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Wilmar’s ‘no deforestation’ goal could revolutionise food production


Wilmar’s ‘no deforestation’ goal could revolutionise food production
February 3, 2014February 3, 2014tradingstock4aliving Leave a comment Edit
After years of lobbying the world’s largest palm oil company has promised to end deforestation and exploitation – will it set a new threshold for responsible food production?



Palm oil plantations in Riau province, Indonesia. According to Greenpeace, palm oil cultivation is one of the driving forces behind deforestation. Photograph: Bagus Indahono/EPA
In the very late hours of what had been a long Singapore day, on 5 December 2013, global palm oil giant Wilmar quietly posted a press release on its website.

It announced a far-reaching new policy commitment – no deforestation, no exploitation, no peatland development in any of its business. Shared with only a handful of journalists because of the late hour, it was only in the US where filing deadlines had not yet passed that the news filtered out.

Picked up here and there in the subsequent days, it made no real bang in the global media, quite different from the worldwide interest when pulp and paper giant Asia Pulp and Paper made a similar announcement ten months earlier.

Wilmar’s commitment represents the latest but also by far the most significant “no deforestation” commitment yet. It has the legs to create a global revolution in how we grow food.

No deforestation commitments spring from the logic that deforestation is driven by businesses sucking it through supply chains, that forests are destroyed to grow raw materials such as palm oil, soy, beef and wood fibre. Embedded in products made with the raw materials, deforestation drives climate change, species loss, and human rights violations. Thus, to solve it, we need to block the pipeline for deforestation-linked products and instead produce raw materials without destroying forests. “If your product contains deforestation, I will not buy it” is a powerful deterrent. It’s also a powerful incentive to disengage from deforestation, exploitation or peatland clearance – “desist and I’ll buy your entire stock”.

Nestlé deserves special mention for making the first no deforestation commitment in December 2009 when its Chairman committed that no Nestlé product would cause deforestation. Attacked by Greenpeace for links to deforestation in its palm oil procurement, Nestlé announced No Deforestation Responsible Sourcing Guidelines for the palm oil and pulp and paper it buys in May 2010.

Indonesia’s largest and the world’s second ranked palm oil grower, Golden Agri Resources, made its own commitment, mirroring Nestle’s policy, in February 2011. Asia Pulp and Paper followed in February 2013, then Neste Oil (the biofuel giant) in April 2013, Ferrero in November 2013, Reckitt Benckiser in December 2013 and now Wilmar. Unilever, Delhaize, E Leclerc supermarkets and others have made policy commitments enshrining the no deforestation concept.

The Consumer Goods Forum, comprising 400 member companies, many with links to deforestation through beef, palm oil, soy and pulp and paper, made their own commitment in November 2010 to “no net deforestation” by 2020. The CGF, in partnership with the governments of the US, UK, Netherlands and Norway as well as some NGOs, then formed the Tropical Forest Alliance to help move the commitment from policy to implementation. The Government of Indonesia hosted the first TFA meeting in June 2013. This looks like positive action, a growing push.

Yet deforestation continues.

Wilmar’s commitment has the potential to change that. Wilmar is the world’s largest palm oil company; it controls some 45% of the market. Estimates suggest it buys from 80% of all palm oil growers. With its new policy, those growers will have to stop cutting down forests, stop exploiting people and stop clearing peatlands.

Implementing the policy will not be straightforward. We’ve recently seen concerns from Forest People’s Programme that Golden Agri’s implementation in Indonesia has not respected community customary rights. The focus is now on fixing that but the reality is that we’re in very new ground here. No one has ever sought to protect forests, respect community rights and run a profitable business on this scale before in an industry famous for focusing solely on profits.

Wilmar’s Chairman spoke eloquently and passionately recently at Davos where he noted that the younger generation of plantation growers had received the policy commitments positively. There had been an expectation of large-scale push back. That hasn’t happened yet and it raises the hope that the snowball has started to roll downhill. Even more significantly, questions are already being asked about other commodities, “If we can grow palm like this, what about soy, beef, pulp and paper, cocoa, sugar?”

The fascinating thing about these policy commitments is that they are predicated on the very simple idea that a buyer can work with suppliers to specify broadly defined qualities – ethical specifications like no forests destroyed, and no people exploited and so go beyond traditional technical specs like colour, strength, price and so on. No tortuous UN resolutions needed, good practice is rewarded; food is grown in a different way, let the multi-trillion dollar food market work.

Wilmar going for it has set a new threshold for responsible food production. Yes, the company has to work through the challenges of implementation but there is real hope that with this germ of an idea, this relatively new approach to saving forests and respecting people, we just might be witnessing the final, beautiful unfolding of a butterfly’s wings. Its subsequent flight could indeed change the world.

