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Segi Enam Research
POC2023 Panel Session - Palm Oil ...
Environment, Regulatory compliance
Yuleng Khor
The positive of the EUDR - inclusive of ...
Segi Enam Research
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IDEAS-FedEx: Highlights on RCEP and how it can benefit your business
Segi Enam Research
At Roundtable (RT) 2022 - Day 1 Observations
At Roundtable (RT) 2022 - Day 1 Observations
Segi Enam Research
PalmTrack—Sep 2022 Wrap Up
PalmTrack—Sep 2022 Wrap Up

More Public Attention on Malaysia Flood and Climate Change

In December 2021, heavy rainfall had resulted in severe flooding in numerous areas within Peninsular Malaysia. Regarded as one of the worst flood disasters the country has seen in the recent years, the flood effectively displaced an estimated tens of thousands of residents and was further proof that Malaysia is not—and will not be—spared from the growing effects of climate change.

Malaysia has yet to forget the devastation the floods had caused—topic of climate change is becoming an increasingly important and popular one, particularly online. Accordingly, activists and environmentalists have taken the opportunity to highlight the gravity of the situation, oftentimes working hand-in-hand with the media as a platform where the public can be kept abreast about the matter.

Kini News Lab is one such platform and its most recent article is “When the Water Rises: A Malaysian Climate Change Story,” which described how climate change has adversely impacted the livelihoods, standards of living, and psychology of Malaysians across the country. The article also allows readers to see annual temperature and rainfall changes in various locations since 1952.

A part of the article also covered rising sea water levels, yet another threat Malaysia is facing as a direct result of climate change. In the worst case scenario for Malaysia, sea levels could very well rise up to 0.74 metres by the 2100 year, plunging low lying and coastal areas underwater.

Khor Reports did a short review several years ago comparing between the best and worst case scenarios for key areas where the land is at risk of coastal flooding by 2050: Land Reclamation Projects and Sand Dredging/Mining Sites in Peninsular Malaysia ver. Oct 2019.

We also wrote a piece on the politics of floods, with criticism about land development coming from businessmen and bureaucrats interviewed: Malaysia - the Political Economy of Land Development (or the Politics of Flood). While attention on coastal and flash floods is gaining attention, we would also like to highlight the issue of ground water flooding that can worsen flood woes (see box below).

PalmTrack—Aug 2022 Wrap Up

Here is a wrap up of the some of the issues PalmTrack covered in Aug 2022:

  1. The rise and fall of key agri-food commodity prices feels like a blast from the past, but many prices remain at multi-year elevated levels, notably fertilizers and also the likes of palm oil. In this two-part series, we look at recent news views from The Economist, FAO, and what some say about the 2008/09 price bubble and food speculation in Part 1 before moving on to what commodity traders say about the role of "non-commercial traders” in the recent early 2022 food price bubble in Part 2.

  2. PalmTrack has been updating on recent and upcoming palm oil sustainability issues. There are three parts to this series, and each highlight the following points of interest gathered from close observers: greenwashing, legality, product pricing for smallholders (fair trade), traceability to farms, carbon emissions, and political-policy challenges.

  3. In our posting ‘Sarawak CPO production to overtake Sabah’, we covered the forecast for Sarawak to be the biggest CPO producing state in Malaysia, the timber-to-palm transition of its big state suppliers, and the decline of its timber business segment, especially downstream amidst log supply woes. Now, we look at market access and dip into some issues for Sarawak timber and palm supplies.

  4. Our latest discussion with labour experts revealed a wider regional competition for agricultural workers rising and expanding. We expect the Covid recovery to drive change toward a more formal and compliant agricultural labour supply. We case study Australia, who are reportedly now focusing on Indonesia and Oceania, and Taiwan who has opened up for agricultural labour workers from Southeast Asia in 2020.

  5. BOM raised a La Niña alert on 16 Aug, the final step before an official La Niña. In the meantime, BMKG on 12 Aug revealed that while the dry season in Indonesia is expected to last from August to October, La Niña may still result in heavier-than-usual rainfall within the country.

