CPO).

Benchmark futures contracts for delivery of CPO in December hit a one-year high of RM2,450 points on Sept 29, having gained nearly 30% from levels below RM2,000 seen just the month before.

Despite the near-term volatility, average selling prices amounted to just RM2,100 per tonne so far this year, according to recent reports by several research houses.

As companies begin reporting their earnings for the July to September period (3Q15), the lower average prices for CPO and the ringgit will significantly impact earnings for the remainder of the year, say analysts.

Companies, especially those with operations outside of Malaysia, face the threat of ballooning foreign exchange losses given the ringgit’s plunge in recent months.

As these losses can take up a large chunk from companies’ net profits, it would impede their ability to maintain a consistent dividend payout.

In an Oct 5 credit report by Moody’s, the firm points out that Asian palm oil companies are struggling to de-leverage their quantum of borrowings due to the prevailing low CPO prices.

Moody’s highlighted the currently poor cash generation by some plantations firms as the main reason.

“We have lowered the ratings outlook for Sime Darby Bhd (A3) and IOI Corp Bhd (Baa2) to negative from stable to reflect this, as well as the rising leverage,” it says.

IOI’s recent earnings performance shows a rising exposure to liabilities arising from foreign exchange translation losses.

The bulk of its long term debts are denominated in US dollars, making them more expensive to service as the ringgit weakens against the greenback.

As at June 30, IOI’s net forex losses stood at RM735.3mil, causing its cumulative net profit for the year to plunge to RM172.4mil compared with RM1.26bil over the same period last year. The company’s cumulative dollar –denominated borrowings stood at RM5.6bil.

It is worth noting that these are unrealised losses and subject to fluctuations of currencies in the forex markets.

However, since June 30 the ringgit has plunged from RM3.77 to RM4.11 against the dollar as at Oct 9.

While other firms such as Kuala Lumpur Kepong Bhd and Sime Darby owe hundreds of millions of ringgit worth of dollar debts, they actually posted unrealised forex gains in the latest quarter, suggesting that the positions were hedged with currency forward contracts.

In the meantime, the El Nino phenomenon may prove to be a mixed blessing for planters’ earnings prospects.

While prolonged dry weather could boost CPO prices higher, the resulting downturn in production activity will have the effect of depressing future earnings.

El Nino effect

The effects of El Nino are currently concentrated in the Kalimantan and south Sumatra region, with major integrated players such Sime Darby and KLK owning large tracts of landbank there.

Even if CPO prices stayed at present levels, which represents a one-year high for the commodity, companies may not be able to maintain their revenues as lower fresh fruit bunch production in the coming months will offset any gains seen in selling prices.

The unseasonably dry weather and lower rainfall can cause lower yields in the long term, given the significant time lag for the conditions to impact overall production figures.

Lower rainfall for plants during the early stages of production can cause fruit bunch failure within six months’ time and floral abortion within 12 months’ time, according to CIMB Research.

“The current drought, which has lasted more than eight weeks, could affect estates’ productivity in the fourth quarter and 2016. Sime Darby and KLK’s palm oil estates in Kalimantan are older, so their upstream earnings will be more significantly impacted by prolonged drought,” says CIMB Research plantations analyst Ivy Ng.

Despite the threat to earnings, analysts have turned bullish on CPO prices over the next six months. In an Oct 9 report, Morgan Stanley Research raised its forecast CPO price to RM2,750 per tonne in 2016, a steep premium from the spot price of RM2,502 per tonne on Friday.

While the growth rate for demand this year is the slowest since the 1997-98 Asian financial crisis, the research house attributed this to the contraction in discretionary biodiesel demand arising from lower crude oil prices.

This will be rectified as Indonesia moves towards its B15 biodiesel mandate, which is expected to require an consumption of 4.6 million tonnes of biodiesel annually.

“We forecast global palm oil demand growth to rebound back to trend growth rates of about 6% in 2016 from just 2% growth in 2015,” it says.

Source : The Star

http://www.thestar.com.my/Business/Business-News/2015/10/10/Possible-earnings-setback-for-plantation-players/?style=biz

Cocoa Industry Gets RM37.8 Million Under 11MP

KOTA KINABALU, Nov 13 (Bernama) -- The Federal government has allocated RM37.8 million to the Malaysian Cocoa Board (LKM) to develop the cocoa industry nationwide under the Eleventh Malaysia Plan (11MP), said Board of Governors Chairman Datuk Marcus Makin Mojigoh.

