Malaysia’s small oil palm farmers have combined forces to contest another EU attempt to ban palm oil biofuels. A new campaign has released a digital advertisement to appear across Europe in December, to reject an unjust and discriminatory move to ban palm oil biofuels under the Renewable Energy Directive.
The ban would sentence 3.2 million Malaysians to renewed poverty, noted Faces of Palm Oil, a grouping of agencies that advocate the cause of oil palm smallholders. It comprises the National Association of Smallholders (NASH), Federal Land Development Authority (FELDA), Sarawak Land Consolidation and Rehabilitation Authority (SALCRA), Dayak Oil Palm Planters Association (DOPPA) and the Malaysian Palm Oil Council.
Faces of Palm Oil demands that the European Council rejects the proposal of the European Parliament, and reaffirms Europe’s commitment to Southeast Asia, Malaysia and small oil palm farmers.
NASH president Dato’ Haji Aliasak Haji Ambia said: “Palm oil has allowed us, the rural poor, to develop our own land, lift ourselves and our families out of poverty, and take control of our own economic destiny. A ban on palm oil biofuels would be an all-out assault against the hundreds of thousands of small farmers across Malaysia. The EU will force farmers back into poverty if it bans palm oil.
“NASH and Malaysia’s small farmers will not stand by while Europeans sell commercial products to Malaysians on the one hand, and cut our economic lifeline on the other. It is unacceptable behaviour: the move to ban palm oil biofuels must be stopped immediately.”
FELDA chairman Tan Sri Shahrir Abdul Samad said: “The proposed ban is discriminatory and must be removed. The 112,635 FELDA small farmers and their families demand clear and direct clarification from the EU that palm oil biofuels will not be banned. The Malaysian palm oil industry is an economic lifeline for small farmers; it has lifted their families from poverty to prosperity. I will continue to defend their interests and ensure justice for them in the global markets.”
SALCRA chairman Datuk Amar Douglas Uggah Embas said: “It is unacceptable that European politicians are preparing to put at risk the prosperity, safety and health of 3.2 million Malaysians. Tens of thousands of SALCRA small farmers and their rural communities will suffer if the EU bans palm oil biofuels. We will not allow this to happen.”
DOPPA president Dr Richard Mani said: “Indigenous peoples in Malaysia will suffer if the EU bans palm oil biofuels. Indigenous communities have used palm oil to lift ourselves and our families out of poverty, and build new hope for the future. The EU proposal puts all of that at risk and undermines the UN’s Sustainable Development Goals. On behalf of the Dayak planters of Malaysian Borneo, I urge the European Council to abandon this cruel and heartless plan that will only bring poverty back to Malaysia.”
Source: Faces of Palm Oil, edited press release, Dec 19, 2017
The job scope and responsibilities of planters have increased dramatically in recent years – all too often, they have to manage a big land area, with lower skilled and less experienced workers. They also have to satisfy the interests of stakeholders, cope with social welfare issues, respond to Environment Safety Health and sustainability auditors, and attend meetings regularly.
As a result, millennials – identified as those born between 1980 and 1995 – are not generally attracted to plantation jobs, with the demanding workload and challenges of multitasking in an outdoors environment.
However, the use of technology and smart phones could counter such reluctance, and enable them to work effectively and efficiently. Tools such as Apps, sensor technology and intelligent logarithm software will assist in quick reference and swift decision-making in daily estate operations.
To help with weed management and Pest and Disease (P&D) issues, for example, I have developed an Oil Palm Pesticides Calculator App. This is available free of charge in the Google Play Store. Just search for ‘Oil Palm Pesticides Calculator App’, click on it and download.
The App can be used even when there is no data or Internet connection. It is divided into five sections. The first four are separate calculators for Sprayer Calibration (add the required information to the column in the blue icon); Herbicide Mixing, Insecticide Mixing and Fungicide Mixing.
