Archive for March 2012

Economic growth forecast lower 'but still good'


KUALA LUMPUR: DEPUTY Finance Minister Datuk Dr Awang Adek Hussin said Bank Negara Malaysia (BNM)'s economic growth forecast for 2012 at between four and five per cent "is still good" although slower than last year's 5.1 per cent. 

Of late, many economists have expressed downside risks to the world's economy due to fiscal drags from the Eurozone's debt-impaired countries. 

"It is better to be conservative than to be overly optimistic. We need to factor in uncertainties in the external markets since we made the initial forecast during Budget 2012 six months ago," he told reporters after officiating at Export-Import Bank of Malaysia Bhd (Exim Bank)'s launch of the world's first credit takaful here yesterday.

Awang Adek acknowledged that as a net commodity exporter, Malaysia is exposed to trade fluctuations. But he is confident the central bank has sufficient international reserves to attenuate volatility in the foreign exchange markets to prevent extreme currency movements. 

As at March 15 2012, BNM reported that the country's international reserves totalled RM427 billion, enough to fund 10 months of retained imports and four times the short-term external debt. 

"Our financial system remains highly resilient and domestic sources of growth are still very strong. Should our economy grow by five per cent from last year, we'll be very grateful to God," he said.

Also present was Exim Bank managing director and chief executive officer Datuk Adissadikin Ali.

He explained Exim Bank's new product named Comprehensive Takaful Shipment protects Malaysian exporters' future payments from overseas buyers via takaful claims. 

It adds value to the exporters in securing their financing facilities from the commercial banks. The export transaction must, however, be syariah-compliant.

In view of increasing uncertainties in the export markets, exporters are likely to take up trade credit insurance to manage their risks. "The ability to export on credit terms with insurance will make their cargo more competitive in the international market," he said.

Recently, tighter trade sanctions on Iran spearheaded by the US and European Union to punish Teheran over its nuclear programme has dampened Malaysia's palm oil exports. 

Last year, Malaysia exported around 350,000 tonnes of palm oil to Iran. That is about a month's shipment to China, data from the Malaysian Palm Oil Board revealed.

As the bulk of Exim Bank's clientele are commmodity exporters, Adissadikin acknowledged that the sanctions on Iran have had a slight impact on the bank's business. 

"Since the end of last year, money cannot be routed out of Iran the usual way. Quite a few palm oil and rubber exporters from Malaysia made claims with us. Although it was difficult, we managed to recover some of the money," he said.

Asked on the bank's business outlook, Adissadikin said Exim Bank had underwritten RM4.5 billion from its 130 policyholders of conventional credit insurance. "Last year, we collected RM20 million in premiums. This year, we hope to achieve a 30 per cent growth," he added.

IPPs and utilities should give to RE Fund


PUTRAJAYA: Independent power producers (IPPs) and utility companies should contribute to the Renewable Energy (RE) Fund, a government authority said.

"It would be good to have IPPs and utility companies set aside a percentage of their profits to contribute to the RE Fund," said Sustainable Energy Development Authority (Seda) chief operating officer Ali Askar Sher Mohamed.

Seda, a government agency under the Energy, Green Technology and Water Ministry, is a one-stop centre that facilitates supply and use of RE in Malaysia. 

When it comes to allocation of RE quota, Ali said Seda is restricted by the amount in the kitty called the RE Fund. "If the fund is higher, the quota can be increased and more RE can be generated," he told reporters at Malakoff Corp Bhd's seminar on RE and feed-in tariff (FiT) here yesterday. 

The FiT essentially guarantees RE producers a premium selling price over that generated from depleting and finite sources such as oil, gas and coal.  Power generated from sustainable sources that will benefit from FiT includes that of oil palm biomass, biogas, small hydro and solar.

Also present at the seminar was Seda chief executive officer Badriyah Abdul Malek.

Currently, electricity consumers in Peninsular Malaysia who use more than 350kWh or whose monthly bills exceed RM77 pay an additional one per cent RE levy. Tenaga Nasional Bhd (TNB) started collecting this money since December 2011.

Sarawak is exempted from the RE levy because under the Renewable Energy Act 2010, the FiT is only applicable to Sabah and Peninsular Malaysia.

The one per cent levy was initially expected to rake in about RM300 million a year to facilitate the implementation of FiT. But the situation has changed.

The Sabah state government has appealed to the federal government not to collect the one per cent levy from consumers there as it had only recently raised electricity tariff. 

This means RE producers in Sabah cannot benefit from the FiT until the one per cent is collected by Sabah Electricity Sdn Bhd, a 70 per cent-subsidiary of TNB, from heavy power users in Sabah.

Furthermore, in the first two months of this year, Badriyah said Seda did not receive any money from TNB. She said TNB had justified that not all consumers pay their electricity bills on time and in full amount. TNB, however, had promised Seda that the first monthly payment is due on April 1 2012.

Since the RE levy collection is now narrowed down to heavy power users in Peninsula Malaysia and actual collection by TNB, Seda's initial estimate of RM300 million a year will now have to be lowered. 

