I’ve posted links and quotes from the excellent Chain Reaction Research newsletter before. Here’s a few choice gems from their post recent missive, looking at a subject not covered that often by anyone: China and palm oil. I’m reproducing quotes from their recent note, below.
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(China aside, they also published a really useful overview of where some of the biggest FMCG companies are, publicly on hitting deforestation targets, you can check that out here. 2020 will be interesting for these firms as they set new goals and discuss progress. See end of post for more on that)
…At current pace, China’s imports of palm oil are set to be the highest annual rate ever in 2019. This is likely another consequence of the U.S.-China trade war. As the trade war between Beijing and Washington has affected China’s soy volumes from the United States, China has looked for alternatives elsewhere, particularly soy from Brazil. Now, China is also including substituting palm oil for soy as a cheaper edible oil, while also increasing its use of palm oil for biofuels as a cheap alternative to crude oil. China said in August it will eliminate import tariff quotas on palm oil from Indonesia, paving the way for more imports….
…China has so far imported mostly refined products, which have been covered by refiner NDPE policies despite the lack of sustainability demands from Chinese end-users. If China now starts importing significant crude palm oil volumes, that could be a major factor in the leakage market…
…On the Chinese side, companies in the palm oil supply chain have lagged other markets in joining certification schemes such as the RSPO or developing zero-deforestation policies. However, in recent years, there has been a sharp increase in Chinese companies joining the RSPO along with more initiatives to build a “sustainable” palm oil supply chain in China. There are now 117 Chinese companies as part of the RSPO, double 2016 levels and up from only a handful in 2011. Key palm oil players in China include AAK, Mars, L’Oreal, COFCO, state-owned China Grain Reserves Corporation, and Cargill. COFCO, a major trader of agricultural commodities and one of the most visible Chinese companies in the soft commodity trade, has been a member of the RSPO since 2012. Yet, though the company has a commodity-specific commitment for soy, it does not have one for palm oil. As CRR has previously reported, COFCO has yet to put in a zero-deforestation policy that covers palm oil sourced from Indonesia. Still, COFCO says it is forming long-term relationships with suppliers “based on responsible and sustainable business practices” and has said it plans to transition to “sustainable” palm oil by 2025….
They conclude that:
“Investors will keep attention on future shifts in trade flows to monitor deforestation risks. Global trading dynamics for soy and palm oil are certain to continue to change again based on volatile price dynamics and changes in trade policy, causing deforestation risks to fluctuate on a regular basis for companies operating in soft commodity markets.”
In case you are interested…
This year’s Sustainable Landscapes and Commodities Forum (20th-21st November, London) is set to be the flagship meeting place for professionals looking to build sustainable, resilient agricultural supply chains and create a net positive impact.
We’ll welcome 65+ speakers and 350+ attendees representing a cross section of industries and stakeholder groups. Take a look at a sample list of attendees here: http://bit.ly/2pHDfHT
Agenda highlights include:
- C-suite executives at Barry Callebaut, Golden Agri-Resources and Louis Dreyfus Company discuss the future of sourcing sustainable commodities
- 2020 targets and beyond: Nestlé, Cargill and Greenpeace on what’s been achieved and what’s next for business objectives around deforestation
- H&M, Pernod Ricard and ICMM share their efforts to effectively monitor, protect and promote biodiversity throughout operations and supply chains
- How to tackle deforestation by communities and smallholders with L’Oréal and RSPO
- Mondelēz International, WWF and Wageningen University on whether business should move from enforcing zero-deforestation to incentivising sustainable development
- Sustainable land management: How business can enable better water management, tackle the soil crisis, and engage in climate smart agriculture with METRO, Olam, Bayer Crop Science, University of Edinburgh, JUST and more
- How far is sustainability truly taking centre stage within financial institutions? HSBC, BNP Paribas and Bank of America Merrill Lynch share their insights
- Farmers of the future: Philip Morris International, The Nature Conservancy, Fairtrade Foundation and Soil Association discuss how business can ensure the sustained viability of smallholders as a business model
- APRIL, IDH and TFA2020 on how business can scale the landscape approach to sustainable commodities
To secure a place at the conference, register online or email me directly. Book by next Friday, October 18th, to get a £100 discount on your pass.
We strongly encourage delegates to join as a team to ensure you don’t miss anything across the four tracks. Please get in touch for details on group discounts and feel free to share this with any interested colleagues.
Thanks to each of our sponsors: APRIL, Gold Agri-Resources, Wageningen University & Research, Nestle, Bayer Crop Science, GAA, Authenticate, Cargill, Satelligence and SupplyShift.