World’s Largest Palm Oil Processor Crushed by Soaring Costs, Chinese Food Controls

Montreal, Canada

Not every commodity bull market is created equally. And China isn’t necessarily friendly to every commodity trade.

Surging costs and Chinese price controls hit Wilmar International (Singapore-F34.SI) this week — the world’s largest palm oil processor.

Palm oil is ubiquitous in food consumption and found in virtually every processed food, including peanut butter, cookies, microwave popcorn and breakfast cereals, to name just a few items.

In China, palm oil is used across a broad swath of processed goods, although it’s widely regarded to be an unhealthy oil because of its high saturated fat content.

Over the last 12 months, crude palm oil prices in Malaysia have rallied about 38%.

Singapore-based Wilmar International, which suffered a bruising 27.9% plunge in Q4 profits, blamed soaring input costs and China’s tight price controls.

Food prices are soaring across Asia and other emerging markets forcing some governments to reintroduce price controls and subsidies to keep populations satiated.

Another palm oil giant, based in Southeast Asia, is actually making a killing. Despite Chinese subsidies, some companies are making some serious money. Palm oil is a popular vegetable oil and long-term prices are heading higher. That’s my focus in the upcoming issues of The Sovereign Individual.

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