Badriyah said while waiting for the RE levy payment from TNB, Seda had started using a RM300 million grant from the government to kickstart the FiT.

Felda Global: Investments profitable


KUALA LUMPUR: BURSA-bound Felda Global Venture Holdings Bhd (FGVH) has been profitable in its overseas investments since 2009, Felda Group chairman Tan Sri Isa Samad stressed. He denied claims that the company had been bleeding losses.

On Monday, PAS’ Kubang Kerian member of Parliament Salahuddin Ayub claimed that he had documents detailing FGVH’s overseas losses.

Asked to comment, Isa described the document leakage as an opposition ploy to erode Felda settlers’ confidence in taking FGVH public.

“We don’t know the leaked contents ... are they really the minutes of meetings? So we make the assumption that there has been a leak. We’ll make a police report tomorrow. Let the police investigate,” he said.

The chairman then gave assurance that FGVH is a profitable entity. “If it is not, we wouldn’t have the confidence to go for listing,” Isa said at a press conference here yesterday.

Citing figures by external auditor PricewaterhouseCoopers (PwC), he said FGVH posted RM203 million pre-tax profits in 2009. The following year, the figure jumped 80 per cent to RM366 million.

Merchant bankers handling FGVH’s initial public offering (IPO) are CIMB, Maybank, Morgan Stanley, JPMorgan and Deutsche Bank. 

“These bankers know what they are doing. They all have wide experience in managing IPOs. They will ensure the best returns for Felda settlers,” Isa said.

Meanwhile, FGVH group president Datuk Sabri Ahmad said FGVH had never intended to be secretive in the listing details as it had to abide by the Securities Commission rulings.

When asked on FGVH’s 2011 performance, Sabri said: “Based on higher palm oil prices, it should be better than that of 2010”.

Last month, eight Felda settlers won a temporary court order blocking the transfer of shares from Felda Investment Cooperative or Koperasi Permodalan Felda (KPF) to FGVH, a rucial step in the government’s plan to list the plantation firm. The injunction had since lapsed.

KPF has about 220,000 members, of which 112,635 are settlers. The rest are Felda employees and children of settlers. The decision to list FGVH is the prerogative of the Felda board and the minister in charge of Felda.

To capitalise on current high palm oil prices, Sabri said, the Felda board will continue to push for the listing by June. Since the court blocked the transfer of shares, Felda’s board is arranging that the IPO proceeds be channelled into a special purpose vehicle. 

Isa reassured Felda settlers that they will continue to retain full ownership of their land and benefit directly from any potential revenues realised from the listing exercise.

Boustead to sell Indo estates, focus on Msia

KUALA LUMPUR: Boustead Holdings Bhd's plan to dispose of its Sumatra plantation will see it focusing on increasing the yield of its plantations in Malaysia, said its deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin.

Lodin said the disposal of the Sumatra plantation would help improve the yield of the company's plantations in Malaysia. "The Sumatra plantation has been dragging our plantation yield a bit as it is not really as productive as our plantation in Malaysia.

"We're very happy with the progress of our plantation activities in Malaysia, but we believe we can do more to unlock its value," he said in an interview.

Lodin said Boustead expects to finalise the sale of its oil palm plantation in Sumatra at RM120 million by the end of the month or April.

"We have made announcement to Bursa Malaysia, two months ago, of our intention to sell the plantation. With the disposal, we'll be focusing on our plantation activities in Peninsular Malaysia, Sabah and Sarawak," he added.

After the disposal of its plantation in Sumatra, Boustead would have about 84,000ha of oil palm plantations in Malaysia, equally spread across Peninsular Malaysia, Sabah and Sarawak.

To unlock the value of its oil palm plantations, the Group will replant old trees with higher yielding planting materials supplied by its associate Applied Agricultural Resources Sdn Bhd (AAR).

Lodin explained the dwarf stature of the new planting materials allows for the Group to plant more trees in existing areas. "Previously, we have been planting 136 trees per hectare. Now, when we replant, we'll increase that to 148 trees."

This high density planting method and usage of semi-clonal materials will enable the company to get better oil yields -- consistently.

"This improved planting materials provided by our associate AAR will raise future oil yields per hectare by at least 10 per cent. We continue to engage AAR's expertise in best agronomic practices and fertiliser optimisation," he said.

Boustead is also in the midst of improving its harvesting system by providing its workers with motorised sickles.

The group managing director noted that most of Boustead's activities are in line with those of the government-owned areas and it was aiming to be ahead of others in terms of productivity.

With such efforts in place, he sees strong performance from the company's plantation division for the current financial year.

"We expect a similar or better profit contribution from the plantation division if the price of crude palm oil (CPO) remains at the current level of around RM3,200 per tonne. The disposal of the Sumatra plantation will not have any impact on the profits of the plantation division," he said. Last year, the plantation division contributed about 40 per cent to the company's profit.

