-  It was reported that state-owned Rajawali Nusantara Indonesia Group has replaced the President Commissioner of BW Plantations in Indonesia with its representative. There have been reports that Rajawali may merge with BW Plantations, which has a stretched balance sheet. BW’s net gearing stood at about 160.1% as at end-December 2013. BW has roughly 96,000ha of plantation land in Kalimantan.

-  Incidentally, Louis Dreyfus Commodities Asia Pte has exited their plantation joint venture (JV) with Rajawali, called Green Eagle Plantations. According to news reports, Rajawali Group has palm oil land bank of about 46,000ha and 10 sugar factories in Java. Apart from plantation, Rajawali is involved in pharmaceuticals.

-  Jakarta Post reported the mixed reaction of palm oil stakeholders in Indonesia over a new regulation that allows companies to claim production costs from the sales tax. Palm producers can now be directly reimbursed for value-added tax incurred in purchases of goods such as fertiliser and tools.

-  Chairman of Indonesian Palm Oil Board (IPOB) said that the new rule would apply to plantation owners, who have facilities to process FFB into CPO. Previously, integrated plantation companies faced difficulties tracing details to calculate the input tax.

-  In contrast to IPOB’s view, the Indonesian Oil Palm Smallholders Association said that the new rule is unfair as it excludes upstream companies that do not process their own FFB and millers, who do not own plantations. Indonesia’s Trade Minister said that trade officials are now in intensive talks with their counterparts in tax, industry and agriculture over this issue.

-  Indonesian Palm Oil Association said that the country’s palm oil exports fell from 11mil tonnes in 1H2013 to 9.75mil tonnes in 1HFY2014 mainly due to a decline in demand from India. India bought more rapeseed and soybean oil instead of palm oil in 1H2014. The official also said that domestic consumption of biodiesel did not meet expectations. Deliveries to Pertamina are expected to be 500,000 tonnes to 600,000 tonnes this year versus previous predictions of 2.8mil tonnes.

-  Finally, Bloomberg quoted an industry player as saying that Malaysia’s palm oil production could have climbed 16% in the 20 days of July versus the same period in June. In contrast, two independent cargo surveyors said that palm oil shipments from Malaysia improved by 7.8% and 10.6%.

-  SGS said that the increase in exports was driven by China and Europe. Exports to China expanded by 80.3% in the 20 days of July compared with the same period in June while Europe bought 44% more palm oil. The US imported 44.5% fewer palm oil while exports of palm oil to Pakistan fell by 35.3%.

Source: AmeSecurities