23 May, 2011

Crude palm oil (CPO) futures contracts on Bursa Malaysia Derivatives are expected to continue the uptrend next week driven by positive sentiments from the external market and export data, dealers said.

They said the uptrend would continue unless short covering occurred.

A dealer said cargo surveyors, Intertek Testing Services and Societe General de Surveillance, were scheduled to release the export data for the period of May 1-25 on May 25.

He said the higher soyaoil prices due to the bad weather in the major producers country were also expected to support CPO prices.

However, Jim Teh, senior trader of Interband Group of Companies, said the current prices were too high for physical traders.

“CPO prices need to be around RM3,200 to RM3,300 per tonne for physical traders to return to the market,” he told Bernama.

He said there were plenty of stocks currently but the prices were too high.

“The prices need to go down in order to clears actual physical stocks,” Teh said.

For the holiday-shortened week, June 2011 added RM112 to RM3,477 per tonne, July 2011 went up RM147 to RM3,422, August 2011 moved up RM141 to RM3,390 and Sept 2011 gained RM139 to RM3,379.

Turnover dipped to 94,638 lots from 125,813 lots, previously, while open interest slipped to 105,668 contracts against 112,707 contracts recorded on Friday last week.

On the physical market, June South stood at RM3,460 per tonne.

The market was closed on Tuesday for Wesak Day.

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23 May, 2011

Crude palm oil (CPO) futures contracts on Bursa Malaysia Derivatives are expected to continue the uptrend this week driven by positive sentiments from the external market and export data.

Dealers said the uptrend would continue unless short-covering occurred.

A dealer said cargo surveyors, Intertek Testing Services and Societe General de Surveillance, were scheduled to release the export data for the period of May 1-25 on May 25.

The higher soyaoil prices due to the bad weather in the major producers country were also expected to support CPO prices.

However, Jim Teh, senior trader of Interband Group of Companies, said the current prices were too high for physical traders.

“CPO prices need to be around RM3,200 to RM3,300 per tonne for physical traders to return to the market,” he told Bernama.

He said there were plenty of stocks currently but the prices were too high. “The prices need to go down in order to clears actual physical stocks,” Teh said.

For the holiday-shortened week, June 2011 added RM112 to RM3,477 per tonne, July 2011 went up RM147 to RM3,422, August 2011 moved up RM141 to RM3,390 and Sept 2011 gained RM139 to RM3,379.

Turnover dipped to 94,638 lots from 125,813 lots, previously, while open interest slipped to 105,668 contracts against 112,707 contracts recorded on Friday previous week.

On the physical market, June South stood at RM3,460 per tonne.

The market was closed last Tuesday for Wesak Day.

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23 May, 2011

Deforestation has severely ravaged Indonesia’s tropical forests, and a recently introduced moratorium on forest conversions would help reverse the trend, a senior official says.

President Susilo Bambang Yu-dhoyono’s special aide on climate change, Agus Purnomo, said illegal practices such as squatting and logging, had encroached on primary forests, leading the government to consider it necessary to give double protection to areas already under legal protection from exploitation.

“The decree will help stop such problems, as it will explicitly emphasize the duty to protect forests. With the decree, the Presidential Work Unit for Development Control and Monitoring [UKP4] will be able to issue recommendations to the president on punishing perpetrators,” he said.

Brought on by the relentless expansion of palm oil plantations and mining and logging activities, deforestation has earned Indonesia the dubious distinction of being the world’s third-largest emitter of greenhouse gases, just behind China and the US.

The moratorium, delayed by five months from its planned January start, was signed into law Thursday under a US$1-billion climate deal with Norway.

The government has been under pressure from industry lobbyists who promised significant investments if allowed to continue exploiting forests.

The decree will only protect primary forests — which already have legal protection — and peatland, while allowing the conversion of other forests for geothermal projects, sugar and rice plantations and ecosystem “restoration” projects.

Critics say the decree would have no impact on the current state of forests in the country.

Agus said the government would focus on protecting forests that were still intact because it would be difficult to relocate people who have already occupied degraded forests.

“We will issue more regulations on forest preservation and form an agency to oversee REDD projects.”

Indonesia’s ambition in the palm oil sector has been stated as a major reason for the government’s reluctance to include secondary forests in the regulation.

The government aims to become the largest palm oil producer in the world with a goal to produce 40 million tons of crude palm oil by 2020.

Indonesia is currently the largest exporter and producer with 7.5 million hectares of oil palm plantations, 45 percent of which are managed by smallholders.

Norway and Indonesia signed an agreement in May last year under which Jakarta promised to impose a two-year moratorium on forest clearing. In return, Norway would extend $1 billion in aid based on Indonesia’s performance in achieving long-term goals to slow deforestation.

The Norwegian government praised the moratorium as an important step that would help the goal of reducing greenhouse gas emissions.

“What Indonesia is embarking on is a very serious development choice. Indonesia’s efforts to combine the goal of 7 percent economic growth with reducing greenhouse gas emissions by 26 percent by 2020 are commendable,” Reuters quoted Norwegian Environment Minister Erik Solheim as saying in a statement.

The Norwegian Environment Ministry said setting up a new Indonesian agency for slowing deforestation and monitoring and verifying greenhouse gas emissions was crucial.

Palm oil producers, however, continue to lambast the moratorium.

Indonesian Palm Oil Association (Gapki) executive director Fadhil Hasan said the moratorium could cause new problems because it ran counter to a 1990 presidential decree allowing the use of peatland less than 3 meters deep.

“The moratorium did not include the management of degraded forests that could be used for other economic activities, while the letter of intent [with Norway] said the government must identify degraded forests that could be used for other economic activities,” he said.

