PALM OIL

The oil palm or Elaeis guineensis originates from Africa, probably along the Gulf of Guinea where natural and spontaneous palm groves can still be found. The Elaeis includes two main species: the most widespread being Elaeis guineensis, and the Elaeis oleifera (Noli) which is found in South America in spontaneous plantations.
The oil palm starts producing at between 2 and 5 years depending on ecological conditions and reaches maturity 4 to 6 years later. Production can reach 40 tonnes of bunches per hectare and per year in optimum conditions, which corresponds to 9 tonnes of palm oil. There are several harvests per year.
Pulp is extracted from the oil palm to give palm oil and the kernel is extracted to give palm kernel oil. Palm oil must be produced as close as possible to the harvest sites.
Palm oil and its derivatives are primarily used (80%) for human consumption (margarine, vegetable fat, etc.), then in oleochemistry (soaps, detergents, etc.) and increasingly for biofuels.
The oil by-products – kernel shells, pulp fibres, liquid and solid effluents, oilcakes - are used as bioenergy, fertiliser and feed for livestock.
Produced solely in developing countries, palm oil is the leading vegetable oil in terms of production and trade.
Palm oil offers many advantages over other competing vegetable oils: its yield (on average an oil palm produces 4t/ha of oil against less than 0.8t/ha for competing oils such as soybean, sunflower or rapeseed), its low production costs (requiring less input), using proportionately less land (six times less acreage than soya, for example). Moreover, it is the cheapest oil in the world and its production is not very mechanised and therefore labour-intensive (30 times more jobs generated by unit of surface than other large agricultural holdings, like soya).

A market dominated by Asia

Both as regards supply and demand, the palm oil market is dominated by Asia. Europe is the only exception, and remains a net importer of vegetable oilseeds.

Production

Worldwide production of palm oil should reach 48.98 million tonnes (Mt) in 2011, according to Oil and World, covering an area of 13.41 million hectares. Indonesia and Malaysia, with 23.9 Mt and 18 Mt respectively, contribute to 85% of worldwide palm oil production. From several million tonnes in the 1960s, palm oil production has grown exponentially, doubling every 10 years. Malaysia was at the forefront of this development, followed 15 years later by Indonesia. Both countries pursued a proactive policy based on industrial plantations. In the years to come they should continue to be the main producers. However, the expansion of production in Malaysia is likely to be held up the availability of land, whilst Indonesia is looking to produce 40 Mt by 2020, of which 50% will be set aside for biofuel. 
Alongside the two giants of South-East Asia, about forty developing countries produce palm oil. Amongst the most important are Nigeria, Papua New Guinea, Ivory Coast, Colombia, Thailand and Ecuador.
At the same time that South East Asia grew in importance, Africa became a marginal player on the global market, both in terms of production and exports.  After having supplied Europe for a long time, the continent became a net importer of certain oils. Today Africa is faced with the challenge of ensuring its own self-sufficiency in palm oil.
In the medium term, Africa, much like Latin America, must become stronger both in terms of supplying its own market as for exporting. Over the last few years, several African countries have attracted foreign investors, especially Asian: the Malaysian Sime Darby and the Singaporean Golden Agri-Resources (GAR) in Liberia, the Singaporean Olam in Gabon, the Singaporean Wilmar in the Ivory Coast, Ghana, Nigeria and Uganda, etc. but also the Belgian SIA in Nigeria, Ghana and Gabon, or the German-Italian FR-EL Green in the Congo and Nigeria.

Consumption

Between 1970 and 2010, demand for palm oil grew by 2.5 Mt per year. This trend should continue in the years to come, both to satisfy food requirements and for biofuels.
According to the FAO and OECD 2010/2019 agricultural forecasts, global consumption of vegetable oil will increase by nearly 30% between 2010 and 2019. Growth will come mainly from developing countries, in view of the population growth and rise in average income. As such, it will increase by 44% in non-OECD countries. Compared with OECD countries, the consumption of oil per capita in developing countries is four times less (for example 59.3 kilos per capita per year in the EU27 and 13.4 kilos in India or 12.5 kilos in Nigeria).
Demand will also be more and more dictated by biofuel requirements and will closely depend on governmental decisions, incentives, oil prices and on second generation technologies. The European Union (EU) adopted the Directive of 23 April 2009 requiring member states to produce 20% of their energy from renewable sources in 2020, with the specific objective of 10% for the transport sector.  Thus, in its latest forecasts for the European biofuel market (2009/20), the EU will almost double its consumption of biodiesel (11.1 billion litres in 2010 to 20.9 billion in 2020), with biodiesel then representing 7.9% of energy. Whilst today biodiesel is primarily produced from rapeseed or sunflower oil, palm oil will be in demand.