Lodin expects the price of CPO to hover in the range of RM3,300 per tonne this year. --Bernama

More palm oil for hungry world

FOOD SECURITY: Cooking oil importing countries must reject calls by WENGOs to restrict expansion of oil palm plantations, writes Ooi Tee Ching.



UNITED Nations' Food & Agriculture Organisation (FAO) recently warned that world food prices are on the rise again.

In February 2012, the food price index rose one per cent - the second increase in two months. It was mostly driven by costlier sugar, oils and cereals. At the current level, the food price index is just 10 per cent below its peak in February 2011.

The FAO report said the 2011/12 market points towards a paltry 1.5 per cent increase in global oils and fats production to 181 million tonnes. Demand, however, is anticipated to expand five per cent to 184 million tonnes.

With global demand forecast to outstrip supply, the stock-to-use ratio is seen to fall below 15 per cent - close to the critically low level of the 2008's food crisis.

In an interview with Business Times, Malaysian Palm Oil Board chairman Datuk Seri Shahrir Samad said, 

"This is a timely reminder for the cooking oil importing countries around the world to reject calls by western environmental non-government organisations (WENGOs) to restrict expansion of oil palm plantations."

He said palm cooking oil has done more to enhance food security than any of the other vegetable oils, on a global scale.

Last year, Oil World journal showed world exports of all vegetable oils stood at 68.21 million tonnes. Palm oil accounted for 61.3 per cent of the global market share while rivals like soyaoil only command 10 per cent and rapeseed oil, five per cent.

Currently, oil palms are cultivated in southeast Asia, Papua New Guinea, Central and West Africa and Latin America, all of which are developing countries in the humid tropics.

"The trees are planted by some 10 million farmers across the equatorial belt of the globe. At the same time, it feeds billions of people in China, India and other developing nations," he said.

FAO's update made a stark reminder that nearly a quarter of the world's population continue to live on less than US$2.00 (RM6) a day.

If the world is going to address the growing issue of food security, Shahrir said, a strategic move would be to plant more efficient oil crops like oil palms.

The yield from oil palms is seven times higher than rapeseed a hectare and ten times that of soya- beans. In terms of energy balance, it takes less sunlight to produce a unit of palm oil than any of the other vegetable oils.

At the recent Roundtable of Sustainable Palm Oil (RSPO) meeting held in Kuala Lumpur, resolutions put forward by oil palm growers were outvoted.

Now, many planters feel the RSPO has deviated from what it was set up to do. It has instead become a big boys club for multinational consumer goods companies and WENGOs.

From the start many Malaysian and Indonesian plantation companies have spent tens of millions of dollars to meet WENGOs' definition of "sustainable palm oil" but the promise of a US$50 (RM150) a tonne premium over market price was never met.

When asked to comment, Shahrir pondered for a while and sighed.

He cited that Milton Friedman, a renowned economist, once said "the social responsibility of business is simply to maximise the rate of returns to the general shareholders, consistent with the law. Anything that sidetracks corporate management from that responsibility spells big trouble".

The bottom line is tens of millions of corporate dollars have been and continue to be diverted away from investors and redistributed elsewhere - not by duly constituted governments - but as a result of the power of extortion wielded by wealthy WENGOs and their affiliates who are accountable to no one but their "well-meaning donors".

"It is sad," Shahrir said, "that many of these WENGOs have managed to execute corporate coup d'etats in dictating business policies and behaviour based on their definition of what is sustainable, equitable and fair for Malaysian taxpayers."

For example, the Malaysian government had allocated RM50 million of taxpayers' money to help smallholders fulfil "sustainable standards" defined by WENGOs in the RSPO.

With the involvement of taxpayers' money, Shahrir noted, Malaysians are dragged into a global vegetable oils trade war waged by these WENGOs over the democratic values that we cherish - individual freedom, open markets, private property, and progress.

Shahrir opined that the current contention by WENGOs that RSPO-certified palm oil must be used in their home countries, namely; the US and Europe, is a big disservice to the millions of small oil palm farmers in developing nations who aspire to have fair access for their produce into the world markets.

Smallholders in developing nations have similar aspirations to those of developed countries.

But smear campaigns against the oil palm industry and harassment to cough out big amount of money to be RSPO-certified lead to a restricted market access for palm oil.

"Why should our smallholders contend with trade barriers disguised as environmental protection erected by green activists of developed nations?" he asked.

Shahrir, who is also Member of Parliament for Johor Baru went on to question the logic of allowing backdoor legislation. "Why should our oil palm industry submit to principles and criteria governing our country's land resources that is being pushed by green activist-driven organisations such as the RSPO?

"Where is the respect for Malaysia's laws enacted by Parliament and state assemblies that had shaped good agriculture practices, workers rights and sustainable return on investments for farmers?"

Shahrir observed that the select few but financially strong WENGOs within RSPO often justify their tactics by claiming to be stakeholders of tropical rainforests.

Indeed, green groups can play an invaluable role in highlighting overlooked environmental problems and stirring public, and even government oversight.

