Behemoths' land banking efforts stutter?

"Sime Darby’s expansion into Liberia may have hit some road blocks. It was reported that citizens from more than 15 towns and villages near Sime Darby Plantation in Grand Cape Mount County have threatened that the company would face stiff resistance if it intends any further extension of its concession. Not yet known at this point is the size of the area affected as portion to Sime’s 200,000ha concession land." (ECMLibra research report, 18 July 2011)

Khor Reports comments:

a) SE Asian plantations have taken a great interest in West Africa, Papua and other 'tougher' regions, to extend their land banks. Various problems have been reported with these major expansion efforts.

b) Sime Darby is reported facing some resistance from locals in Liberia (article above). The plantation behemoth had also sought to extend its interests in Sarawak, Malaysia, by offering larger stakes to local landholders - but we hear that some of these efforts may have gone 'on hold' for various reasons.

c) Golden Agri is also looking to develop 220,000 ha in Liberia via the USD1.6 billion deal with Golden Veroleum (the land area was initially reported as a 500,000‐acre palm oil plantation in the southeast of the country).3 September 2010: Golden Agri said its “subsidiary Golden VerOleum would form a partnership with the Government of Liberia in a palm oil project… for the cultivation of sustainable palm oil by the company and by Liberian smallholders and farmers, mill processing and value‐added manufacturing…The investment is expected to total USD1.6 billion” (source: http://www.reuters.com/article/2010/09/03/goldenagri‐liberia‐idUSSGC00373720100903). In October 2010. Golden Agri reported it disposed of its entire shareholding comprising one share of HK$1 in Golden Veroleum Limited. A clear status update is needed.

d) Sometime in 2009‐2010, Golden Agri’s “in progress” acquisition of 1 million ha in Papua falls through. Now, players like Wilmar are looking to Papua for major cane sugar projects. Will they have a happier outcome in the low-lying and seawater-flood prone region?

Cargill goes RSPO but keeps smallholders in

Cargill has announced that the palm oil products it supplies to its customers in
Europe, United States, Canada, Australia and New Zealand will be certified by the
RSPO and/or originated from smallholder growers by 2015. This commitment will
be extended across all Cargill's oil and trading businesses to cover 100% of its palm
oil products and all customers worldwide – including China and India – by 2020.

Khor Reports comment:

Cargill includes the smallholder element with the “and/or” flexibility for its sourcing. This seems a tacit acknowledgment that RSPO may have problems including smallholders in its efforts to a significant degree. With Greenpalm certs just bouncing off a meager $1 per unit, it seems hard for smallholders to see monetary compensation for their RSPO certification efforts, unless an attractive program for them is launched soon. The biggest concern we have had with regard to RSPO is its de facto limited inclusion of independent smallholders thus far. We think Cargill’s move is pragmatic and heartening in terms of keeping market access open for these smallholders.

Malaysia criticizes "sinister" campaign against palm oil

The Malaysian Insider reports: “It is utter cruelty to the orang utans. The zoo must understand these are animals from the tropics and adequate protection should be given to them during winter. Their enclosures must be warm and made comfortable,” (Tan Sri Yusof Barison, head of the Malaysia Palm Oil Council) was quoted as saying..... Yusof was reported as saying that he suspects having the orang utans in such degrading captivity was to win public support in Australia in the campaign against the use of palm oil products.... He said having anti-palm oil signs at the zoo was to win public sympathy and to misrepresent the orang utan issue.... “Australians must visit our orang utan sanctuaries in Malaysia and see how well the animals are taken care of. There is something sinister behind the campaign by western NGOs to ruin the palm oil industry,” he said. (Source: http://www.themalaysianinsider.com/malaysia/article/palm-oil-council-chief-upset-over-orang-utan-treatment-in-aussie-zoo/)

Khor Reports comment: The orang utan is a key symbol of the campaigns by NGOs for the sustainable growing of palm oil i.e. without deforestation, peat land development and loss of biodiversity.

Trends in planted area for the Top 10

Khor Reports comment: The recent 3-year expansion by the ten largest plantations has averaged some 18,000 ha each year. The annual net increase in their planted area has decelerated from an average of 33,000 to11,300 and 9,300 ha per year. The recent Indonesian moratorium on deforestation has been successfully diluted by corporate and development lobbies. Indonesian planters note that uncertainty surrounding the moratorium had the impact of tamping back their country's 2010 expansion to some 300,000 ha instead of a minimum 500,000 ha per year in prior years (refer to http://khorreports-palmoil.blogspot.com/2011/05/indonesia-moratorium-eases-business-and.html ). Indonesia is widely reported as deforesting at the rate of 1 million ha per year. This implies that oil palm new plantings accounts for half of Indonesia's recent annual deforestation.

The Top 30

The Top 30 public-listed SE Asian plantation groups, listed by market capitalization:













Source: Khor Reports
Data: Bloomberg, 27 Jan 2011


The aggregate landbank (hectares) for selected top plantation groups (inclusive own estates, smallholder / plasma, interest in joint ventures, and unplanted areas):







Source: Khor Reports
Data: Recent company annual reports