Sunny Verghese of Olam on structural trends

No slides during his talk but slide deck will be given later. Olam has stopped powerpoints for the last two years to improve communications. Previously, analysts will know Sunny Varghese was famed for big powerpoints.
He's now talking about FAO food index, previoys price declines and inflection to price rise in last decade plus. China inflation largely due to food prices. He expects higher food prices to stay with us.
Demand drivers. Population: 9 billion plus people by 2050 and many most populous countries will be in Africa. Per capita income: rising faster than in past on larger populations, notably China and India doubling in 12 and 16 years. Income and middle class size as low/mid/high income consume 2600/3000/3600 calories respectively.
Another game changer is urbanisation. Urbanites consume 2.5X dairy, 3.5X meat than rural. West consumes over 130kg per capita and it's not just culture as HK and Taiwan consume over 100kg meat.
Supply is "shot in foot" by biofuels. FAO blames 2008 price crisis in most part to misguided policy on biofuels. Plus there's loss of farm land over time. Supply affected by declining productivity growth that has halved more recently and is now below population growth. Expansion car usage means there's set aside 0.74 ha for each new China car and take away farm land.
Water tables are receding in large zones. Olam is the world's largest corporate farmer and knows that wells now cost $0.5 million, going to depth. Wars might come about over food and water if it can happen over oil. 1300 liters of water for a big breakfast. One calorie needs one liter if water. 55 liters for personal need and 1-2 liter for drinking. China imports water by importing soybeans.
Climate change. Evidence is there from extreme weather events.
We need lot more investment on agricultural research. So much spent on defense but hard to find sufficient spend on food. Also to reduce 40 percent wastage. 
Can companies create value without destroying the environment. Nature does not issue invoices. Olam buys 2 billion bees a year for its almonds estates for $80 million.
Can we have inclusive growth? 400 people have more money than 4 billion. Such massive inequality usually addressed by revolution. Politicians are not working on this.

Sime Darby: Liberia fire and doubt on Olam

CIMB report on Sime Darby Bhd, "Fire destroys 200ha of estates," 20 March 2014: "We estimate that a fire, which has destroyed around 200ha of oil palm estates owned by Sime Darby in Liberia, may cost the group around RM3.6m in financial losses. This is negative although the earnings impact is insignificant. It could also possibly set back the progress of new planting in the near term. Sime Darby has invested RM300m-400m in its Liberian venture and planted 10,035ha of oil palm estates in the country..... The workers at the Bomi plantation said that the blaze was started by suspected arsonists and raged for two weeks before being brought under control... It is trying to work with the government to conduct an investigation....the cost of developing new oil palm estates in Liberia (RM18k per ha)... "

In the same report, CIMB notes, "We do not think the speculation that Sime Darby is keen on Olam is true and the group has also denied this."

Other news on Liberia (updated 26 March 2014):
Fire Destroys 200 Hectares at Sime Darby, Liberian Daily Observer, http://www.liberianobserver.com/news/fire-destroys-200-hectares-sime-darby
A fire has destroyed about 200 hectares of an oil palm plantation owned by Malaysian firm Sime Darby in the northwest of Liberia, Reuters reported, ... (includes comments form Liberia newspaper readers)

Olam was bid up on Africa market hopes?

Singapore Business Times on 18 March 2014 reported that "market talk revealed that there have been at least three separate parties interested in acquiring Olam during the same period, potentially pushing up its share price as well..... Sime Darby, one of the largest palm oil producers in the world, is said to be one of them. Two Japanese trading companies are also said to be interested in Olam due to its exposure to African markets...." newslink: http://www.businesstimes.com.sg/premium/companies/others/moodys-olam-bid-temasek-credit-negative-20140318

Khor Reports wrote about palm oil prospects in West Africa and two key Asia-based companies tackling the consumer market there - Indofood's Indomie and Olam.

KHOR REPORTS' PALM OIL NOV/DEC 2013, ISSUE 5: Feeding Africa, Asian companies eye West Africa consumers with palm oil, instant noodles and more
 Feature: Indomie, Unilever & Olam in W Africa. Instant noodles & global hunger

 Indonesia’s landholding ceiling, Felda Global deals & more
 Biofuel policy cooling and boost, Neste Oil’s renewables
 Sustainability: more certification, snacks & supply chain
 Preview: RSPO hot topics
Click here to read: /khorreports-palmoil/2013/11/khor-reports-palm-oil-novdec-2013-issue.html

Olam share price over 5 years (Bloomberg.com):

Other news on Temasek's Olam takeover offer :
Temasek Unit’s Offer for Olam Is Credit Negative, Moody’s Says; By Lisa Pham and Colin Keatinge Mar 17, 2014; http://www.bloomberg.com/news/2014-03-17/temasek-unit-s-offer-for-olam-is-credit-negative-moody-s-says.html; The offer by Temasek Holdings Pte’s unit to take over Olam International Ltd. (OLAM) is credit negative for the Singapore state-owned investment company, according to Moody’s Investors Service. The acquisition, which values one of the world’s top three coffee and rice traders at S$5.3 billion ($4.2 billion), will put pressure on Temasek’s “portfolio liquidity,” Moody’s, which rates the investment firm at Aaa, said in a March 17 report. Olam’s 2 percent dividend yield in 2013 is also lower than Temasek’s return of about 3 percent, it said. “Bringing a new company under the Singapore umbrella negatively pressures portfolio liquidity,” Alan Greene, a senior credit officer at Moody’s, said in the report, which estimates 65 percent of Temasek’s S$215 billion investments are in Singapore dollars.



Other recent news on Olam:

Update 20 March 2014: Nomura Research, Olam International (OLAM SP, Buy) - Temasek offer sets the floor  ( SGD2.22 / PT: SGD2.50 ) by  Tanuj Shori; Bineet Banka.  Raising price target — We still see long-term value in the business; we advise shareholders to hold on.  Action: Temasek offer sets the floor; in line with recent agri transactions.  In an unexpected move on March 14, Temasek’s (unlisted) subsidiary, Breedens Investments (unlisted) proposed an all-cash offer of SGD2.23/share for Olam. While the offer values Olam at ~14x CY14F P/E [~10% premium to peers Wilmar (WIL SP, Neutral) and Noble (NOBL SP, Buy)] and ~9x CY14F EV/EBITDA, it is in line with the recent major transactions in the global agri space (Fig. 11). We raise our TP to SGD2.50.