But that is a far cry from self-declaring stakeholders status and hoodwinking corporations into making uninformed decisions that is slowly but surely retarding the growth of the oil palm industry.

Shahrir went on to say green protectionism that is being practised by WENGOs and their paymasters actually inflicts huge risks to economic growth in both the developed and developing world, alike.

For the developed countries, the cost is to industries which rely on imports to be competitive, and consumers who will spend more of their disposable income on less.

For the developing world, the cost is denial of natural resources development and therefore, poverty perpetuation among farmers. "Yes, money is not everything. But when you don't have it, it could mean hunger and death," Shahrir said, with a heavy sigh.

Golden Palm Growers aims to raise RM240m


KUALA LUMPUR: GOLDEN Palm Growers Bhd, (GPGB) is expected to raise as much as RM240 million by the end of next year if it sells all 70 per cent of the lots offered under its palm oil investment scheme.

"As the management company, we hold a 30 per cent stake, or 13,200 lots," GPGB executive chairman Andrew Phang told a media briefing here yesterday.

"So far, we have sold some 15,000 lots. There are still another 15,000 lots available for subscription. We are quite optimistic that they will be fully taken up by end-2013," he added.

GPGB, which is part of the Australian Stock Exchange-listed Sterling Biofuels International Ltd, holds a 90-year concession to develop and manage a 4,566.8ha plot in Gua Musang for 60 years, with an option to renew it for another 30 years, from the Kelantan government.

So far, it is one of two interest schemes registered with the Companies Commission of Malaysia that invest in the oil palm business.

Licensed trustee AmTrustee Bhd acts as trustee for investors while profits are audited by international audit firm Ernst & Young.

When asked on the difference between GPGB's scheme with that of Country Heights Grower Scheme, Phang replied: "Our's is the only licensed scheme that distribute 100 per cent of audited net profits to investors."

Subscribers to GPGB can invest a minimum of RM8,000 per lot. For this, they are guaranteed to receive a six per cent return annually for the first six years.

Once the plantation starts to mature from the seventh year, investors will enjoy a share of plantation profits, or a minimum dividend of nine per cent, if the average annual palm oil price exceeds RM1,500 per tonne. Should palm oil prices drop below RM1,000 per tonne, there will not be any payout.

Phang said once an investor subscribes to the scheme, he can change his mind within the first 10 days. "He is entitled to a full refund. The prospectus allows for such a cooling period."

He said as the scheme is categorised as medium risk and medium reward, investors are advised not to pull out within the first six years.

"The investor is not allowed to withdraw within the first year. But if the investor still want to pull out from the second to sixth year, he is unlikely to get back in full what he has put in because he needs to be able to sell his lots to other subscribers on a willing-buyer-willing seller basis," said Phang. 

"By the seventh year, we have a buyback scheme to repurchase investors' plots. But it has to be at the original purchase price," he added.

On risks management, Phang said the company takes precaution against the deadly ganoderma disease by practising good agriculture practice.

Protection for brain cells

My colleague Tan Choe Choe interviews researchers who found palm oil vitamin E is able to to reduce risk of stroke or damage caused by it.



VITAMIN E extracted from palm oil has been proven to be able to stop human brain cells from dying in the event of a stroke, according to a recently concluded study by a team of researchers from Universiti Sains Malaysia.

It is the first clinical trial of its kind on humans, testing the ability and efficacy of tocotrienols, a variant of vitamin E found in palm oil, in protecting brain cells, said USM Professor Yuen Kah Hay, who leads the team.

The results of this study have far-reaching implications -- among them lowering the risk of stroke or reducing the damage it wreaks in the event of an attack.

The vitamin E family is made up of four variants of tocopherols and another four called tocotrienols.

Malaysian researchers have been studying palm tocotrienols since the 1980s and the Malaysian Palm Oil Board was the first in the world to discover that the lesser known vitamin E family member, the tocotrienols, is a far more potent anti-oxidant than tocopherols.

Tocopherols are sourced from oilseeds such as soya oil, canola and sunflower, while tocotrienols are only found in abundance in palm oil and rice bran oil.

Preliminary research proves tocotrienols can heal body cells and trigger cancerous ones to kill themselves. In a research published in 2000, a group of researchers in Ohio State University in the United States found that tocotrienols are neuroprotective, that is, able to protect brain cells, at low concentrations, what scientists term nano-molar levels.

"The American study showed that tocotrienols have neuroprotective effects on cultured brain cells. They found that tocotrienols are involved in cell-signalling.

They work by suppressing two key signals in the cells to prevent cells from dying," Yuen told the New Sunday Times.

After experimenting on genetically modified mice, which are prone to stroke, the same group then published in 2005 its results, which showed that tocotrienols could minimise cell damage.

In view of such promising results, Yuen and his team here started clinical trial on 200 human volunteers with white matter lesions (WML) or oxygen-starved brain cells in January 2008. It was completed in November 2011 and the results are now being finalised before publication.

