KINGOYA Enterprise – A Story of Innovation, Partnership and a Passion for Plantations
09/01/2024
IRGA Officially Opens Agritech Experience Centre in Shah Alam
19/03/2024Cultivation of Palm Oil: Industry Challenges, Solutions and Compromises
Written by Rema Kurup
The agricultural sector is currently at a crucial point in terms of its development, facing significant challenges on multiple fronts. The three primary concerns of the industry are:
- Increasing Productivity - The global population is set to reach 10 billion by 2050, and as incomes rise in developing countries, demand for steady nutritional sources of food will increase in tandem.
- Addressing Labour Shortages - Between 2000 and 2015, total employment in agriculture in the Asia-Pacific region declined at an average rate of 1.6% annually, as interest in the sector among the workforce continues to wane due to challenging work conditions.
- Managing Climate Change Concerns - The agricultural sector contributes to approximately 11% of total Global Greenhouse Gases, primarily through land-use change and associated activities such as the release of methane from cattle.
In light of these challenges, a major transformation of the industry will be required to ensure that operators are able to meet productivity targets in a manner that sustainably balances the above issues.
The Controversial Commodity - Palm Oil
It is an understatement to say that palm oil is divisive. For its proponents, it serves as the cornerstone of economic progress by optimizing land utilization and bolstering numerous small-scale farmers through its financial viability and global trade. Conversely, critics view it as a catalyst for deforestation and social discord, posing a direct peril to endangered species and playing a role in climate change. With the escalating demand for palm oil, apprehensions regarding its sustainability are on the rise, with a recognition that there exists both 'good' and 'bad' palm oil.
Source: Chinadialogue.net
Increasing Productivity and Sustainability
Half of all packaged products sold in supermarkets, everything from processed foods to cosmetics, soaps and detergents use palm oil. Primarily employed as a cooking oil in Asia and Africa, palm oil also finds applications in industrial lubricants, pharmaceuticals, and animal feeds. Notably, there's a growing trend of its use as a fuel, with biodiesel accounting for 58% of the palm oil imported into the European Union (EU) in 2020.
The global demand for palm oil is set to rise from 76 million metric tonnes currently to an estimated 264–447 million metric tonnes by 2050. Hence, it is evident that there must be a shift in the methods of palm oil production and consumption to avoid attracting additional controversy for the industry in the future.
About 2 years ago, due to geopolitical factors like the Ukraine-Russia war, the price of palm oil had soared as high as MYR 7 to 8k/mt. Currently it hovers around MYR 3.5 to 3.7k/mt, dropping by almost 25%, contributed to by the El Nino weather pattern in Indonesia which slowed down production. Furthermore, the COVID pandemic saw a sharp decline in the workforce in both Indonesia and Malaysia between 2019 and 2021.
The price of crude palm oil (CPO) is expected to range between MYR 3,900/mt–MYR 4.200/mt ($840.16-$904.78) in 2024, with limited palm oil supplies supporting prices, MPOB said in its first outlook of the year.
Malaysia accounts for about 23% of the world's palm oil production and 30% of the total exports of the commodity. The 3 main bodies governing the Malaysian palm oil sector are: the MPOA, MPOB and MPOC, each with its distinct role in monitoring the industry: -
- MPOA: A private setup that provides stewardship, and supervised growth and profitability
- MPOB: Governs policies, RnD Programs, licensing, regulation, commercial research and more
- MPOC: Deals with promotions outside the country and campaigns to address minsinfomation issues, etc.
Over and above these governing bodies are the RSPO (Roundtable for Sustainable Palm Oil) and also the MPOAC, both of which are councils that provide certification and monitor industry standards. However, monitoring alone by such self-regulatory bodies will not suffice if government does not step in to help with smallholders and how they source seedlings plus other cultivation processes. Palm Oil mills buy from over 10 different estates and smallholders. The traceability factor is key here to ensure that the quality of seedlings procured by smallholders are not contaminated from the start through, for instance, buying randomly from unreliable sources to save on costs. If contaminated seedlings had been used initially during planting, it would only be apparent during harvesting, by which time it would be too late.