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22 May, 2011

Forest fragmentation driven by demand for palm oil is having a catastrophic effect on multiple levels of biodiversity, scientists from Queen Mary, University of London have discovered.

The researchers are worried that unless steps are taken to safeguard and manage the remaining forest, then certain species will struggle to survive.

The study, which focused on bats as an indicator of environmental change, was published in the journal Ecology Letters.

The team conducted bat surveys in pristine forest and also in forest patches of varying size in central Peninsular Malaysia. They recorded the numbers of different species present and also assessed the level of genetic diversity within populations of some species.

Lead author Matthew Struebig, jointly based at Queen Mary University of London and the University of Kent, said: “We found that smaller forest areas support fewer species, and that those species that remain face an eventual decline, potentially leading to local extinction in the long-term.”

When the team compared the number of species present to genetic diversity within populations they found that fragmentation appeared to have an even greater impact on genetic loss, which might also be important for long-term population viability.

“We found that in order to retain the numbers of bat species seen in pristine forest, forest patches had to be larger than 650 hectares, however to retain comparable levels of genetic diversity, areas needed to be greater than 10,000 hectares,” he said.

Co-author Stephen Rossiter, also at Queen Mary, emphasised that the findings could have important implications for forest management in the face of the ever-growing demand for oil palm plantations.

He said: “We found that while more species existed in larger forest patches, even small fragments contributed to overall diversity. Therefore, conservation managers should aim to protect existing small fragments, while seeking to join up small forest areas to maximise diversity.”

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Financial Times

22 May, 2011

For something which ends up in such simple products as soap, fish fingers and cakes, palm oil has a tortuously complex supply chain, a fact food producers cite as a significant difficulty in attempting to source the ingredient sustainably.

The world’s most prolific vegetable oil begins life on tropical plantations; some 85 per cent hails from Indonesia and Malaysia. The fruit is then transported to crushing mills, from where the crude oil is shipped to refiners and blenders for further processing and then on to manufacturers.

Multiple links in the chain mean multiple opportunities for oils from different sources to be blended – those certified as sustainable and those which are produced without adherence to environmental or human rights principles.

Exacerbating this complexity is the fragmented nature of the industry, at both ends of the chain. More than 3m smallholders manage 20 per cent of the palm oil plantations in Indonesia and Malaysia. As for buyers, the biggest – Unilever, the Anglo-Dutch consumer goods conglomerate – takes just 3 per cent of what is produced globally.

All of this adds to the difficulty of tracing the palm oil in the average chocolate bar back to a certified plantation, mill, refiner or even ingredient manufacturer.

Subsequently, the amount of segregated sustainable palm oil produced in the past 12 months was 3m metric tonnes, a fraction of the 46m-plus tonnes of total production.

“Palm oil is palm oil,” says Chris Wille, chief of sustainable agriculture at the non-profit Rainforest Alliance, noting that there are no quality tasting sessions as there are for coffee. “There are huge quantities of it and it all just goes into various stages of refining and transport.”

As demand for palm oil surged – roughly doubling in the past decade – farmers have scrabbled to plant more trees, much of these on peat-rich forest land.

Oil palm land conversion in peninsular Malaysia, Borneo and Sumatra by the early 2000s released more greenhouse gas emissions than China’s entire transport sector in 2007, according to a recent study published in the US Proceedings of the National Academy of Sciences.

The body charged with tackling this issue is the Roundtable on Sustainable Palm Oil, a grouping of stakeholders including growers, processors, food companies, retailers and non-governmental organisations, which certifies and sets a code of conduct for its 550-plus members.

Since its establishment in 2004, the RSPO has sought to promote higher yields through more efficient agricultural processes rather than through further land grabs – a strategy curtailed by the fact oil palm trees can only grow in a narrow band around the equator.

The RSPO itself certifies plantations and mills that meet its criteria, but it is slow going: certified production is still less than one-tenth of the total. Yet if supply is small, demand for the sustainable product is smaller still. Manufacturers bought just half the 3m metric tonnes produced in the past year sustainably, and are resorting to using offset certificates to back up their claims of sustainable sourcing.

The GreenPalm certificate trading scheme, which is backed by the RSPO, offsets companies’ consumption against the production of an equivalent amount of sustainable oil. Nestlé, the world’s biggest food producer, is among those buying offset certificates, which Kevin Petrie, the Swiss group’s head of procurement, attributes to the complexity of the supply chain.

Like other food producers, Nestlé is seeking to get around this by dealing directly with vertically integrated companies that can guarantee delivery of segregated sustainable finished product.

Unilever has taken similar steps, signing supply agreements with Europe’s Unimills for speciality fats and US-based Cargill for refined palm oil. These are expected to account for about one-tenth of sustainable purchases this year – up from virtually zero physical purchases last year. This is not how many envisaged the scheme working and, say some, could jeopardise pledges set by food producers to use 100 per cent sustainable oil by 2015.

“It’s achievable but to be frank no one has said these targets are physical volumes. If this development does not pick up the speed it needs then in 2015 a large part will only be covered by certificates and that will do this initiative a disservice,” says Johan Verburg, RSPO executive board member and a policy adviser to Oxfam.

“The certificate trade was allowed to kick-start the market and get to large volumes, a stepping stone towards physically segregated supplies. But the risk is it stays there.”

GreenPalm is run by the Scandinavian diversified edible oil refinery AarhusKarlshamn. It takes a $2 brokerage fee per tonne and passes a $1 levy on to the RSPO.

“I would love to see people buy as much segregated sustainable oil as they can, and then buy the rest off GreenPalm,” says Adam Harrison, senior policy officer for food and agriculture at the WWF, formerly known as the World Wildlife Fund, and an RSPO vice-president.

“Currently only about half of the certified palm oil that is being produced is being sold as certified.”

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