Brain scans were conducted on the volunteers before and after the administration of the tocotrienol supplements and placebo in a randomised, double-blind study. "The results are amazing," said Yuen, who conducted the study with a team of 10 researchers and postgraduate students. Chief among his collaborators is Prof Dr Ibrahim Lutfi Shuaib, a radiologist and senior consultant at the Institute of Advanced Medical and Dental Sciences.

After one year, those on tocotrienol supplements showed only little increase in the amount of WMLs, compared with the group on placebo, whose increase was about seven times more.

By the second year, the placebo group continued to show further increases in the volume of lesions, while those on tocotrienols showed a decrease. "The volume of lesions in the group taking tocotrienols was lower than the baseline, the starting point. We are puzzled and amazed by this development."

It is hard to conclude precisely what this means now without further investigation, so Yuen has been growing brain cells in the laboratory for the past three months to try to understand the phenomenon.

Meanwhile, in a study on stroke-induced dogs published by researchers at Ohio State University last year, similar results were found. More interestingly, they also found that tocotrienols somehow increased the blood flow to stroke-stricken areas because there was an increased expression of the arteriogenesis genes, which enabled the reconstruction of blood vessels.

"The evidence we have now suggests that if people take it as a neuroprotective supplement, it can prevent brain cells from dying in the event of a stroke and also stimulate the reconstruction of blood vessels after," said Yuen.

From these positive indications of the neuroprotective capabilities in tocotrienols, Yuen, with funding from the Performance Management and Delivery Unit (Pemandu) that was announced last November, is embarking on a similar study, this time on diabetic patients.

"Diabetics are prone to nerve degeneration. They lose sensations in their peripheral nervous system, which affects things like the limbs, as opposed to the central nervous system in the brain for stroke patients, as the illness progresses. It's a condition called peripheral neuropathy. So we want to see now whether tocotrienols have the ability to slow down or prevent this degeneration in diabetics," said Yuen.

The study will be conducted on 300 volunteers and is expected to take up to three years, with collaboration from doctors led by Dr Irene Looi (neurologist) from the Clinical Research Centre of Seberang Jaya Hospital and a few community health centres in Butterworth.

Malaysia is the world's biggest tocotrienol producer and exporter. A kilogramme of palm oil vitamin E retails at US$500 (RM1,500). Annually, Malaysia exports some RM50 million worth of palm oil health supplements to Europe, the US, Canada and Japan.

Growers unhappy after being ‘sidelined’

This is written by my colleague Rupa Damodaran.


KUALA LUMPUR: Oil palm growers, one of the stakeholders of the Roundtable of Sustainable Palm Oil (RSPO), are dismayed that their interests are not being taken into consideration, as shown at the grouping’s rescheduled 8th General Assembly here yesterday.

“It did not work as we had hoped,” said a dejected grower. All the resolutions submitted by the growers, who are from Malaysia and Indonesia, were voted against.

“Despite all out invested time and energy, the question now is where is the weightage,” he said, adding that growers would soon lose interest in attending the annual meetings.

The Zurich-based RSPO, which was set up eight years ago, seeks to promote the growth and use of sustainable palm oil products through credible global standards and engagement of the stakeholders, which come from seven sectors of the palm oil industry.

They are the palm oil producers, palm oil processors or traders, consumer goods manufacturers, retailers, banks and investors, environmental or nature conservation non-governmental organisations (NGOs) and social or developmental NGOs.

The growers said although their resolutions were debated yesterday, many of the stakeholders who attended shared their sentiments and felt that there was merit in the resolutions that were brought up.

Of the resolutions, four were passed, seven voted against and two withdrawn by the MPOA (Malaysian Palm Oil Association). The two dropped were on multi-stakeholder decision-making and off-set mechanisms.

RSPO president Jan Kees Vis, in a statement, said even though a number of resolutions put forward by the growers from Malaysia and Indonesia were voted against, the executive board found they held significant merit and value.

“While the growers may have felt marginalised with the outcome of the GA8, we’d like to reassure the constituent that we are definitely committed to discuss and deliberate these many propositions to ensure that the fundamental concerns and reservations of the growers are addressed,” he said.

On the resolution on a moratorium for certification, which was proposed by the MPOA and not passed, he said their concern towards CSPO uptake could be addressed through another resolution that was passed, which was on enhancing time bound plan.

"This can be a platform to encourage affirmative response on the demand side of the supply chain," said Vis, who is also global director (sustainable sourcing development) for Unilever.

Meanwhile, the RSPO secretariat said the assembly witnessed the highest ever presence from its global members. It achieved a 58 per cent quorum, more than the required 50 per cent, although 75 per cent of those present were proxies.

Oil palm growers to push for change


This is written by my colleague Rupa Damodaran.

KUALA LUMPUR: Disgruntled oil palm growers want the Roundtable on Sustainable Palm Oil (RSPO) to “bring some direction” to the world’s largest commodity certification body, with a Malaysian or Indonesian as the head.

Thi is because they have been overlooked by the RSPO. Planters are taking advantage of the rescheduled annual general meeting today to push for some sweeping changes to the eight-year old outfit.