Calibration of spray equipment and application of the correct dose of pesticides are important for a satisfactory ‘kill’. This will not only reduce over-use of pesticides, but will save costs as well.
The final section in the App is a guide to weeds and P&D management, with the recommended rate being based on general conditions. To control tough problems, the user should consult the R&D department, General Manager or Plantation Advisors.
Developer, Oil Palm Pesticides Calculator
The author is not responsible for any liability, loss of profit or other damage caused directly or indirectly by the guidelines, techniques, recommendations or information in this article.
In 1862, the principalities of Moldavia and Wallachia formally united under the name ‘Romania’. The country gained Independence in 1878. In 1947, however, a Communist ‘people’s republic’ was formed during Soviet occupation after the Second World War.
In 1965, the dictator Nicolae Ceausescu took power. After he was overthrown in 1989, former Communists dominated the government until 1996, when they were swept from power. Romania joined NATO in 2004 and the EU in 2007.
By the end of the Ceausescu dictatorship, the Romanian economy was in extremely poor shape. But, thanks to the support of international donors such as the International Monetary Fund, the World Bank and the EU, Romania has succeeded in revitalising its economy. It achieved 3.7% growth in 2015 and 4.8% in 2016. Still, with 55% of the average EU per capita income (2014), it is the EU’s second-poorest country after Bulgaria (Figure 1).
Vegetable oils market
Sunflower oil is by far the dominant commodity in the Romanian market (Figure 2). It is a staple in every kitchen. Palm oil is a major import, surpassing sunflower oil in 2013 (Figure 3).
Poland has come a long way since 1989, when its first free elections were held since the Second World War. With a population of close to 40 million and the GDP at purchasing power parity of around US$800 billion (equivalent to US$21,000 per capita, according to 2012 estimates), the country is ranked sixth in Europe in terms of population and economic prowess.
Poland’s economy is considered to be one of the healthiest of the former Eastern Bloc countries. Its growth rates over the past few years have been among the highest in the EU.
There remains room for improvement, of course. Per capita income is still below the EU average. Other problems persist, including an inefficient commercial court system, rigid labour laws and heavy taxes.
A look at the oils and fats sector reveals that rapeseed oil is the frontrunner in terms of production and consumption in Poland. According to Oil World, the country consumed more than 870,000 tonnes of rapeseed oil in 2016 (Figure 1). Palm oil contributed almost 253,000 tonnes in 2016 – on par with lard, which has traditionally been second-highest in the domestic consumption rankings.
Palm oil is also the primary vegetable oil import into Poland, with Malaysia being the leading exporter. While the bulk of the palm oil imports appear in Oil World statistics as originating in the EU-28 (mainly Germany and the Netherlands), Malaysia is the only producer that also plays a role as direct exporter to Poland (Figure 2). However, recorded quantities in 2016 were only a third of the 2015 figures.
MPOB numbers show a decline in trade activity as well (Figure 3). However, the much lower 2016 total is due to the disappearance of the ‘other products’ category in 2016. The rest grew year-on-year.
Poland´s generally good infrastructure makes it a preferred place for international trade. In particular, the large and modern port of Gdansk on the Baltic Sea is in a position to play a vital role. Strategically located at the centre of Europe, this port lends itself to being the gateway for palm oil imports – not only to Eastern and Central Europe, but to the EU as well. Its neighbour to the west is Germany, the European economic powerhouse. The distance between the two capitals – Berlin and Warsaw – is a mere 550km.
Poland is a potentially lucrative market for Malaysian palm oil, although the commodity faces stiff competition from rapeseed oil and sunflower oil. Other hurdles to overcome are the poor awareness of the Polish consumer regarding the benefits of palm oil; as well as apprehensions connected to environmental issues. Malaysian companies stand to benefit by stressing the positive aspects of palm oil with regard to both nutrition and sustainability.