How Soybean financing affecting Wilmar’s oil seed & grain segment
February 7, 2014February 8, 2014tradingstock4aliving Leave a comment Edit
Soybean becoming a financing tool in China as a means to avoid the country’s tight credit rules.

1. Domestic traders would get banks to issue letters of credit with either at zero interest or <1% (in the case of soybean) for 90 to 180 days to import soybean.

2. Once soybean arrive in 30 days, they will be immediately sold for cash at a discount price in the local markets.

3. Then the traders will use the proceed to lend to small companies especially property developers who usually find it hard to get bank loan from banks due to tight credit rule in China with high interest rates.

4. The traders then either need to collect back the loans from those small companies or repeat the process when the due date for the letter of credit is due.

*Soybean financing has been mushrooming between 2009 and 2012 and has became a highly profitable business for commodity traders who benefitted from these :

i) Rising of commodity prices as the traders will either gain or bear less losses when they sell soybeans at a discount in the domestic markets.

ii) Appreciation in Renminbi.

iii) Interest rate difference between trade financing (zero or >1%) and chinese domestic underground leanding rates. The difference could be as high as doube-digit percentage points!!!

“IMPACT ON WILMAR INTERNATIONAL”

1. Soybean financing has lead to oversupply of soybeans. Hence lower domestic soybean price due to :

“supply > demand”

2. This will leads to price depressed in end-products like soybean oil and soy meal.

3. “Wilmar imports its soybean from north and south america”. Which means Wilmar has purchased Soybean higher than domestic soybean price and selling their end products at “depressed” price.

Which has leads to margin compression in the oil seed and grains segment.

Refer to table 1 below, Wilmar’s contribution from Oilseed and grain segment has contracted from 32% at 2008 to only 1% at 2012.

Table 1.





Which is the main reason why you see Wilmar share price drop from SGD 6.XX to SGD 3.XX.

Soybean financing heyday may be over soon. Why?

1. End of the commodity supercycle.

Those soybean financing trader will bear more losses.

2. USD vs RENMINBI

Gaining of USD meaning traders have to bear for forex losses.



3. Property Cooling measures by Chinese goverment

i) Goverment moves to force out the smaller developers that used to be the major customers of those soybean financing.

ii) Interest rate liberalisation and government actions against shadow banking could further downsize soybean financing market.

Will Soybean Financing REVISITED??

In fact, Beijing has implemented a series of measures to regulate off-balance-sheet lending and the cash crunch last year has caused many traders involved in commodity financing to go bankrupt.
Therefore, we can expect more stable earnings from this segment ahead. Indeed, we have seen this segment recorded four consecutive quarters of positive Profit before tax. However, its share price was still hovering at between SGD 3.10 – SGD 3.30. This is mainly due to some of those investors are not yet regain their confident towards this counter.

One more point to highlight. Base on table 1 segment contribution, we can conclude that Wilmar are expanding its sugar segment since 2010. Sugar segment will be their next leg of growth.

In conclusion, we can expect this counter rebound to SGD 6.00 easily in time to come.

https://tradingstock4aliving.wordpress.com/

You may refer to my blog for more details in table format.

Thanks a lot darknight. if it is truly the soybean causing the contraction of margin for oil & seed segment, then it is really good opportunity to collect some. The next few quarter result will prove it.

China indeed regulate a lot on its off balance sheet recently, my portfolio can feel it.

Thanks for sharing anyway

SGD keep appreciating. SGD 2.63 now.

my wilmar investment gain in currency around RM 36K.
Share price gain only RM 18K.