The eighth AGM which was scheduled to be held in Kota Kinabalu was postponed in November 2011 when the quorum fell short of 47 votes to meet the 50 per cent criteria for the overwhelming attendance.

Zurich-based RSPO which has its secretariat based in Kuala Lumpur, is currently headed by Jan Kees Vis from Unilever since 2004.

Oil palm growers, through the Malaysian Palm Oil Association (MPOA), make up only 17.2 per cent (103) of the total membership of 599. 

Majority of the members are palm oil processors and traders and consumer goods manufacturers with 213 and 205 representatives respectively.

“It has lost direction of what it had set out to do and has instead become a club for multinational companies, consumers and non-government organisations (NGOs),” lamented a member of the growers fraternity.

“The impasse we face today is because growers are not satisfied. From the start, we’ve toiled to meet the standards required. Although the CSPO (certified sustainable palm oil) is flowing now, the offtake has not matched the supply.”

One of the resolutions MPOA hopes will be adopted today is a moratorium on the RSPO certification. “There is no point in producing more CSPO if there is no demand for it and if the market does not value CSPO compared with regular non-certified palm oil.”

In 2011, only 52 per cent of the CSPO was taken up by consumers where the actual physical offtake was only 17 per cent.

MPOA says the 2.30 million tonnes or 48 per cent of CSPO produced was not taken up by the market. "This significant annual surplus in the production of CSPO drove the original projected premium down from US$50 (RM151) per tonne to an actual US 50 cents (RM1.51)."

It is also upset that there is no differentiated market access for CSO and it is being traded in the normal market which would dilute the value of palm oil.

"This situation discourages existing RSPO growers from expanding their certified areas and new entrants from investing in the certification. It is also difficult to encourage smallholders to adopt it."

On the choice of the president for RSPO, MPOA said the appointment should not be decided by the board but by the entire membership for a limited two terms. "The larger the membership, the more accountable he should be to all groups, instead of getting elected by the (current) star chamber of Europeans when it is the Asians who are growing the stuff."

It was also felt that the current 16-member board is not well represented and being more European, representing various sectors - oil palm growers, consumer goods manufacturers, retailers, palm oil processors and traders, environmental/nature conservation NGOs.

Malaysia and Indonesia form the bulk of the membership as the top two palm oil producing countries and they account for 73 per cent of the world's net exported oils and fats.

Together with the Indonesian growers, the MPOA also proposed that for a general assembly to be valid, there must be representation from every member category.

The daggers may be drawn for today's meet by the growers, but the RSPO is likely to be here to stay. "We need the RSPO (certification) otherwise certain markets, namely the EU and the US, will be locked up against us," said another grower.

On the take-up of CSPO, he said the situation has improved compared with six months ago. Many of the misgivings of the growers, he said, were due to the ineffectiveness of their representatives to the board when the Principles and Criteria and other aspects of the RSPO were discussed over recent years.

He also argued that Kees Vis may be quite difficult to replace, considering that he comes from Unilever, which is the biggest buyer of palm oil with 1.3 million tonnes per year.

Meanwhile, RSPO adviser M. R. Chandran said the postponement of the AGM has delayed the review of the P&C, which was drafted five years ago. "It is a crucial year for us as we have to get all the experts together to review all eight principles and 38 criteria."

Bullish bets on palm oil


KUALA LUMPUR: Oil palm planters are smiling again this year as price forecast gurus at the Palm and Lauric Oils Outlook Conference (POC) 2012 placed bullish bets on crude palm oil (CPO) prices.

Hamburg-based ISTA Mielke GmbH executive director Thomas Mielke highlighted that for the first time in history, drought has impacted soy bean output in the United States and Latin America at the same time. "We're likely to see global soy bean output plunge by 20 million tonnes this year," he said.

Mielke, who is also editor of Oil World journal, said "poor weather is also hurting rapeseed yields in Ukraine and the European Union".

He then said Malaysia's palm oil production could touch 19.3 million tonnes this year compared with 18.9 million tonnes in 2011. As for Indonesia, he foresees output to expand to 25.5 million tonnes. 

"I still think these rise in palm oil output will not be enough to offset shortage in soya and rape oils."

He stressed that the oil palm industry must continue its focus on yield improvement as a way to overcome limitations of arable land and water so as to retain world market leadership.

Mielke, a well-respected and authoritative vegetable oil analyst, once again, at this POC series rejected calls by green activists for a moratorium on oil palm plantings and encourage adoption of genetically modified technology.

"In order to satisfy the daily oils and fats need of an increasing global growing population, we need to plant more genetically-modified oil crops that are drought tolerant and disease resistant," he urged the 2,000-odd participants at the POC 2012.

He repeated his message to oil palm planters not to be misled by green activists' lobby to limit expansion of oil palm plantations as the world continues to face shortage of edible oils. The conference, which traditionally focused on price forecasts for palm and coconut oils, had in the last few years, taken a more holistic approach.

