By Brian Monteith – 5 minute read
As if we needed more pressure on the cost of living, Indonesia, the world’s biggest producer of palm oil, announced last week it would halt exports of palm oil in a bid to stabilise soaring prices at home which it blamed on the war in Ukraine and the Covid pandemic. This will put even more pressure on countries relying heavily on vegetable oil at a time when people are already suffering from the cost-of-living crisis, with soaring food and energy bills and taxes rising to pay for the Covid pandemic.
Fortunately, Malaysia, the second biggest producer of palm oil, maintains it has enough palm oil to meet global demand and keep supply chains moving. Yet despite this, markets such as the European Union are ramping up the pressure on the palm oil industry by pushing forward with sustainability regulatory frameworks, which seemingly targets the commodity.
Long in the EU’s planning, it was already an unjustified intervention when countries like Malaysia have encouraged a move to sustainability in Palm Oil production, now with the impact of the ongoing Ukraine-Russia war effecting vegetable oil supplies and prices it has become spectacular example of self-harm.
Why boycott an entire commodity at a time when vegetable oil supply is at risk of falling well short of global requirements, with industry experts expecting millions of tonnes of oil production to be disrupted in Ukraine? Sunflower oil is likely to be the biggest casualty, as Ukraine produces around 19 million tonnes of it annually, with Ukraine and Russia together making up nearly 80% of global crude sunflower oil exports (Ukraine usually makes up about half of the export market).
Furthermore, sunflower seeds are generally sown in April and May, and harvested in September – none of which looks likely to take place this year – which will drive sunflower oil supply down and prices up even further. The war in Ukraine is likely to lead to a 25% cut in supplies of sunflower oil in the next fiscal year. We can already see the news trickling through to consumers with Sunflower Oil running out in supermarkets and supplies being limited by some to no more than 3 one litre bottles.
It therefore makes sense to reassess our views on palm oil and take a closer, more considered look at Malaysian palm oil, and seriously weigh-up the role it can play in addressing the world’s supply of vegetable oil, as well as our growing energy needs. Why? Because Palm oil tops the list of oil crops for yield. Today, palm oil accounts for 6% of all cultivated land for vegetable oils globally; but produces over one-third of the total output.
Yet, for too long palm oil has been cast as the pantomime villain, with the media often misrepresenting it around the issue of land clearance and deforestation even though great strides have been made to limit the environmental impact of the commodity’s farming. The EU has been a cheerleader of the criticism of Palm Oil, booing from the back stalls whenever its entered stage left and looking to introduce bans.
Now, with huge pressure on supply and prices, food and beverage firms have been urged to look to alternative vegetable oil sources and palm oil is one of the top alternative choices. One such example is UK supermarket Iceland pledging originally to remove palm oil from all its products but now reversing its opposition and in the process acknowledging that palm oil can be sustainably farmed. This recognition of reality, this realpolitik, will be lost to EU member states if its boycotts on palm oil continue, driving up prices even higher for its member states.
Governments, food firms and consumers that have boycotted palm oil in the past should reconsider their approach, as sustainable palm oil is a credible alternative to oils such as sunflower oil, which is in short supply due to the Ukraine crisis. With 90% of palm oil imported into the Europe already ‘Certified Sustainable’ the switch should be easy.
The reason palm oil is an attractive replacement for Sunflower Oil is because it uses as little as one-ninth the land of substitutes like rapeseed oil, olive oil, soybean oil, etc. According to a study published in Nature, expanding palm oil production to keep pace with the demand would require 36 million hectares of additional land whereas soybean, the second most popular oil crop, would need 204 million more hectares.
On top of this, producing palm oil takes significantly less amount of fertilizer, pesticides and energy inputs. The reduced use of fertilizer is key, as Russia is the biggest exporter of fertilizer, meaning palm oil’s supply chain is less affected by the ongoing war in Ukraine than other edible oils.
Even the World Wildlife Fund (WWF) believes palm oil can contribute to sustainability if it’s managed properly, citing deforestation from palm oil falling to a four-year low according to satellite analysis published from Chain Reaction Research (CRR), a risk analysis group. Another monitor of sustainability schemes, Global Forest Watch, noted primary forest loss in Malaysia decreased by almost 70% between 2014 and 2020. These improvements follow Malaysia’s forest management and conservatorship, which includes tougher law enforcement and mandatory moratoriums, including plans to increase fines and jail terms for illegal logging.
To improve biodiversity and conserve wildlife nationwide, the Malaysian Palm Oil Council launched the Malaysian Palm Oil Wildlife Conservation Fund in 2006. Several programs have already been initiated, including the Wildlife Rescue Unit, which ensures the long-term survival of orangutans. Until 2017, it carried out more than 500 rescue and translocation operations, which included 52 Bornean orangutans.
Singapore-based Palm Oil Analytics co-founder Dr Sathia Varqa foresees Malaysia having the capacity to fulfil demand for 625,000 tonnes of palm oil from Indonesia’s export ban. According to him, Indonesia exports about 70,000 tonnes of palm oil, 500,000 tonnes of palm olein and 55,000 tonnes of crude palm oil (CPO) per month.
Malaysia plantation industries and commodities minister Zuraida Kamaruddin said that Malaysia should be able to increase its production of palm oil with the reopening of the country’s borders.
And it is sustainable palm oil – in 2015, MSPO was launched to ensure Malaysian palm oil is sustainably produced and safe for consumption. Under the MSPO fragmented forests have been reconnected, to the benefit of endangered orangutans. A recent study by ‘Frontiers in Forests and Global Change’ underscored the importance to Malaysia’s orangutan population of such efforts. Malaysian industry is working on innovative solutions to improve sustainability. Many palm oil mills are transitioning to net-zero by capturing the biogases produced and converting them into renewable energy. In Malaysia, 125 out of 452 oil mills operated a biogas plant. The green energy produced from this initiative has saved approximately 712 kt CO2 per annum.
Looking at it in the round, Western Europe has a problem – a growing shortage of vegetable oils – and Malaysia has an answer – the ability to export its sustainable palm oil to fill the gap. All that’s required is for authorities to recognise the environmental improvements they wanted have in fact happened and can be maintained. The real question then is do they have the humility to recognise it’s time to change too?
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Brian Monteith has worked in public relations for nearly forty years, initially in the City, then Scotland and finally as an international consultant in Africa, the Caribbean and Asia. A former member of the European and Scottish parliaments, he is now managing editor of brexit-watch.org and ThinkScotland.org.
Image of palm oil fruit by nopparat from Adobe Stock