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?

Sime explores 300,000ha landbank in Cameroon, France processing plant

Sime Darby lately announced a few proposed ventures overseas, including exploring a potential 300,000ha plantation landbank in Cameroon.

In its 18th March 2011 research note entitled "Sime Darby – Malaysia, Too early to add more overseas ventures," UOB Kay Hian research notes that, "Notwithstanding the risks associated with investments in Africa, this venture could divert the new management’s focus from re-examining and streamlining its current business divisions........ Sime is planning to build a processing plant in France which would receive palm oil feedstock from its Liberia estates. This move faces the challenges of meeting Europe’s high oil quality requirements as well as strong resistance from the environmental movement in Europe against palm oil...." (On left, UOBKH graphic with data from Sime Darby, showing the earnings by division of the Malaysian conglomerate)


Khor Reports comment:

a) Sime currently operates in Liberia with under 10,000ha, but has potential to increase this to 220,000 ha. With perhaps another 300,000 ha from Cameroon, this could ramp up Sime's already large landbank reserves substantially.

b) Old-style plantation expansion in Malaysia did not require corporate growers to set-aside land for smallholder development (Felda was the land agency that focussed on smallholder efforts). Indonesia requires corporate land concession holders to set aside some 20% for smallholder development. Sime's planned new project in Sarawak will give substantially more allocation to indigenous land owners and a state land agency under an improved 'native customary rights' program. Thus, there is an increasing trend toward higher allocations for smallholders. Oil palm growing in Africa is characterized by significant smallholder interests and it is likely that corporates will be required to give larger allocations for these.

c) The proposed processing plant in France is a move toward creating a segregated supply chain (perhaps of sustainable smallholder palm oil??) direct to the end market in Europe. Such a supply chain is the goal of global giants Cargill and Wilmar, and large Malaysian planters such as KL Kepong and IOI Corp. Mid-sized, Europe-oriented players, United Plantations (affiliated with Aarhus) and New Britain Palm Oil have also made a similar moves, with the latter even building a dedicated supply for confectionary maker, Ferrero Rocher.