Khor Reports’ PalmTrack is an independent research service that tracks palm tanker movements and reports trade of palm products (and shipments, upon request) for selected trade routes. It features a forward-looking market topic and sharp analysis every quarter, e.g. palm biofuels issues & opportunities for Jan–Mar 2022. Subscribe now!

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PalmTrack—Jul 2022 Wrap Up

Here is a wrap up of the some of the issues PalmTrack covered in Jul 2022:

  1. The 2022 Trafficking in Persons (TIP) Report was released recently, and Malaysia remains at Tier 3 for a second year. In this two part-series, we look at key excerpts of the report, which should give a sense as to what national policy and implementation could or should be as well as other non-Western labour standards Malaysia is struggling with.

  2. Palm oil price is looking to find a footing with the ramp up of Indonesia domestic demand via an expanded biodiesel mandate whereby Indonesia plans to implement B35 in biodiesel by end of July. In another two part-series, we contemplate two questions: with demand side worries abound amidst inflationary and other concerns, what are some of the economic issues and is there demand destruction with 4–10% contractions?

  3. Malaysia made a confusing price control lift, with rapid response among politicians on maintaining subsidies. But there is little regard on the leakage from the billions that go into food subsidies. Read our post for our full analysis.

  4. BOM reported on 5 Jul that there is about a 50% chance of La Niña occurring later in 2022. BMKG made similar a forecast, warning that Indonesia may face heavier-than-usual rainfall up until the end of 2022.

Khor Reports’ PalmTrack is an independent research service that tracks palm tanker movements and reports trade of palm products (and shipments, upon request) for selected trade routes. It features a forward-looking market topic and sharp analysis every quarter, e.g. palm biofuels issues & opportunities for Jan–Mar 2022. Subscribe now!

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PalmTrack—June 2022 Wrap Up

Here is a wrap up of the some of the issues PalmTrack covered in May 2022:

  1. Neste Oyj is a leader in HVO-SAF products using 95% waste/residue input (bio)share—that's a bit different from co-processed HVO-SAF. We looked at recent news on its margins, deals, and Singapore expansion.

  2. The shock of the Russia-Ukraine conflict added tremendous pressure to the already tight vegoil, grains and input markets. We listened in on a global fertilizer briefing, and it seems like markets have gotten used to and are indeed getting over the conflict impacts. We also took a look at what observers are saying about freight rates and port congestion, which are of relevance to agricultural inputs.

  3. How quickly prices move and relative prices can reverse, with palm oil now cheaper than gas oil and making voluntary blending viable! We chatted with a trader to find out what’s been happening and what’s next in the violent price correction, and another on potential demand-side issues in energy demand and Chinese restocking. 

  4. The US CBP conducted a virtual workshop on forced labour facilitated by MPOC on 8 June, which provided a guide as to how the agency generally enforces its anti-forced labour tools, as well as how it modifies and revokes imposed export bans. 

  5. There were several updates in the palm industry in the week of 10 June, including Indonesia allowing exporters not on its list of companies approved for bulk cooking oil distribution to ship palm oil subject to a extra charge on top of the existing export tax and levy.

Khor Reports’ PalmTrack is an independent research service that tracks palm tanker movements and reports trade of palm products (and shipments, upon request) for selected trade routes. It features a forward-looking market topic and sharp analysis every quarter, e.g. palm biofuels issues & opportunities for Jan–Mar 2022. Subscribe now!

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Malaysia, Singapore, and the Chicken Problem - Part #2

Following the previous post on Malaysia, Singapore, and the Chicken Problem - Part #1 late last week, here are our thoughts and observations on the matter.

Observations. The aspect I know a bit more about is for Malaysia, it seems clear that producing chickens for the domestic market at the target price is/was loss making per bird. The government was looking at suggestions on palm-based chicken feed to help lower cost but that is unlikely as palm kernel expeller/cake/meal, while well established, is primarily used as feed for ruminants, mostly dairy cows. While the industry hope and experiments for wider use for chickens, that is still a work in progress.

(Inside story: policy analysts were a bit surprised that some plantations made this suggestions when, with basic research, it becomes obvious that palm material not an immediate solution).

