Highlight Pressure on Sarawak planters

by **Cals** Mon 17 Feb 2014, 18:42

Highlight Pressure on Sarawak planters

Business & Markets 2014

Written by Sulhi Azman & Kathy Fong of theedgemalaysia.com

Monday, 17 February 2014 09:27

KUALA LUMPUR: Sarawak-based plantation firms or those with large plantations in the state may face some selling pressure, no thanks to news that Wilmar International Ltd intends to stop buying crude palm oil (CPO) produced there.

Wilmar, managed by tycoon Tan Sri Robert Kuok’s nephew Kuok Khoon Hong, is not the only buyer of palm oil produced in Sarawak, but it is the biggest buyer in the state. Investment analysts said there could be a knee-jerk reaction to the share prices of the Sarawak-based plantation companies on Bursa Malaysia.

When contacted, an executive from a Sarawak plantation firm said there wasn’t any official notice and planters were in the dark on the matter.

“We are not sure what exactly is happening … we are still trying to find out whether Wilmar has decided not to source palm oil from the refiners in Sarawak at all,” said the executive.

“There may not be a complete ban. Perhaps Wilmar may impose a set of tougher requirements or rules for the plantation firms here,” he told The Edge Financial Daily.

Among the public-listed Sarawak-based plantation companies are Jaya Tiasa Bhd, Ta Ann Holdings Bhd, Rimbunan Sawit Bhd, WTK Holdings Bhd, Sarawak Plantation Bhd and Sarawak Oil Palms Bhd. TH Plantations Bhd also owns 45,000ha of plantation land in the state, besides its estates in Pahang, Johor, Negeri Sembilan, Terengganu and Sabah.

Wilmar’s palm oil refinery was set up in Sarawak over 10 years ago. The company is the world’s largest processor and merchandiser of palm and lauric oils and buys 45% of the CPO produced by 41 mills in the state. The remaining 55% is sold to the Senari refinery in Kuching and other mills.

Phillip Capital Management Sdn Bhd chief investment officer Ang Kok Heng said this would not augur well for the plantation firms in Sarawak as the “stop” purchase by Wilmar would weaken the bargaining power of the planters in the state. “They may have to sell at lower prices,” he commented.

Some quarters argued that this will create a price difference between sustainable and conventional markets, which in the long run, will not bring economic benefits and competitive edge to the plantation sector.

To recap, Bernama last Friday reported that Wilmar had conveyed its intention to Sarawak Land Development Minister Tan Sri Dr James Masing to cease buying CPO from mills in the state.

The minister was quoted as saying that Wilmar had made known the decision in a letter sent to him on Dec 5 last year. He had replied to the letter and briefed the state Cabinet on the matter.

Masing said the state government “would not bow to such pressure” from Wilmar, which he believes has been pressured by non-governmental organisations in Europe to make such a restriction on the state’s palm oil products.

“They told us not to sacrifice our environment with the planting of oil palm on our forest and peat swamp soil and I don’t agree to that because there are no soybean and sunflowers planted in the Sahara desert. Soybean and sunflowers are planted all over Europe and the forest areas are also cut down,” Masing said.

“If we are not allowed to plant on those two areas [forest and peat swamps], 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.”

Sarawak has 1.6 million hectares of peat swamps with 90,607.3ha of land planted with oil palm trees, according to Bernama.

The opposition against the development of peat swamp is because the disappearance of these areas will increase the emission of carbon dioxide, which will accelerate global warming.

In December 2013, Wilmar and Unilever signed a memorandum of understanding and launched a new “No Deforestation, No Peat, No Exploitation” policy aimed at advancing an environmentally and socially responsible palm oil industry.

This article first appeared in The Edge Financial Daily, on February 17, 2014.