Palm oil

We've applied this tool to trade finance and started to look at how we can calculate social returns, societal returns, and most importantly of all, security returns.

One which really, um, made real sense for us was a particular transactions, um, where our client was buying, uh, palm oil to, uh, which was the destination was Madagascar.

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But first, to catch up with an old friend of this program not heard for a while, Brendan May, whom I met in the 1990s at Oxford when he was finishing his fine degree.

Then he went off to look after marine fisheries and then the forests of Southeast Asia, which were being smashed in favor of palm oil plantations and putting orangutans in dire peril.

I've often wondered how you got attention from the, especially the companies and the, uh, people with plantations in Southeast Asia, when they've got huge enterprises, you know, palm oil and such like.

Why would they take notice of someone [laughs] from an Oxford background with no necessarily technical skills in such things? What, what advantage would they have? What did you tell them?

Well, I think they were savvy because they knew their customer market, and they knew that their customer markets, particularly in Europe and the United States and to some extent Australia as well, were very influenced by a lot of the NGO and activist campaigns around orangutans and forest sustainability and human rights in the plantations.

And they had a big trust deficit and a license to operate problem.

And their problem was very much exemplified by huge boycotts by major brands, you know, the Unilevers, the Nestlés, the Marses who said, "You know, we won't be buying your palm oil if it's from deforestation and if you can't trace it and prove that you're managing it properly." And actually, it's one of the few examples where an entire industry changed relatively quickly within the space of 10, 15 years from being the poster child for the worst excesses of corporate behavior and poor governance into something of a success story in the sense that you can measure it by examining how the rate of deforestation for palm oil fell and leveled off.

There are always bad actors, and there will always be the odd horror story here and there.

first to catch up with an old friend of this programme, not heard for a while, Brendan May, whom I met in the 1990s at Oxford when he was finishing his fine degree.

Then he went off to look after marine fisheries and then the forests of Southeast Asia, which were being smashed in favour of palm oil plantations and putting orangutans in dire peril.

I've often wondered how you got attention from the, especially the companies and the people with plantations in Southeast Asia, when they've got huge enterprises, you know, palm oil and such like.

Why would they take notice of someone from an Oxford background with no necessarily technical skills in such things? What advantage would they have? What did you tell them?

Well, I think they were savvy because they knew their customer market and they knew that their customer markets, particularly in Europe and the United States and to some extent Australia as well, were very influenced by a lot of the NGO and activist campaigns around orangutans and forest sustainability and human rights in the plantations.

And they had a big trust deficit and a license to operate problem.

And their problem was very much exemplified by huge boycotts by major brands, you know, the Unilevers, the Nestles, the Marzes.

who said, you know, we won't be buying your palm oil if it's from deforestation and if you can't trace it and prove that you're managing it properly.

Not quite at the halfway point where we normally would be, but getting close and I think, uh, not quite as worried about that, uh, as I was before.

Palm oil, we also got some palm oil news here.

Uh, good news, bad news on palm oil.

The good news if you're a buyer, that is a record large stocks number in Malaysia.

Bad news, we have an El Niño, and it's [laughs] getting a little bit dry in that part of the world.

Nope.

I think right now if, if you're a buyer of, of fats and oils, I think, you know, we're, we've kind of gotten past that hurdle with, with the slow harvest.

And now the, uh, looking out forward, I think the, the big issue is gonna be demand from biofuels and then probably the impact that El Niño has on production of palm oil in Southeast Asia.

We'll discuss what all this means for Singapore banks, including Singtel, where AI infrastructure is becoming an increasingly important part of the investment story.

Last but not least, we'll also examine whether palm oil is approaching another commodity super cycle because of El Nino.

Harpreet, hi.

You expect MAS to increase the SingDollar NER appreciation slope by another 25 basis point at its October 14 policy meeting.

So the free and open source models accelerate price pressure at the infrastructure layer while expanding demand at the application layer.

With that, let me just swing to the last topic right now.

We're going to leave the AI space and focus on palm oil.

And I'd like to basically bring Xuan Hao on board to basically discuss about his latest findings on Bumitama Agri.

And I think it can work in different ways as well.

And really nice examples, probably something like palm oil, which, you know, obviously the profile of palm oil is very, you know, we've got some really extreme opinions on palm oil.

And there's really good reason for that.

It's highly associated with large-scale deforestation where native forest is cleared and replaced with palm palm oil plantations so we're losing that forestry we're losing all the biodiversity that comes alongside it there's um huge carbon emissions associated with that um and it's quite easy to maybe think, right, I might boycott palm oil because of those huge environmental impacts.

And I can completely understand that.

And I would certainly prefer not to have palm oil added into everything.

But the flip side of that is that if you switch to other things, palm oil actually is better produces a lot more oil that we need in many of these foods than equivalents do so so the palm oil plantations that are already there if you start using something else and if large sales consumers start using something else then actually we need a lot more land for example and i've got a figure here i think i can't remember what it is yeah so so you know It could be anything between four and 10 times as much land you might need for some other types of oil.

Oh, wow.

our...

Palm oil.

Yes.

Talking about it, these days got haze.

So actually that helps plantation to actually get more profit because CPO price is going up.

That's right.

And especially when right now we are talking about biodiesel and all, so people are also using palm oil to mixing to diesel to be able to use it as fuel to save cost so then naturally the demand go higher as well and this is very important for Malaysia because Malaysia we are one of the largest palm oil producer in the world world number two right number one is Indonesia right so we are number two so that's why this is a very important sector for us

Yeah, having said that, there's actually a big argument on whether we should actually use palm oil on biodiesel.

It is a classic market, I would say, mistake, or at least maybe it's not a mistake because it happens over and over and over and over.

We've talked about it in context with palm oil.

We've talked about it before in context of all these crops.

Prices get cheap.

Well, price goes up a buck or two, a bushel.

Well, demand might not look the same as it did a buck or two, a bushel ago.

So we do this over and over and over and over the palm oil markets fighting it right now.

Paige is going to talk about that just a little bit when we get to that side of it.