Instead, the Malaysians went with a cash handout to B40s and buffer stock policy for now, as the mechanism to help poultry breeders seems uncertain no subsidy support plan has been announced. Governments are likely to be struggling with industries to supply export products to domestic consumers as the high international prices attract big volumes out. Export restrictions can tighten global/regional supply even more and distort export prices upward even more.

Another example is the cooking oil conundrum in Indonesia that has pitted their President against an alleged 'cooking oil mafia.' There is worry about a 'chicken cabal' in Malaysia. While politicians and policy makers figure out chicken suppliers, and with more money in the pocket, B40 consumers may have to find other proteins for their rice.

Further observations. Malaysia observers have noted that even the likes of KFC are resorting to selling more patties as fresh chicken is in acute shortage locally. They are not sure whether this issue can be easily resolved, as the government is still maintaining the price ceiling.

In the meantime, consumers in Singapore are not noticing chicken shortages. A banker friend told me: "We can get chicken everywhere, I just had a curry chicken toastie for lunch." Economists there are not worried about supplies at present, as Singapore can pay for chilled and frozen chickens from other nearby countries such as Thailand and further from Australia.

Land Reclamation Projects and Sand Dredging/Mining Sites in Peninsular Malaysia ver. Oct 2019

A few years ago, Khor Reports conducted a brief study on land reclamation in Peninsular Malaysia. We attempted to locate selected land reclamation projects and sand dredging/mining sites based on news reports and other publicly-available sources online before overlaying these locations with a map highlighting land areas at risk of coastal flooding.

We have also made brief case studies comparing the best and worst case scenarios for key areas where the land is at risk of coastal flooding by 2050.

Malaysia, Singapore, and the Chicken Problem - Part #1

In a move that sent exporters and vendors into a ruffle, Malaysia announced on 23 May that all exports of various chicken products, including live poultry and whole carcasses, are prohibited effective 1 June. The ban is part of the country’s efforts to address the domestic supply shortages and rising prices of poultry.

Food security concerns have been in the forefront of the minds of various nations within Southeast Asia following the Russia-Ukraine war. According to the United Nations, “global food prices have risen by nearly one-third, fertilizer by more than half, and oil prices by almost two-thirds” in the past year.

China Daily published an interesting article on the matter, in which Segi Enam Advisors were quoted:

“In Southeast Asia, there is an opportunity in the crisis in cooking oil,” said Khor Yu Leng, research head for Southeast Asia at Singapore-based consultancy Segi Enam Advisors.

Khor told China Daily that palm oil exports can fill the gap when other vegetable oils like rapeseed oil and sunflower oil, of which both Russia and Ukraine are key exporters, are in tight supply. 

“My check of vessel movements from Indonesia shows a big rise in palm oil tankers going to the Commonwealth of Independent States (and) Russian region,” said Khor. 

While Thailand, also a palm oil producer, pulled back on domestic use of the product in biodiesel to ensure food supplies, Malaysia and Indonesia are sticking to diverting it into domestic transport fuel with 20-30 percent biofuel blending mandates, said Khor. 

Read the full article here: Asian nations enhance food security amid Russia-Ukraine conflict

[Sample!] PalmTrack—US CBP Workshop on Forced Labour

Yesterday, the US CBP conducted a virtual workshop on forced labour facilitated by MPOC. The one hour-long workshop provided a useful guide as to how the agency generally enforces its anti-forced labour tools, as well as how it modifies and revokes imposed export bans. 

There are primarily three types of forced labour enforcement tools the US CBP exercises: Withhold Release Order (WRO), findings, and penalties. Note the difference in standard of proof for each tool—“reasonable suspicion” has a much lower bar than “probably cause”, the latter requiring that the US CBP “conclusively demonstrate that the merchandise is prohibited” due to elements of forced labour along the relevant supply chain.

As of 8 June 2022, the US CBP reports on its website that Malaysia has six WROs and one finding.

According to the US CBP, its forced labour enforcement process comprises a nine-step process, initiated whenever it receives a tip, whether from “internal channels” or received from external sources, e.g. civil society, “tips from researchers”, about exported merchandise produced using forced labour. 

