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Palm oil industry moves into the Amazon rainforest

Palm oil industry moves into the Amazon rainforest

Amazon palm oil:
Palm oil industry moves into the Amazon rainforest
Rhett Butler,
July 9, 2008

Malaysia’s Land Development Authority FELDA has announced plans to immediately establish 100,000 hectares (250,000) of oil palm plantations in the Brazilian Amazon.

The agency will partner with Braspalma, a local company, to form Felda Global Ventures Brazil Sdn Bhd. FELDA will have a 70 percent stake in the venture.

“As a start, 20,000ha in Tefe will be opened for oil palm planting. After that, between 3,000ha and 5,000ha will be opened yearly,” said Deputy Prime Minister Datuk Seri Najib Razak. “Felda wants to emulate Petronas as a global player,” he added, referring to Malaysia’s national oil company.

Wednesday’s announcement had been expected. Last month Najib said Malaysia would seek to expand its booming palm oil industry overseas. The country is facing land constraints at home.

Accordingly, Felda chairman Tan Sri Mohd Yusof Noor said the agency had been offered 105,000ha in Papua New Guinea, 45,000ha in Aceh on the Indonesian island of Sumatra, and 20,000ha in Kalimantan on the island of Borneo.

Palm oil and the Amazon

Agricultural potential for soy, palm, and sugar cane in the Brazilian Amazon (top). Carbon storage on forest lands suitable for various crops (bottom). Derived from the Woods Hole Research Institute’s Readiness For REDD: A Preliminary Global Assessment Of Tropical Forested Land Suitability For Agriculture.

The establishment of oil palm plantations in the Amazon will be seen by environmentalists as a new threat to the world’s largest rainforest. Presently little commercial palm oil is produced in the region due partly to the traditional nature of Brazilian farmers and pest concerns, but the entrance of industry-leading Malaysian producers could serve as a model and quickly increase palm oil’s visibility as a viable form of land use. As the world’s highest yielding mass market oilseed, palm oil will likely offer better financial returns than cattle ranching and mechanized soy farms, the dominant agricultural activities in Brazilian Amazon, and will employ larger numbers of people (oil palm plantations may employ roughly one worker per 8-10 ha, whereas a single cowboy can handle 4,000-5,000 head of cattle grazing hundreds of ha of land).

The potential for palm oil plantations in the Brazilian Amazon is vast: the Woods Hole Research Center estimates that 2.283 million square kilometers (881,000 sq miles) of forest land in the region is suitable for oil palm, an area far greater in extent than that which could be converted for soy (390,000 sq km) or sugar cane (1.988 million sq km). Woods Hole calculates this area of forest locks up some 42.5 billion tons (gigatons) of carbon in above-ground biomass, or roughly six times 2006 global emissions. Converting this area for palm would release nearly 60 percent of this carbon (oil palm plantations in SE Asia store about 75 tons of carbon per hectare).

Oil palm expansion in the Amazon will likely be facilitated by infrastructure projects currently underway in these region, including road-building, port expansion, and new hydroelectric projects. Oil palm producers may also benefit from a “logging subsidy” whereby timber harvested from a tract of land helps offset the cost of establishing a plantation. Before the recent run-up in palm oil prices, logging had been a key element to the profitability of oil palm plantations in Southeast Asia.

Palm oil economics

Market prices for crude and vegetable oils from January 2003 through December 2007. Data derived from FAOstat and the World Bank.

The tripling of the price of palm oil since early 2005 has been linked to rising demand for crude oil, which has effectively driven up the price of all other vegetable oils. Producers in the U.S. and Europe have been diverting vegetable oils (canola/rapeseed and soy) and other agricultural feedstocks (especially corn) to the production of biofuels, buoying the high price for grains and oilseeds worldwide. While palm oil holds great potential as a feedstock for biodiesel production, prices are presently too high to make the process viable — roughly 80 percent of the cost of biodiesel is the price of its feedstock. As such most palm oil is currently used in food products, cosmetics, and for industrial purposes 𔃐 less than one percent of Malaysia’s 2007 production was used for biodiesel. Still the industry has high hopes to eventually use more palm oil as a biodiesel feedstock.

Palm oil and biodiversity

Oil palm plantations support significantly lower levels of biodiversity than even logged rainforests. Research by Lian Pin Koh and David Wilcove found a 77 percent decline in forest bird species and an 83 percent loss of butterfly species upon the conversion of old-growth forest to oil palm plantations. By comparison, secondary forest 30 years after logging retained roughly 80 percent of the original forest species. Oil palm plantations also store considerably less carbon than primary forests.

