Operations Review
This segment comprises the processing, merchandising and distribution of animal feeds, non-edible palm and lauric products, oleochemicals, gas oil and biodiesel.
We operate crushing plants in China, India, Vietnam, Malaysia, Russia, Ukraine, Zimbabwe, Zambia, Tanzania and South Africa. We crush a wide range of oilseeds including soybean, rapeseed, groundnut, sunflower seed, sesame seed, cotton seed, copra and palm kernels. With a growing demand for our downstream products, we continued to expand our soybean and palm kernel crushing capacities during the year.
Oilseeds and Grains - Crushing
Soybean meal demand increased significantly in China with the recovery of the hog population. Total volume of soybeans crushed in China increased 7% from 86.8 million MT in 2019 to 93.0 million MT in 2020. Demand for soybean meal is also growing in Vietnam and we are expanding our joint venture crushing capacity in the south of Vietnam and planning a new plant in the north.
Tropical Oils
In 2020, Indonesia expanded its biodiesel blending mandate from B20 to B30 with an initial allocation of 8.1 million MT. However, due to low crude oil prices and reduced diesel consumption resulting from Covid-19, Indonesia’s biodiesel production declined 4% to 7.2 million MT in 2020 from 7.5 million MT in 2019. Nonetheless, the Indonesian government remains committed to the biodiesel programme and is maintaining its support for the biodiesel programme by increasing the crude palm oil export levy.
Our Performance
In 2020, the Feed and Industrial Products segment achieved a pre-tax profit of US$795.9 million, a 26% increase from US$630.3 million in 2019. Overall volume for the segment increased by 11% from 52.4 million MT to 58.1 million MT, mainly driven by improved sales in both oilseeds and grains and sugar businesses. Crushing margins and volume were healthy in 2020, supported by steady recovery in hog production in China. The tropical oils and sugar merchandising businesses performed well during the period. However, the segment was impacted by mark-to-market losses on hedging derivatives in the last quarter of 2020, which will reverse in the coming quarters.
Outlook and Strategy
We expect meat consumption and hence demand for feed ingredients in China to continue to grow in 2021. Soybean imports into China are forecasted to grow to around 100 million MT for 2021.
For tropical oils, the Group’s palm oil processing business is expected to benefit from the continued support of the Indonesian B30 biodiesel programme.