Companies slapped with WROs and/or findings are allowed to submit requests for modifications to and/or revocations of their export bans. The US CBP uses on ILO indicators as a guide when considering these requests. 

In response to a question posed about how companies could provide evidence that its goods were not produced using forced labour, it was emphasised that companies are strongly encouraged to hire a reliable, independent auditor as an assessor, although the US CBP quickly clarified that it does not and will not dictate any specific requirements of said auditor. Interestingly, one of the speakers had expressed bewilderment that one Malaysian company had opted to use its “internal auditors” to challenge its export ban and hoped that the US CBP’s later rejection of the aforementioned company’s report assessment assessment emphasises its insistence for an independent audit.

research@segi-enam.com | 9 Jun 2022

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Khor Reports’ PalmTrack is an independent research service that tracks palm tanker movements and reports trade of palm products (and shipments, upon request) for selected trade routes. It features a forward-looking market topic and sharp analysis every quarter, e.g. palm biofuels issues & opportunities for Jan–Mar 2022. Subscribe now!

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BFM: Can We Afford GE15 Right Now

There have been increasing chatter about GE15 in Malaysia. Many within UMNO are reportedly pressuring Prime Minister Ismail Sabri to call for a general election, with one source interviewed by the Malay Mail claiming that “the consensus of the top leadership of the party is that GE15 should be held sooner rather than next year.” Consequently, experts have began weighing the pros and cons of holding an election this year, especially given the last two years of regular pandemic-related lockdowns in Malaysia. Segi Enam Advisors Khor Yu Leng was invited to BFM to give her thoughts on the matter: Can We Afford GE15 Right Now

There have been calls from within UMNO for parliament to be dissolved and GE15 to be held as soon as possible. However, Prime Minister Datuk Seri Ismail Sabri has said that with inflation and the rising cost of goods, this isn't the right time. We look at where we are in our economic recovery and whether initiating an election could have repercussions.

Image Source: Gwoeii, Shutterstock; produced by: Natasha Fusil; presented by: Lee Chwi Lynn, Sharmilla Ganesan

PalmTrack—May 2022 Wrap Up

Here is a wrap up of the some of the issues PalmTrack covered in May 2022:

  1. We’ve been updating a lot on the changed political-policy landscape for Indonesian palm oil. Note that the Jokowi administration has been struggling to get cooking oil at the right price to Indonesia consumers for months, toggling between the export-restricting DMO-DPO rules and export duty/levies. 

  2. Experts expressed surprise at Indonesia’s intentions to reimpose a domestic sales requirement effective 31 May 2022. CIMB in its agribusiness brief dated 23 May expects the potential impact of the regulation to depend on the new volumes and price obligations set by the government, it is overall still too early to conclude how the DMO will impact the market and/or palm oil players due to the lack of details.

  3. Weather and rainfall: On notable rainfall events (30 days to 11 May 2022), 30 days accumulated rainfall was est. above 500mm in Central and East Kalimantan, where a significant area has within those regions recorded an accumulated rainfall of est. above 500mm. On 13 May, BMKG issued a warning of heavy rainfall accompanied by storms and strong winds for several Indonesian provinces, including Aceh, and West and South Sumatra.

  4. Tankers from Indonesia: Port calls for 25 Apr–8 May 2022 (14 days) count, c.50 palm-related tankers, with sample net tonnage c.295k (versus 14 days to 10 Apr, c.60 tankers with sample net tonnage c.330k). These two weeks (25 Apr–8 May), the share of port calls was higher for European ports; conversely, the share is lower for CIS and American ports (versus 14 days to 10 Apr).

  5. On 7 May, the Indonesian navy seized its third vessel, the Mathu Bhum, after seizing two others, the World Progress and Annabelle, a week earlier. A review of the Mathu Bhum’s movement shows that the vessel was doing unloading/loading operations on 7 May 2022 at Belawan’s container port.

Khor Reports’ PalmTrack is an independent research service that tracks palm tanker movements and reports trade of palm products (and shipments, upon request) for selected trade routes. It features a forward-looking market topic and sharp analysis every quarter, e.g. palm biofuels issues & opportunities for Jan–Mar 2022. Subscribe now!

$380.00
Every year
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Every month