Reducing the impact of oil palm and other forms of agriculture in the Amazon

Oil palm plantations and heavily logged forest near Lahad Datu, Malaysia. Photo by Rhett A. Butler

It may seem inevitable that large areas of Amazon forest will be converted for agriculture, but there are ways to mitigate the most serious environmental impacts of the transition. Developers can be encouraged to adopt cultivation methods promoted by the Roundtable on Sustainable Palm Oil — an industry-led initiative to improve its environmental performance. These include using natural pests and composting in place of synthetic pesticides and fertilizers whenever possible, implementing no burn policies, and creating catchment ponds to prevent palm oil mill effluent (POME) from entering waterways where it would damage aquatic habitats.

Better enforcement of existing Brazilian environmental laws — including requirements to leave a portion of one’s land forested and riparian buffer zones — coupled with Brazil’s real-time satellite monitoring of forest cover could further reduce the worst impacts of extensive palm oil cultivation in the Amazon.

Because oil palm plantations offer higher yields on a per hectare basis than either soy or beef production, the establishment of regulations that restrict new development to already cleared lands or secondary forests could result in a net economic gain for the region without the need to clear more forest. In a sense, if the highly productive oil palm plantations replace low-intensity cattle pasture already established in the region (without displacing ranchers or farmers into forest areas), the Amazon may well be richer economically and biologically. An important component to this would be the maintenance riparian zones and migration corridors along with the protection of critical habitats.

Forest cover versus palm oil production in Indonesia. In 2007 Indonesia overtook Malaysia as the world’s largest producer of palm oil. Together the two countries account for more than 85 percent of global production.

Finally, ecosystem services payments, like those employed in a pilot program in the state of Amazonas, whereby rural communities are paid for leaving forests standing, could offer economic alternatives to forest clearing. If REDD (Reducing Emissions from Deforestation and Degradation) and other payment schemes become a reality, they could compete directly with other forms of land use.

More data on palm oil production and use
(units = metric tons, 2008 market year)

Palm Oil Food Use – Domestic Consumption
1 India 4715
2 Indonesia 4231
3 China 4100
4 EU-27 2715
5 Pakistan 2360
6 “Other” 1170
7 Malaysia 950
8 Bangladesh 945
9 United States 863
10 Nigeria 800
11 Egypt 740
12 Iran 550
13 Japan 512
14 Russian Federation 490
15 Thailand 480
16 Vietnam 470
17 Colombia 410
18 Turkey 410
19 Burma, Union of 375
20 South Africa 348

Palm Oil Imports
1 China 6200
2 India 4900
3 EU-27 4050
4 Pakistan 2460
5 “Other” 1170
6 Bangladesh 1070
7 United States 960
8 Egypt 925
9 Russian Federation 620
10 Iran 550
11 Japan 550
12 Turkey 500
13 Vietnam 480
14 Jordan 460
15 United Arab Emirates 400
16 Burma, Union of 375
17 Kenya 350
18 South Africa 350
19 Mexico 335
20 Iraq 330

Palm Oil Exports
1 Indonesia 14800
2 Malaysia 13840
3 Thailand 500
4 Papua New Guinea 405
5 Jordan 300
6 Colombia 295
7 United Arab Emirates 220
8 Singapore 200
9 EU-27 140
10 Ecuador 140
11 Honduras 122
12 Sri Lanka 115
13 Costa Rica 110
14 Guatemala 50
15 Kenya 30
16 Benin 27
17 Cote d’Ivoire 15
18 United States 15
19 Brazil 10
20 Yemen 10

Palm Oil Industrial – Domestic Consumption
1 Malaysia 2745
2 China 2100
3 EU-27 925
4 Indonesia 720
5 Mexico 362
6 Thailand 350
7 India 210
8 Egypt 185
9 Brazil 180
10 Nigeria 177
11 Bangladesh 140
12 Russian Federation 130
13 Colombia 115
14 Cote d’Ivoire 110
15 United States 95
16 Turkey 90
17 Congo, Democratic Rep 73
18 Pakistan 70
19 Costa Rica 55
20 United Arab Emirates 40

Palm Oil Production
1 Indonesia 19700
2 Malaysia 17400
3 Thailand 1400
4 Colombia 830
5 Nigeria 820
6 Papua New Guinea 425
7 Ecuador 340
8 Cote d’Ivoire 320
9 Costa Rica 285
10 Congo, Democratic Rep 175
11 Cameroon 165
12 Honduras 165
13 Guatemala 155
14 Ghana 120
15 Brazil 110
16 Philippines 70
17 Angola 58
18 Venezuela 54
19 Guinea 50
20 India 50

Chart/Graph: Market share of top 5 palm oil producers for the 2008 market year

More news on palm oil (full list of articles)

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