Home Uncategorized Rising demand for palm oil is again threatening tropical forests

Rising demand for palm oil is again threatening tropical forests

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Pressure from businesses and environmental groups has slowed the destruction of rainforests for palm oil production in Indonesia, the largest country in Southeast Asia.

Growing demand for the commodity has tested these efforts, but so far further deforestation has been kept under control.

Palm oil prices have tripled in the last two years to record levels and are likely to remain high. Along with other more expensive commodities, palm oil supports global inflation.

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“It looks like the link between prices and expansion has been broken,” said David Gavo, a scientist who heads TheTreeMap, a French-based forest monitoring organization.

The group tracked the historical expansion of palm oil plantations using satellite data. When prices rose in 2020 and 2021, Mr Gavo expected deforestation to increase as producers tried to profit. But, contrary to historical trends, growth has continued to slow, he said. “As long as it lasts,” he said. “It seems that price pressure is not yet affecting the rate of deforestation, so that’s really good news.”

One of the results of many years of slowdown is the lack of rich reserves of the world’s most popular vegetable oil for compensate for the oil shortage due because of the war in Ukraine. Big buyers like it

Unilever PLC

and

Colgate-Palmolive.

burdened by high prices.

Palm oil production operations in Indonesia are more tightly regulated and controlled by environmental groups.


Photo:

WILLY KURNIAWAN / REUTERS

In the case of palm oil, supply restrictions have a big side: the preservation of tropical forests of Southeast Asia filled with orangutans. For three decades, forest areas have been burned to ensure demand for palm oil, which is used to add foam to shampoo, even out the texture of ice cream and keep candy from melting. According to government statistics, this culture was so popular that by 2019 it covered almost 10% of Indonesia. For at least ten years, this rapid growth has kept prices under control.

The strongest deforestation occurred when prices were high. In 2012, when prices reached about $ 1,000 per tonne, just over 2,000 square miles of Indonesian land – about seven times the size of New York – were converted into industrial palm oil plantations, according to an article published by Mr. Gavo and colleagues in PLOS ONE magazine in March. By 2018, prices had dropped to about $ 600, and annual plantation growth had dropped to about two New York cities.

But when prices jumped to $ 1,100 in 2021, plantation expansion declined to about the equivalent of just one New York City. By April, they averaged $ 1,700 and faced additional pressure in recent weeks Indonesia has announced a ban for the export of certain types of refined palm oil in order to reduce the price of oil at home.

The slowdown in Indonesia is producing about 60% of the world’s palm oil, has also been seen in Malaysia and other palm oil-producing countries. According to the Council of Palm Oil Producers, palm oil production in these countries increased by 18% from 2015 to 2018, but by 4% from 2018 to 2021.

Trucks loaded with palm oil, bunches of fresh fruit stand in line near a palm oil plant in Indonesia.


Photo:

WILLY KURNIAWAN / REUTERS

The shift is due to tighter government regulations, high-quality satellite imagery and the work of environmental groups who have pressured businesses to stop buying palm oil grown in newly felled forests. Groups could view satellite imagery and tell businesses which companies need to be kicked out of their supply chains. According to environmentalists, the loss of access to buyers has reduced incentives for growers to burn the jungle, which is good for the forest.

The situation is creating problems for consumer goods companies, which until recently could count on increasing amounts of palm oil to keep prices under control. Unilever, which is buying palm oil for its skin cleansers, said declining expansion could fix rising palm oil prices in the coming years, boosting its business costs.

“In fact, there has been no increase in the world’s sown area under palm oil,” said Graham Pitketley, the company’s chief financial officer, in July. In an email, a company spokeswoman said Unilever was exploring alternatives to palm oil “as a good search practice to ensure a sustainable and flexible supply chain”, although she said it would always be a significant buyer of palm oil.

Meanwhile, alternatives are being sought.

Calyxt Inc.

, a biotech company listed on the Nasdaq, is working with an Asian customer to develop a soybean gene crop that produces fatty acids with palm oil properties. “You can grow it in a much more sustainable way than some of the palm products traditionally used in the past,” said Travis Frey, the company’s chief technology officer.

Indonesian police are trying to put out the 2019 forest fire, some of which were illegally kindled for deforestation.


Photo:

Afrianto Silalahi / Zuma Press

Pressure on palm oil producers intensified in 2013, when fires clearing tropical forests enveloped Southeast Asia in a thick strip. Major palm oil traders have said they will stop buying from suppliers who have destroyed the rainforest, amid growing concerns about the contribution of deforestation to climate change. By 2020, 83% of palm oil processing facilities in Indonesia and Malaysia will not buy palm oil related to deforestation, according to Chain Reaction Research, a group of sustainable development risk analysts in Washington, DC.

Among the largest targets was GAMA, an Indonesian group of palm oil plantations with broad ambitions. Evidence that this is a clearing of tropical forests has prompted traders to sever ties.

“It was a bit like Russia now – suspended trade with all of the supply chains,” said Eric Wacker, a Dutch environmental consultant who works for the company now known as KPN Plantations.

Money is the commentary point in climate change talks around the world. As economists warn that limiting global warming to 1.5 degrees Celsius would cost far more trillions than expected, the WSJ is considering how the money can be spent and who will pay. Illustration: Preston Jesse / WSJ

The company now controls 500,000 acres – much less than the 900,000 acres it said it was trying to acquire its affiliates in 2016, before the trade was suspended. KPN says it will not explore new lands. Merchants are buying from him again.

The high price of palm oil is not allowed, although the benefits may be temporary. One is better quality chocolate. In the April call about income,

Barry Callebaut AG,

Swiss chocolate maker said higher prices for vegetable oil mean that customers who normally buy compounds – usually made from cocoa powder and vegetable fats such as palm oil – have instead sought to buy chocolate made from more expensive cocoa butter.

“Prices are so close now that we see customers interested in saying,‘ Hey, now it doesn’t matter much whether we could also buy chocolate, ’” said Peter Boone, the company’s chief executive. on the April earnings call.

Write to John Emont at jonathan.emont@wsj.com

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