These self-regulatory bodies also look into sustainability factors such as:-
- No Deforestation - This is achieved through various means which includes imposing "no new planting" on primary forests and certification of the existing 5 million plus hectares of current cultivated plantations
- No Expansion on Peat - Peats soils release the greatest quantities of carbon when disturbed, thus peat zones are designated for special protection to avoid emissions release and to maintain biodiversity
- No Forced Labour - Looking to immediately curb the "forced labour" issue of migrant workers in plantations by regulatory controls and fair wage systems.
- Smallholder Inclusivity - Focussing on the supply chain of smallholders to enable them to get certified for global standards, with economic input by both government and private industry organisations.
Undoubtedly, the RSPO has spurred change by enhancing industry practices. However, as legislative changes from the EU, UK, and US propel palm oil sustainability from a voluntary to a compulsory realm, it is anticipated that the current certification frameworks within the sector will undergo further evolution.
Malaysia being the second largest exporter of palm oil, it becomes mandatory to take into consideration the global consumer environment by complying with the crucial international prerequisites of its export markets, over and above the local standards of certification.
The recent breakthrough discovery of the SHELL Gene by MPOB is yet another key factor that will enable increased yield of palm oil, which is important for food security and sustainability.
Addressing the Labour Shortage
As of 2022, there were approximately 382 thousand workers in palm oil plantations in Malaysia. Foreign labourers coming from Indonesia, Bangladesh, India and Pakistan account for almost 80% of Malaysia's oil palm plantation workforce. Due to border controls during the pandemic and a temporary halt in recruitment, Malaysian plantations have faced prolonged labour shortages in the last three years.
Other labour issues with foreign workers in the palm oil industry have been said to be “forced labour” practices such as debt bondage, deceptive recruitment processes, retention of passports and limited availability of or access to grievance mechanisms. Migrant workers may also face discrimination and stigma. These have been some of the most commonly reported issues. Working in the oil palm industry as general workers and harvesters has never been popular with locals as they considered the job dirty, difficult, dangerous and demeaning.
The cabinet meeting on 10 December 2021 had reopened borders to foreign workers to work in permitted sectors, including plantations. Palm oil production was seen to surge and rapid increase in oil palm yields were already evident in May of 2023 as foreign workers returned to plantations.
But labour issues have to be addressed by both the corporate sectors as well as the government. While this may take time, it would be crucial at this point in time for the bigger plantations to consider digitising and digitalizing the daily operations in plantations with mechanised technology and robotics to ensure that productivity is not compromised.
The government has allocated RM60 million to the Mechanisation and Automation Research Consortium of Oil Palm for agricultural mechanisation, technology research and commercialisation (MARCOP). MARCOP was established to reduce reliance on foreign labour in the palm oil industry and to develop technologies and innovations for increased productivity and efficiency via automation. MARCOP is supported by a grant from the Malaysian government and the Malaysian oil palm industry. Increase in the labour ratio for FFB cutting is one of the strategy targets for research and development of mechanisation.
IRGA’s mechanised tools (hardware) like the ECUT ACE and EVAC wheelbarrow, as well as the digital input (software) like IRGA’s iPLANT will be of great assistance in this area.
MPOA on Entry of Foreign Workers into Plantations expected to Boost Revenue to RM4Bil
The pivotal decision taken by the Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani after a meeting with the Home Minister Datuk Seri Saifuddin Nasution Ismail and Human Resources Minister Steven Sim on Jan 16, 2024 to allow recruitment of approximately 40,000 foreign workers for oil palm plantations has been hailed by the MPOA as a springboard to generate RM4B revenue this year, even if only half the indicated workforce numbers could be deployed in harvesting.
