• Wilmar International has partnered ING to convert a portion of its existing revolving credit of US$150mil into a sustainability performance-linked loan. Wilmar has committed towards improving aspects of its environmental, social and governance performance. Progress will be measured by Sustainalytics, and if the performance milestones are met, the interest rate for part of the loan will be reduced in the following year. This encourages Wilmar to comply with sustainable guidelines as its interest expense would decline in the following year. The lower interest expense would also help reduce the cost of compliance. It remains to be seen if other plantation companies would follow Wilmar's example.

• China's imports of palm oil rose by 77.7% YoY in October 2017 while its imports of soybean increased by 12.4%. In 10M2017, China's imports of palm oil improved by 18.3% vs. 15.2% for soybean. The country's imports of soybean oil grew at a strong 36.1% YoY in 10M2017. After falling in 2016, China's demand for palm oil has recovered in 2017F. We estimate Malaysia's market share of China's palm imports at 40.5% in October 2017. We believe that Indonesia accounts for the bulk of the remaining 60% of China's palm oil imports.

• Reuters reported that researchers have created a detailed map for the first time that will help buyers and consumers work out whether the supply chain is harming forests in Borneo. Developed over the past year, the "Borneo Atlas" was unveiled by the Indonesia-based Center for International Forestry Research (CIFOR) a few weeks ago. The map shows the location and ownership of 467 palm oil mills on Borneo. A tool linked to the Borneo Atlas will use regularly updated satellite imagery to show a 10km radius around each mill, detailing its impact on nearby forest areas and any expansion of plantation estates.

• Reuters also said that Argentina has authorised the use of genetically modified soybean seeds resistant to herbicides. On the flip side, the EU is debating whether to extend the licence of weed killers containing glyphosate. The EU debate comes amid concerns that the active ingredient in Monsanto's Roundup weed killer causes cancer. This has caused concerns in Argentina that its soybean exports to the EU may be in jeopardy. We believe that any drop in demand would exert downward pressure on soybean prices. Currently, Argentina's soybean production is expected to inch down from 57.8mil tonnes in 2016/2017F to 57mil tonnes in 2017F/2018F.

• Louis Dreyfus has proposed to buy an oilseed crushing and vegetable oil refining business from Golden Agri Resources for an enterprise value of US$111mil. Sinarmas Natural Resources Foodstuff Technology owns and operates oilseed crushing and refining facilities in Tianjin.

• SGS and Intertek said that Malaysia's palm shipments fell by 8.6% and 8.4% respectively in the first 25 days of November compared with the same period in October. SGS reported that Malaysia's palm exports to the EU dropped by 18.4% while China's palm imports declined by 13.3%. According to Intertek, RBD palm olein accounted for 44.3% of Malaysia's palm shipments while crude palm oil made up another 16.6%.

Source: AmInvest Research - 4 Dec 2017