Of the total, RM10 million is allocated for Sabah, although the actual amount would depend on the number of cocoa growers in each area, he told reporters after closing a three-day brainstorming session on transforming the cocoa industry here today.

Marcus said cocoa growing could be lucrative with cocoa beans fetching up to RM8,900 a tonne, adding LKM plans to build several cocoa collection and processing centres in the state.

Marcus, who is also Putatan MP, said selected smallholders wishing to replant their land with cocoa will get aid of RM1,000 per hectare as well as seedlings, fertilisers, herbicides and technical advice.

"We want to produce our own cocoa and not have to rely on cocoa from overseas," he said, adding the state produced 1,139 metric tonnes of cocoa beans last year, mainly in Tawau, Tenom, Ranau and Kudat districts.

-- BERNAMA

http://www.bernama.com/bernama/v8/bu/newsbusiness.php?id=1189239

Malaysia to quit Roundtable on Sustainable Palm Oil grouping?

PETALING JAYA: The Malaysian Palm Oil Association (MPOA), which represents the private plantation companies, will decide at its council and exco meeting this Friday whether to quit the Roundtable on Sustainable Palm Oil (RSPO) grouping.

At the same time, the RSPO, fed up with the MPOA stalling on the implementation of measures that would facilitate sustainable planting, has given the Malaysian body an ultimatum to consider its position in the international multi-stakeholder organisation.

The RSPO is a non-profit organisation issuing the certificate that validates that the production of palm oil is sustainable. The RSPO certificate is crucial for plantations to export their products to European and other Western countries.

Industry officials said that of late, there had been a stalemate in negotiations between the RSPO and Malaysian oil palm growers on a host of contentious issues.

“Chief among them is the compensation imposed on planters for being unable to meet the RSPO requirements on high carbon stock, palm oil mill effluents and greenhouse gas emissions,” said an industry official.

The MPOA has recommended to its 17 council and exco members that include plantation big boys such as Sime Darby Bhd, IOI Corp Bhd, Kuala Lumpur Kepong Bhd, United Plantations Bhd, Felda Global Ventures Holdings Bhd as well as mid-tiered plantation companies and independent small estate owners, to do away with the RSPO.

“Now is the time that requires the wisdom of the MPOA council and exco members to make a decision on whether to quit the RSPO or continue to be a part of it,” the official told StarBiz, adding that at least two local plantation companies had agreed to exit the RSPO.

Should the MPOA, as the umbrella body of all plantations in the country, quit the RSPO, then it would be joining many of its counterparts from emerging economies. However, the individual planters may continue to be a part of the RSPO on their own accord.

For instance, Sime Darby, which is one of the largest plantation groups in the country, can continue to be a part of the RSPO to effectively penetrate the European market even if the MPOA opts out of the organisation.

In September 2011, Gabungan Pekebun Kecil Indonesia (GAPKI), the MPOA’s Indonesian counterpart, quit the group.

GAPKI’s rationale then was quite straightforward. It felt that for all the efforts and costs incurred by planters to comply with the RSPO requirements, their exports of crude palm oil (CPO) had failed to fetch a premium and secure a good uptake.

Both Malaysia and Indonesia account for over 80% of CPO production globally.

According to sources, the RSPO is turning out to be “not the right organisation” for the MPOA; one that can act fairly to enable oil palm growers to pursue and embrace the principle of sustainability in the production of palm oil.

They pointed out that MPOA members should support and work closely to build the national certification standard, the Malaysian Sustainable Palm Oil (MSPO), which is expected to be “officially” launched by the end of next month.

Some planters also claimed the governance and aspirations of the RSPO had changed, whereby the increasing involvement of NGOs such as World Wildlife Fund (WWF)-linked individuals and Western green activists had been found at all levels of the RSPO task force, committees and organisational set-ups.

“Now the RSPO is as good as the Trojan Horse of the WWF,” said a member of the MPOA, adding that the oil palm growers who had previously formed the majority of the RSPO have now become the minorities.

“Any objection put up by the oil palm growers’ grouping is no longer sustained but scuttled by the voting majority of the RSPO members from among the NGOs and green activists during most of the annual general meetings.”

Some industry observers opined that the potential exit from the RSPO by the MPOA also comes hot on the heels of the Unilever-Wilmar group’s trade alliance compelling the Sarawak Oil Palm Plantation Owners Association to give an undertaking that there would be “No deforestation, no peat and no exploitation” by the planters.