Mielke then concluded that palm oil prices is likely to average at around RM3,500 per tonne this year.

LMC International Ltd chairman Dr James Fry was next to take to the stage. He said 2011 was a year of wonder for planters, which saw excellent prices and close to ideal output conditions. 

He reiterated his long-held view that palm oil prices would continue to be highly influenced by petroleum prices. 

Yesterday, Brent crude oil rose above US$122 (RM366) a barrel after China said it would boost energy imports this year, while concerns persist over supply risks and Iran's nuclear programme despite the country's offer for talks with major powers. High petroleum prices translates to more demand for biofuel. 

This, in turn, means better demand for CPO. On top of this, there is already strong demand for CPO in emerging markets like China and India as their big population consumes more food.

Fry forecasts the CPO price could rise as high as RM3,310 and fall as low as RM2,590 a tonne if Brent crude oil were to settle to a "realistic level" of US$86 a barrel. "If, however, Brent crude were to go on hovering at current US$125 a barrel, CPO is likely to trade between RM3,140 and RM3,360 a tonne," he said.

Since October 2011, the Indonesian government has widened the export tax gap between CPO and refined products drastically to boost refining capacity and downstream activities. As a result, CPO and crude palm kernel oil became cheaper for downstream producers there.

Fry noted that Malaysian refiners were starting to concede global palm oil market share to Indonesia. This is pushing more palm oil stocks to Malaysia. 

As a stop-gap measure, the Malaysian government has allowed duty-free CPO exports amounting to 3.6 million tonnes this year.

At the industry's leading global conference yesterday, London-based Godrej International director Dorab Mistry said CPO prices, now trading around RM3,200 a tonne, can hit RM4,000 in three months due to the threat of war and geo-political tensions in Iran, specifically at the Gulf of Hormuz.

"I'm assuming that Brent crude oil will go on trading at between US$100 and US$120 a barrel but with the threat of geo-political uncertainty in Middle East and North Africa, vegetable oils prices could climb to higher levels," he said at the POC 2012 here yesterday.

Given the high energy prices, tight palm oil stocks and rising demand, the CPO price is due to reach a new high in the next quarter. "It is conceivable that CPO prices may test RM4,000 a tonne by June," he said.

He reckons that 2012 is a year of two halves, of which palm oil prices remains bullish on tight supply in the first half. As for the latter part of the year, Dorab said early signs of emerging drought could slash palm oil output.

“The price-making factor will, again, be palm oil output. We see signs of oil palm tree stress. Malaysia’s palm oil output could fall to between 18.6 and 19 million tonnes this year. As for Indonesia, palm oil output is likely to expand 1.4 million tonnes to 26.5 million tonnes,” he said.

  On the topic of last year’s change in the Indonesian palm oil tax structure, Dorab said it has resulted in the republic grabbing market share from Malaysia. “Malaysia’s palm oil stocks is not declining. What could happen in the months ahead is; Malaysia can either become a CPO exporter or the government could copy the Indonesian export tax regime,” he said.

China makes big presence at palm oil meet


KUALA LUMPUR: The Palm and Lauric Oils Outlook Conference (POC) 2012 attendance matched that of last year's, with more than 2,000 delegates gathering here.

There are more new faces from China. Their increasingly dominating presence at the POC series is reflective of their clout in the industry.

Bursa Malaysia has also provided more translation earpieces for Chinese traders who arrived in large groups.

China's robust economy, which has overtaken Japan as the world's second biggest after the US, is fuelling a bigger appetite for commodities like palm oil which is mainly made into cooking oil, baking fats, soaps, shampoos, moisturisers, biodegradable laundry detergents, and even health supplements.

For more than 20 years, the POC series has been able to attract top executives from major companies, traders and even foreign government officials to converge on Kuala Lumpur to get an insight on where the palm oil price is heading.

POC 2012, the 23rd edition of the series, carries the theme "Global Shocks ... Local Impact".  This is in view of the volatile developments in the global economy and their effect on futures markets. 

Following an agreement between CME Group and Bursa Malaysia in 2010, traders were introduced to palm oil contracts on the CME Globex, a global electronic trading system for futures and options.

Celebrity-status palm oil analysts Thomas Mielke, Dorab Mistry and Dr James Fry also flew into Kuala Lumpur two days ago. They are due to give their palm oil price forecasts today.

Meanwhile, at a POC 2012 gala dinner yesterday, Kenanga Deutsche Futures Sdn Bhd, a subsidiary of K&N Kenanga Holdings Bhd, emerged the top overall performer for nine years in a row in attracting the biggest trades into Bursa Malaysia Derivatives Exchange.

"We strive to challenge ourselves to maintain our position as the leading futures brokerage in Malaysia," said K&N Kenanga group managing director Chay Wai Leong, when receiving the award from Bursa Malaysia Bhd chairman Tun Dzaiddin Abdullah.

Sarawak targets 3 million tonnes CPO output


KUALA LUMPUR: Sarawak expects 15 per cent output growth to 3.1 million tonnes of crude palm oil this year, as more oil palms mature and bear more fruits.