Poland’s success in its journey towards joining the ranks of modern, market-based economies over the past 25 years has been remarkable. Much has been achieved, and there are no current signs of the country slipping back into economic turmoil.
The incomes and appetites of citizens are growing. The country’s geopolitical positioning between the East and West is ideal. The image of Malaysia is positive, and the relationship between the two governments is good. Opportunities therefore abound for palm oil to reinforce itself as a serious rival to the conventional oils and fats consumed in Poland.
Norway, with a population of about 5.2 million, is bordered to the east by Sweden and on the northeast by Finland and Russia. The Human Development Index of the United Nations Development Programme has classified Norway for many years as the world’s most advanced country. According to the Democracy Index of the British magazine The Economist, it is also the most democratic state.
Norway enjoys a prosperous mixed economy with a vibrant private sector, a large state sector, and an extensive social safety net. Through comprehensive regulation and large-scale public enterprises, the government controls key areas, like the petroleum industry.
Norway is the world’s third-largest exporter of natural gas and the seventh-largest exporter of oil. The latter commodity provides the lion´s share of export revenue and represents about 30% of government revenue. The country is also richly endowed with natural resources such as hydropower, fish, forests and minerals.
After solid GDP growth from 2004-07, the economy slowed in 2008, and contracted in 2009, before returning to positive growth from 2010-14. The government budget remains in surplus.
However, lower oil prices in 2015 may cause the economy to contract as higher production costs in the North Sea deter investment. In anticipation of an eventual decline in oil and gas production, Norway saves state revenue from the petroleum sector in the world’s largest sovereign wealth fund – the Government Pension Fund Global. In early 2017, it was valued at over US$900 billion.
The fund is managed by Norges Bank Investment Management. In its 2016 Fund Report, published in March 2017, it states: ‘The production of palm oil in Malaysia and Indonesia is widely recognised as a major contributor to tropical deforestation. Our initial analysis of the sector resulted in divestments from a total of 29 palm oil companies between 2012 and 2015. The divested companies were considered to produce palm oil unsustainably.’
In 2016, the decision to stay divested was confirmed. The move may have an adverse impact on use of conventionally produced palm oil.
As a country surrounded by the North Sea, Norway differs from other European countries through the dominant role fish oil plays in the economy. Its production volume is second to soybean oil. Moreover, after rapeseed oil, fish oil is the second-biggest import.
However, the real news regarding the domestic oils and fats sector is the huge drop in palm oil imports. In 2016, the import volume was just a fraction of the 2009 level. This development must be interpreted as a manifestation of the green conscience of Norwegians, who believe the claim that palm oil is ‘bad for the natural environment’. Over the same period, rapeseed imports more than tripled (Figure 1).
As a result, the use of palm oil has all but disappeared in Norway.
Norwegians are proud of their country´s pristine environment, in particular the fjords and waterfalls. They have a high regard for preserving the global environment as well. The observation that Norway is even ‘greener’ than the Netherlands or France has been borne out in the active anti-palm oil stance that has been adopted.
For example, Clarion Hotels has declared itself “100% palm oil-free”. It is part of the Nordic Choice Hotels Group headquartered in Oslo and operating more than 180 hotels across Scandinavia and the Baltics.
Under the headline ‘Bye, bye palm oil!’ an article on its website quotes Katalin Paldeak, the Group Director of Clarion Hotels in the North, as saying: “… since the 1st of May 2013, all 23 Clarion Hotels in the Nordic region are palm oil-free with regard to restaurant items and products for sale. The reason for this is the increasingly widespread devastation and destruction of the rainforest as [sic] the production of palm oil causes.
“We cannot in good conscience offer our guests food that is made from products that contribute to the devastation of rainforests and people being driven from their homes. Until we can ensure that [what] the palm oil suppliers are seeking to provide us with is being produced in using conscientious and responsible methods, we will pull the emergency brake and remove it from our restaurants, from our sales and from our mini-bars.”