This post has been edited by darkknight81: Feb 10 2014, 06:15 PM

Congrats Now RM is 24-year low against SGD

KUCHING: Sarawak may lose some RM400 million in sales tax revenue a year from oil palm products following the decision of a multinational refinery company’s refusal to buy crude palm oil (CPO) from mills in the state.A Singapore-based company, Wilmar International Limited, which has its refinery plant in Bintulu, has written to the state government to inform that the company would stop buying CPO produced from oil palm trees planted in forest areas and peat swamp land in the state from 2015 onwards.State Land Development Minister James Masing said the company made known the decision in a letter sent to him on Dec 5 last year. Masing said he had replied to the letter and had briefed the state cabinet on the matter.He said the state government would not bow to such pressure from the company.“If there is a stop in planting of oil palm in forest areas and peat swamp, it would definitely affect the state’s revenue and also the 17,578 smallholders in the state as well as some 300,000 people in rural areas who are involved in planting oil palm.Wilmar, the first palm oil refinery set up in the state over 10 years ago, is buying 45 per cent of the CPO produced by 41 mills in the state.Another 55 per cent of the CPO produced in the state are sold to the  Senari refinery plant in Kuching and to other mills.Masing said there are only two areas in Sarawak where oil palm is planted in the forested area and peat swamp soil.“If we are not allowed to plant on those two areas, then there will be no oil palm planted in Sarawak.“We have no areas where there is no forest, if you want to plant oil palm where there is no forest, you will have to go to the Sahara Desert because there is no forest there,” he quipped.Sarawak has 1.6 million hectares of peat swamp and a lot of that area has been planted with oil palm.“This directive from Wilmar has a very disastrous effect on us because it will stop our programme on poverty eradication among the rural people.“I believe the company has been pressured by non-governmental organisations in Europe to make such restriction on the state oil palm products.“They use environment impact argument but it is actually economic argument.“They told us not to sacrifice our environment with planting of oil palm in our forest and peat swamp soil and I don’t agree to that because there are no soya bean and sunflowers planted in the Sahara Desert.“Soya bean and sunflowers are planted in all over Europe and the forest areas are also cut down,” Masing said.He said the European communities are jealous because the production of oil palm was 10 times better than soya beans and sunflowers.“Therefore, I do not agree to their argument that planting of oil palm in forest area and peat swamp would affect the environment. The state government will not succumb to that kind of argument.“Our method of improving the plight of the people in our state is not up to negotiations with the international community. We will continue to find ways and means on how to improve our people’s livelihood,” Masing said.He said the state government was very cautious on how to protect the environment as “we have our own experts to do the job.”“Nobody can stop oil palm planting in the state as it is where part of the state revenue comes from and at the same time helps in rural povertyeradication.In 2012, sales tax from oil palm was RM4.25 million, a 10.8 per cent of the state’s total revenue in that year, while the sales tax for the period between 2002 and June 2013 was at RM2.16 billion,” the state minister said.Masing said the crop contributed RM300 million income to smallholders inthe state, adding that every smallholder earns RM3,328 per hectare a year.A total of 90,607.30 hectares of land are planted with oil palm in the state.“If we stop the smallholders from planting oil palm, it will affect their livelihood and it will mean the state government has bowed to the pressure.“Oil palm cultivation has impr

This is indeed good, a kick at the songlap king coffers. If the soybean articles and points are indeed true, Wilmar is a recommended BUY then.

OnG year ahead...How about palm oil and such? You know it will come again!

better invest in currency then??

I can't buy Singaporean stocks now, SGD is too expensive.

I expect the RM to depreciate further. As the JPY is manipulated to fall futher to enable Japan to export its way out of the 'lost decade", we would lose all our competitive edge if the RM does not depreciate. The falling JPY was the main cause of the 1997-98 crisis. This time around it it probable that BNM allows the RM to depreciate to avoid the above senario.
Thus it makes a lot of sense to hold good quality non-Ringgit assets.

Wilmar qtr 4 result released. Dividend SGD 5.5 cents increase 83% vs 2012. Full year dividend SGD 8 CENTS.

Further details refer to my blog.

This post has been edited by darkknight81: Feb 22 2014, 11:11 AM

Based on your opinion, do you think it is worthwhile to start entering Wilmar now?

For me i have stop buying cos my average buying price is around SGD 3.15 with exchange rate of 2.4X. Which makes my abp even lower with existing exchange of SGD vs MYR at 2.6x. Therefore my
average price is around less than SGD 3.xx.

At current price,

In term of PE is still very low of only 14.x times compare with nestle of around 25 times.
I will say buy as many as you can before it shoot up. Like what i have introduced to you tws. Remember? From RM 2.90 to Rm 9.xx.

Bear in mind all the efforts that wilmar has put in these few years still doesn't bear fruits yet.
1. Expansion in sugar segments in australia, indonesia, africa and latest in India and Brazil.

This post has been edited by darkknight81: Feb 22 2014, 12:01 PM

Ok. I'll think about it. I still have some savings in Singapore and think maybe it's time for me to get more non-RM stocks like in US and Singapore.

In the news yesterday.

Wilmar is quite attractive but portfolio is too huge. There is always something that goes up and another that goes down in the same time which cancelled out all the good news.

It doesn't matter as long as the company is making money. Despite this it's PE is still much much lower compare with other consumer stock. This is more important i think.

BeSIDES, you need to understand some segment are still quite new for Wilmar especially sugar segment. Once all these segment started to contribute we will see this counter skyrocket

Wilmar closed at SGD 3.48 yesterday.

Oil Palm plantation for sell in Miri.

Total land 2500acres (BUMI Land), planted 1500acres since 3yrs ago. The land owner will profit sharing 40% of the NETT PROFIT (after deduct all expenses). Total asking Rm7,000,000. The new owner after taken over, can continue plantation up to total 2500 acres.

interested pls wechat. line or whatsapp me at +66899678779

I thought thai baht is the main cause of 1997 and 1998 economic crisis???



Jpy not affected by them????