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 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 impacting on vegetable oil markets and prices it has become spectacular example of self-harm.
Worse, it comes when 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 imports 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.
Why boycott an entire commodity when supply is at risk of falling well short of global requirements, with industry experts expecting millions of tonnes of vegetable oil production to be disrupted? 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 sunflower oil. With 90% of palm oil imported into the EU already ‘Certified Sustainable’ the switch should be easy.
The reason palm oil is an attractive replacement for sunflower oil is 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. By 2017 it had carried out more than 500 rescue and translocation operations, which included 52 Bornean orangutans.
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 does the EU have the humility to recognise it’s time to change too?
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