Likewise, the industry news service Food Navigator reported on June 15, 2016, that Norway has become the latest country to sign the Amsterdam Declaration of December 2015. Under this, several European countries have pledged to switch to 100% sustainable palm oil by 2020.
The preamble of the Declaration states in part: ‘Europe is the second-largest global import market for palm oil and home to some of the world’s biggest brands and companies. Europe can be an important ‘game changer’ when it comes to a sustainable palm oil supply chain for the world.’
All this goes far beyond symbolism and must be taken seriously, as the divestments of the Government Pension Fund Global make painfully clear. The Fund has already ended its engagement at Korean conglomerate Posco, owner of Daewoo International, on the basis that Daewoo owns an Indonesian company that is ‘cutting down tropical forests’ to plant oil palm.
If Norway provides any indication, the time when consumers and corporations across Europe start boycotting conventionally produced palm oil on a massive scale may not be far away. The palm oil industry should take heed of this.
It is well known that palm oil has faced significant problems in Europe, including adverse public opinion influenced by negative labelling of food products. What is less well known is that such influences are creeping into Malaysian commercial life as well, with local buyers now seeing the undermining of palm oil on supermarket shelves.
It is the responsibility of all of us to hold to account those companies that challenge the national interest in this way and deliberately bring down palm oil, which is a key pillar of the Malaysian economy.
We must remember why this is necessary. Palm oil is one of Malaysia’s great national successes – and our largest single export. Millions of our citizens rely on this miracle crop for their income and livelihood, and to provide a better life for their children. Our rural areas have been transformed beyond recognition into oases of prosperity and productivity by the palm oil sector.
For it to continue to succeed, it’s important that future generations of Malaysians do not fall prey to the negativity and fake news that has been directed at palm oil elsewhere. An ongoing example is the proliferation of the ‘No Palm Oil’ advertisement or label on food products – often accompanied, for example, by the deliberate promotion of competing oils. Such denigration has had a damaging effect on the sale and use of palm oil in Europe – and this could also happen in Malaysia unless we are vigilant and act quickly.
First, we must focus on education. Younger Malaysians should be provided with data and facts about the benefits of palm oil, to ensure that they have the knowledge and understanding to reject the messages of naysayers. This is the responsibility of all of us – government, industry, media, parents, and so on.
By working together and sharing the burden of educating our young, we can ensure that respect and reverence for the benefits of palm oil are passed on down the generations. For example, I recently met with a group of researchers from the US who are developing a drug to fight Alzheimer’s disease; the main component of the drug is palm kernel oil.
Oils and fats consumption in China has kept pace with the country’s economic development, which was robust until recent years. However, the GDP growth rate fell last year to 6.7%, the lowest since the country initiated its open-door policy in the 1980s (Figure 1).
Industrial production slowed in the food and non-food sectors. In tandem with this, demand growth for oils and fats declined by 340,000 tonnes compared to 2015 (Table 1), to the lowest level since 1993.
China’s GDP growth also has a strong correlation with per capita consumption of oils and fats (Figure 2). Population growth is projected at 0.6% from 2016-20, but there will be an increase in the number of people who are ageing. For the current year, the GDP is forecast at 6.5-6.7%. This may be translated to growth of less than 0.5% in terms of per capita oils and fats consumption.
The per capita consumption growth rate was 0.4% over the past two years. Using this as a benchmark, an additional 0.1kg can be expected this year, to stand at 26.7kg. Multiplied by the projected population increase of 0.6%, overall demand for oils and fats is therefore likely to go up by 300,000 tonnes in the current year.
With declining or stagnating domestic production of oilseeds and oils, China has increasingly relied on imports to meet the shortfall. Self-sufficiency in oils and fats has decreased from 50.3% to 33.1% over the past decade. The share of oils from imported oilseeds has more than doubled – from 19.6% to 43.6% (Figure 2). The share of imported oils has decreased from 30.1% to 23.3% because greater demand for oil meal for animal feed has driven local crushing activities.