“The vertical arrangement between Unilever and Wilmar upon oil palm growers in the peat land areas in Sarawak is pre-emptive and unilateral. It is important that this trade overture might either compromise or infringe the Competition Act 712 and/or 713.”

It is said that a group of consultants and plantation experts from Wilmar are currently on a two-day visit to Sibu and Miri to clarify on its new CPO sourcing policy to the affected Sarawak planters and smallholders via the Felda and Sarawak Land Consolidation and Rehabilitation Authority schemes.

Source : The Star

http://www.thestar.com.my/Business/Business-News/2014/02/26/Malaysian-Palm-Oil-Association-to-announce-decision-on-Friday/?style=biz

Malaysian palm oil launches new campaign in France and Belgium

The Malaysian Palm Oil Council launches a mark of provenance and an information campaign for more responsible palm oil

Launched in France and in Belgium on 7 September, the information campaign on Malaysian palm oil organised by MPOC, the promotional association bringing together Malaysian palm oil industry

stakeholders aims to combat preconceived ideas and invites the public to form their own opinion. On this occasion, MPOC is launching a mark of provenance and restating its commitment to more responsible

production.

It is the most-consumed oil in the world. A key product for responding to the needs of the world food-processing industry, it today accounts for 35% of the world vegetable oil market. However, a great many untruths circulate around palm oil. You hear everything and its opposite – at times everything and anything at all – regarding its impact on nutrition, health, the environment, economic and sustainable development in Asia and Africa. Palm oil is blamed for a host of ills, with a particularly high proportion of preconceived ideas in public opinion.

To better inform French and Belgian consumers…respond to the controversies and promote what Malaysians see as an emblematic product (8.3% of the foreign trade, the country's fourth-biggest economic resource), the Malaysian Palm Oil Council (MPOC) has launched this information campaign based on transparency and openness that will showcase the initiatives and efforts made in the field to enable the industry to progress further every day towards more sustainable and more responsible production of palm oil. Malaysian palm oil is already a world-leader, and continues to improve with ambitious plans for a more efficient and responsible future.

More responsible in environmental terms, thanks to a shared determination to optimise management of forest resources and protect endangered species; more responsible also in terms of consumer health, thanks to continuous research to improve a product whose properties are not well understood… and which Malaysians refuse to modify through use of GMO technology. Lastly, a socially responsible industry, that enables a large number of small producers to move up into the middle class thanks to a higher and more reliable income, but that also provides effective, modern infrastructure for plantation residents: schools, clinics, roads, etc.

Officially launched on 7 September, the campaign entitled "They say everything and anything at all about Malaysian palm oil" orchestrated by Havas Paris, invites each and every one of us to form our own opinion about Malaysian palm oil. It relies on the curiosity and exacting standards of the citizen consumer, who is invited to view the original and informative content made available on the malaysianpalmoil.info website.

The integrated communication platform has several components:

a press, poster and digital campaign in France and Belgium. The series of five amusing and colourful illustrations takes a playful look at a number of widespread myths as a way of challenging them

an educational website (malaysianpalmoil.info) offering informative content, together with a quiz to win a study trip to Malaysia

a mini web-doc (six sequences of approximately two minutes each on the themes of production, animals, food, forests, health, social issues) hosted on the dedicated site, which follows the adventures of three students and young professionals - Angélique, Marianne and Simon – who went out to meet local stakeholders

creation and coordination of dedicated social networks to share content and interact with the public:

a platform for relaying information to the French and Belgian media

"Palm oil provides a livelihood for over one million people in Malaysia, including 300,000 small farmers. We have launched this campaign to encourage a more balanced debate and correct the myths, the consequences of which are underestimated. This is particularly important for us in that a great many myths and falsehoods do indeed circulate about the product, often with serious consequences for those working in the industry in Malaysia or in Europe", declared Dr Yusof Basiron, CEO of the Malaysian Palm Oil Council (MPOC) at the press conference to launch the campaign.

Carl Bek-Nielsen, Vice-Chairman of United Plantations, a Malaysian palm oil producer said "We want to let every citizen and consumer form their own opinion based on the reality on the ground. We hope they will realise that the Malaysian oil palm industry is committed on a daily basis to producing an oil that is more responsible in terms of the environment, health and the people who make a living from it ".

- See more at: http://www.mpoc.org.my/Malaysian_palm_oil_launches_new_campaign_in_France_and_Belgium.aspx#sthash.PG1lyp3S.dpuf