CLOSE to 90 per cent of the world’s palm oil comes from Malaysia and Indonesia. Together, they dominate the global trade in palm oil.
From nowhere in the 1960s, palm oil now leads the world trade, accounting for more than 30 per cent of the trade in global oils and fats, displacing a one-time favourite, soybean oil.
Palm oil’s aggressive takeover of the world trade has rattled competing oils, especially soybean oil.
Indonesia leads the world production with Malaysia at a close second. The only other global palm oil player is Colombia, which stands at a distant third in the ranking. The other smaller players include Thailand.
Competing oils have always been unhappy with palm oil. Much of the resentment is attributed to the fact that palm oil is by nature difficult to compete with.
Its yield, at up to 10 times more than the other oils, makes palm oil hard to match in terms of productivity. This has frustrated the producers of the other oils.
Despite attempts by soybean to increase yields, for example through the introduction of genetically modified soybean, it has not been able to come close to the palm oil yield.
High yield is not the only reason why competing oils have failed to unseat palm oil. Its superior performance in literally all the product applications, especially frying, is another factor why palm oil is preferred by users.
In earlier days, enemies of palm oil tried using health to discredit palm oil. They were unsuccessful because the science of nutrition was able to dispute their claims. Instead, the findings on the dangers of trans fats turn the table around in favour of palm oil.
Remnants of such attack on palm oil continue to linger where some companies still try to discredit palm oil through the use of the “No Palm Oil” label on their products.
The sad part is that some of these products have already made their way to Malaysia.
Nowadays, the negative health claims are very much contained. The enemies of palm oil are turning to another issue to put palm oil in a bad light.
Consumers of palm oil have been warned of palm oil’s negative environmental impact. Palm oil has recently been painted as a bad boy in the global fight to mitigate global warming.
The focus by enemies of palm oil is on deforestation. They have resorted to deploying environmental groups to do their dirty campaigning. They have made significant headway in denying palm oil access to some export markets.
The European Union recently introduced new import restrictions on palm biodiesel on the basis of deforestation. Though the data provided by Malaysia say otherwise, the EU lawmakers have been persuaded to act against palm oil.
There is no denying that such acts to create non-tariff barriers against palm oil have, to some extent, dented the global demand for palm oil. This, coupled with the rise in palm oil stocks, has brought down the world price of palm oil to historically low levels.
Palm oil smallholders suffer the most since they depend on palm oil pricing. Other players who have investments in palm oil downstream are less affected. It makes matters worse since palm oil smallholders are in the marginal economic groups.
If the prices stay low for long, they may be pushed back into the poverty group. I wonder whether the EU lawmakers realise this.
Malaysia and Indonesia are badly affected. They have announced initiatives to work together. The latest one is the establishment of the Council of Palm Oil Producing Countries. But many say these are only lip service.
Many have expressed doubts whether the two countries are serious about working together. The fact that they continue to undercut each other is obvious to many. They have also not taken a common stand on the issues linked to sustainability. There is a lot at stake for both countries if the attack on palm oil continues.