In an interview, Sarawak Oil Palm Plantation Owners' Association (Soppoa) vice-president Paul Wong said the association members should be able to harvest and squeeze out between 10 to 20 per cent more than last year's 2.7 million tonnes. 

"About 80,000ha of additional area will come to maturity this year. Many of our members' tree profile is pointing towards favourable output these few years. Malaysia's final expansion frontier is in Sarawak," he told Business Times on the sidelines of the Palm and Lauric Oils Outlook Conference (POC) 2012 held here yesterday. 

Indeed, with some three million hectares of agriculture land yet to be cultivated, the growth story lies squarely on Sarawak. As at December 2011, the country's oil palm planted area totalled five million hectares.

Last year, the Malaysian Palm Oil Board's data show that both Peninsular Malaysia and Sabah's crude palm oil output only grew by 9 per cent and 10 per cent to 10.4 million tonnes and 5.8 million tonnes, respectively. Sarawak's production, however, jumped 24 per cent to 2.7 million tonnes.

Soppoa's 3.1 million tonnes of crude palm oil forecast is in line with that of the Malaysian Palm Oil Board (MPOB)'s national estimate of 19.3 million tonnes.

"While there's good prospects of crude palm oil output, we face shortage in refining capacity in Sarawak. The restructuring of the Indonesia palm oil export taxes have caused an uncompetitive environment here. The uptake by refiners in Sarawak is very slow because they face negative margin when they process the crude palm oil," Wong said.

Since last year, the Indonesian government has widened the export tax gap between crude palm oil and refined products drastically to boost refining capacity and downstream activities. As a result, crude palm oil and crude palm kernel oil became cheaper for downstream producers there. 

"We have a lot of crude palm oil to process but the refiners in Sarawak lose money when they refine in this kind of uncompetitive environment. Although the market is slowly adjusting, we hope the federal government will do something to help the refiners here," he said.

Wong then said the backflow effect of refiners slowing their uptake of crude palm oil from millers have cause a build-up in stocks. 

"Millers in Sarawak only have that much tank storage. What happens when it is peak season in the third quarter? By then, millers would not be able to take in that many fruit bunches from smallholders when their tanks are filled to the brim," he said.

"The government needs to urgently address this issue faced by refiners because it is also affecting the planters," he added.

Sarawak Oil Palms set for bumper harvest, again

Yesterday was the first day at POC2012. Though things were not-so-smooth at the start, it proved to be fruitful towards the evening.

KUALA LUMPUR: SARAWAK Oil Palms Bhd (SOP) expects to harvest 900,000 tonnes of fresh fruit bunches by the end of the year, 10 per cent more than last year's 820,000 tonnes, as more young trees mature and bear more fruits.

Headquartered in Miri, the group has planted close to 63,000ha with oil palms in Sarawak. In an interview, SOP group financial controller Eric Kiu Kwong Seng spoke of the company's favourable tree profile.

"As of December 2011, about 23 per cent of our planted area is of prime fruit bearing ages. As more young trees mature, we expect very good harvest," he told Business Times on the sidelines of the Palm and Lauric Oils Outlook Conference (POC) 2012 held here yesterday. 

"By the end of this year, about a quarter of our total planted area will be of matured ages and bearing more fruit bunches," he said.

SOP's aggressive plantings as early as 2007 have resulted in 45 per cent of its planted area consisting of young oil palms and primed to bear more fruit bunches. This means big earnings growth potential in the next five years. Last year, the group added on 2,500ha to its landbank. To date, SOP has planted 84 per cent of its 75,155ha landbank.

To a question on this year's capital expenditure, Kiu said SOP is spending some RM300 million on new plantings, construction of Sabaju and Tinbarap mills and a 450,000 tonne-a-year refinery.

"The Sabaju mill is able to process 60 tonnes of fruit bunches while the Tinbarap mill can handle 90 tonnes an hour. We'll be commissioning our refinery in the middle of this year," he said.

With regard to the refinery, Kiu said his company will not be able to run it full capacity as yet. "We'll build up the operations phase by phase," he said.

SOP was set up in 1968 via a joint venture between Commonwealth Development Corp (CDC) and the Sarawak state government. In 1995, conglomerate Shin Yang Group bought CDC's entire stake and is now the largest shareholder with 36.5 per cent while state-owned Pelita Holdings Sdn Bhd holds 28.9 per cent.

SOP has a solid balance sheet. It had a net gearing of 50 per cent in 2003 but is now in a net cash position of some RM80 million.

In its filing to the stock exchange, SOP said its profits for 2011 jumped 60 per cent to RM242.95 million on the back of RM1.17 billion revenue. Eric attributed the solid performance to favourable palm oil prices and higher sales volume during the year.

Asked if the group could match last year's stellar performance, Kiu replied: "If palm oil prices were to go on trading at such buoyant levels, we should be able to do so." He said the group declared a payout of 5 sen a share last year. This was almost double that of previous years.