Trade

Palm oil is the most traded oil in the world: 90% of global production is traded. Although in terms of production it is almost level pegging with soybean, its trade is almost three times higher. Trade increased from 3.78 million tonnes (Mt) in 1980 to 36.5 Mt in 2010. Malaysia and Indonesia represented more than 90% of 2010 exports. Far, far behind in third place lies Papua New Guinea with 500 000 tonnes exported in 2010.
While for a long time Europe was the world’s main importer of palm oil, it has been supplanted by India and is hotly pursued by China. In 2010 India imported 6.49 Mt (17.90% of world imports), the EU27 imported 5.857 Mt (15.77%) and China 5.804 Mt (15.63%). Demand from China and India can vary greatly from one year to the next depending on its stocks and national production.

                                        World exports of palm oil en 2009-2010 ( thousands tons)

Source: Oil World

World prices

The price trend for palm oil is favourable. From the middle of the 2000s, prices increased regularly, reaching a peak in February 2008, like the majority of agricultural raw materials, at more than $ 1 300 per tonne. After falling sharply at the end of 2008 to below $ 500 per tonne, palm oil prices regained the high levels of 2008 at nearly $ 1 300 per tonne at the end of December. Since the beginning of 2011, palm oil has lost 15% of its value.
The price of raw palm oil is directly linked to that of soybean oil, and especially to that of soybean meal used in animal feed. The increased use of vegetable oils for energy purposes causes sustained pressure on price and increases its volatility particularly due to the instability of oil prices.

Changes in the price of palm oil and forecast to 2020 ( $ / mt)

Certified sustainable palm oil

Today it is recognised that the development of palm oil at the industrial plantation level (between 2 500 and 10 000 hectares) has caused much environmental damage: destruction of forests, loss of biodiversity, release of greenhouse gases, soil impoverishment. Social issues are also added to environmental issues (displacement of communities, working conditions, etc.).
Indonesia, which dethroned Malaysia to become the leading world producer, attracts a lot of critics. Actions and campaigns of Non-Governmental Organisations (NGO), such as Greenpeace or the WWF, have led many big names in the food and distribution industry to limit or even stop using palm oil in their products. Commercial procurement contracts have also been denounced. Lenders are asking questions. The SFI, the subsidiary of the World Bank for the sector, has suspended its funding in palm oil projects to study the issue in detail and establish a new framework for cooperation.
Governments and companies will be increasingly encouraged to take sustainable crop development into consideration and to adopt the criteria of the Roundtable on Sustainable Palm Oil (RSPO). Created in 2004 in Zurich at the instigation of the Swiss company, Migros, today it brings together nearly 500 member or associated organisations with a majority of businesses (producers, crushers, agro-food industries, wholesalers), distributors, bankers and twenty or so NGOs. In 2005, the RSPO selected 8 principles and 32 criteria to certify the oil as sustainable. The first boatload of RSPO certified palm oil arrived in Rotterdam in November 2008. Today production is at more than 4 million tonnes, i.e. around 9% of world palm oil production. The main producers of RSPO palm oil are Malaysia (54%), Indonesia (35%), then Papua New Guinea (10%) and Colombia (1%). In March 2011, Ghana was the first African country to pass a stage in the certification process with the approval of “The national interpretation of principles and criteria for sustainable oil in Ghana”, in other words national criteria adapted to the local context.
Nevertheless, sales of certified oil, while increasing, are today less than the supply available.  In 2010, 56% of the volume produced was sold. What’s more, the big import markets, China and India, still do not seem to be concerned with the consumption of sustainable oil.
 

References :

- Oil World : www.oilword.biz
- Cyclope  2011, huile de palme, Tancrède Voituriez
- OCDE_FAC Agricultural Outlook 2010/2019 : http://www.agri-outlook.org/
- FAO : http://www.fao.org/es/esc/common/ecg/122/fr/full_paper_English.pdf
- CTB Trade for Development, l’huile de palme dans les échanges mondiaux : http://www.befair.be/fr/fiches/news/l-huile-de-palme.cfm
- IFC in the Palm Oil : http://www.ifc.org/ifcext/agribusiness.nsf/content/PalmOil
- Cirad : www.cirad.fr/publications-ressources/science-pour-tous/dossiers/palmier-a-huile/les-enjeux/l-huile-de-palme

Sustainable palm oil

- RSPO : www.rspo.org
- GreenPalm : http://www.greenpalm.org/fr/accueil
- OCL (Oléagineux Corps Gras Lipide), volume 17 nov-déc 2010, Dossier Palmier à huile et développement durable : http://www.revue-ocl.fr/archives/sommaire.phtml?cle_parution=3447

NGO

- WWF Palm Oil : http :wwf.panda.org/what_we_do/footprint/agriculture/palm_oil/
- Green Peace : http://www.greenpeace.org/

Companies :

 
- SIAT Belgique  http://www.siat.be/
- Olam, projet Gabon : http://www.olamonline.com/newsroom_details/view/0/4cde0b2b-5498-41e9-b280-15047c3410df
- Sime Darby : http://www.simedarby.com/homepage.aspx
- Sinamas : http://www.sinarmas.com/en/