Over the last five years, China’s imports of oils and fats have fallen from 11.1 million tonnes to 8.1 million tonnes, due mainly to smaller imports of soybean oil and, to some extent, rapeseed oil (Table 2).
Lower volumes of all three major vegetable oils were recorded last year (Table 3).The steep decline in palm oil imports was attributed to a drastic drop in global output.
An expanded biscuit production facility has been commissioned in Tema, Ghana. Jointly owned by Singapore-based Olam International (75%) and Sanyo Foods of Japan (25%), it is Ghana’s leading biscuit factory.
Nutrifoods Ghana Ltd invested US$8.3 million in expansion work, upgrading the capacity of the facility with state-of-the-art equipment and technology, and a third production line. It manufactures products for both the domestic and West African market.
The expansion has strengthened Nutrifoods’ position as Ghana’s top biscuit producer, with a market share of 30% currently. It has also created 150 new jobs – raising the workforce to 600 employees, of whom 99% are Ghanaians.
Ghana’s Minister for Trade and Industry Mr Alan K Kyeremanten and Singapore’s Minister of State for Trade and Industry Dr Koh Poh Koon attended the inauguration ceremony held at the factory on March 31.
Dr Koh expressed the hope that more Singapore companies can participate actively in Ghana’s growth. He noted that these companies are not just investing in the physical infrastructure but also in building human resource capabilities, with companies such as Olam sponsoring educational programmes.
The European Union (EU) is among major players in the global oils and fats market. The upward trend in the region’s consumption of oils and fats has been significant in recent years, due to expansion of its biofuels sector, as well as demand from the food and non-food sectors.Read more »
The current steep CPO price trading above RM3,000 per tonne and the lower palm oil inventory are positive profit indicators for Malaysian oil palm plantation companies moving into the current year.
But analysts say that planters’ profit margins could be undermined by escalating production costs, particularly in fertilisers, due to the weakening Ringgit against the US Dollar, the full-year impact of minimum wage implementation and uncertain export markets outlook.
This year, established planters could stand to gain from the CPO average selling price of between RM2,500 and RM2,800 per tonne – albeit almost the same level as last year, according to analysts.
This is on the back of their efficient average cost of production between RM1,400-1,500 per tonne compared with less-efficient or new planters, whose cost of production could be as high as RM1,800 per tonne.
Among the plantation companies, a mere RM100 increase in the CPO price per tonne could translate into additional “hefty” contributions to group profits.
According to Maybank Kim Eng’s latest regional plantations report, companies that are most sensitive and leveraged to the CPO price movement with relatively higher cost of production per tonne include TH Plantations Bhd, Felda Global Ventures Holdings Bhd (FGV) and Boustead Plantations Bhd.
For every RM100 per tonne change in CPO prices, TH Plantations’ earnings sensitivity is the highest at about 28.8% followed by FGV at 28.6%, Boustead Plantations (21.8%) and Sarawak Oil Palms Bhd (14.2%), says the research unit.
Maybank Kim Eng points out that the earnings sensitivity to CPO price movement is mostly lower among big planters with diversified upstream and downstream businesses. IOI Corp Bhd earnings sensitivity is at 5.8%, Kuala Lumpur Kepong Bhd at 6.9%, Sime Darby Bhd at 7.4% and Ta Ann Holdings Bhd at 8.6%.
Sime Darby had said that every RM100 per tonne change in the CPO price could result in an “addition or reduction of about RM250 million” to its group profit while for FGV, it could result in an addition or reduction of about RM100 million.
Maybank Kim Eng also envisaged that large-cap plantations would continue to benefit from the changing investment landscape in Malaysia, where there has been a growing emphasis on Syariah-compliant stocks.
“And the Employees Provident Fund has joined the bandwagon as it launched a RM100 billion Syariah retirement savings fund for contributors effective this month as a start,” adds the research unit.