The freeze on foreign worker recruitment, in place since March 17, 2023, had posed challenges to various industries, particularly the plantation sector, MPOA said.
Climate Change Concerns on the future of oil palm cultivation
Climate change threatens the sustainability of crop production via factors such as temperature, rainfall and disease patterns, although the potential effects on tropical crops have not been researched at length for SE Asia, Africa and Latin America. But recent studies have started to research the situation for oil palm.
Global society is recognising that we cannot address the climate crisis without ending deforestation, which accounts for 15% of global carbon emissions. At the 2021 UN climate talks in Glasgow, 141 countries committed to reversing forest loss and land degradation by 2030. While international cooperation is crucial, corporate commitments are also essential.
The palm oil sector has made more progress in addressing deforestation than other commodities which had much lower commitment levels. An analysis by Forest 500 denoted that the commitment towards deforestation among comparative agricultural commodities was as follows:
Source: Forest 500
Holistic regulation, while raising awareness among consumers and companies, must also push change across the board. Solutions must also include reforestation programmes, sustainable land-use practices, and effective protection of the forested areas that remain. Most importantly, the root causes of deforestation have to be addressed: demand for food and biofuels, overconsumption in wealthy nations, changing diets, and weak land tenure systems that undercut Indigenous customary land owners.
The EU, as the second largest market for forest-risk commodities after China, has adopted certain legislation requiring mandatory due diligence for companies connected to these commodities, whereby, companies will have to prove their products are not linked to deforestation. Although it can be argued that it disregards the human rights issues and could alienate small-scale farmers, the legislation is a holistic approach to addressing interconnected challenges faced by a global society – particularly for sustainable development, food security and for reducing greenhouse gas emissions.
In consumer markets influenced by anti-palm-oil campaigning, the perception that palm oil drives deforestation has stuck. But to truly tackle global deforestation, a serious look at what comprises and contributes to annual global forest loss has to be made. It is important to think about palm oil in relation to other soft commodities. Every year, the world loses around 5 million hectares of forests, and about 80% of this is driven by agricultural expansion for producing commodities. Such ‘forest-risk commodities’ are those that may contribute to tropical deforestation and degradation and include cattle (for beef and leather), soy, palm oil, cocoa, timber, maize, coffee, rubber, paper and pulp.
The most significant agricultural menace to forests and the climate is the expansion of pasture land for cattle grazing. In 2021, deforestation rates in the Brazilian Amazon peaked at their highest level in 15 years, with nearly 75% of it linked to the expansion of pasture. Additionally, soy production, of which 77% is utilized as feed for livestock in meat and dairy production, substantially contributed to forest depletion in the Amazon. Despite the introduction of Brazil's 'Amazon Soy Moratorium,' designed to restrict soybean production on recently deforested lands, it has inadvertently redirected deforestation into other vital ecosystems.
In a recent analysis, another emerging deforestation threat to west and central Africa was attributed to the 52,000 hectares of natural forests that were cleared to establish rubber plantations between 2000 and 2020 across Cameroon, Gabon, Nigeria, Côte d’Ivoire, Ghana and Liberia. Rubber production is an emerging threat to west and central Africa’s climate-critical tropical forests!
Malaysia’s Role in the future of Global Food Security
The United Nations estimates the world's growing population to reach 8.0 billion in 2022, 8.5 billion in 2030, 9.7 billion in 2050 and 10.4 billion in 2100. The vast majority of people with insufficient food to eat live in developing countries and developing countries, including Malaysia, are facing the growing threat of increasing food insecurity. Palm oil is one of the edible oils recognised by the FAO and the World Health Organization (WHO) and has been playing a key role in addressing global food security. It is a versatile ingredient used in a wide range of products including cooking oil, margarine, baked goods, snacks and processed foods. Its versatility contributes to a diversity of food options such as cooking oil, processed foods, margarine, snacks and biscuits and more.
Oil palm’s life span of 25 and 30 years, with production every month throughout the year, ensures a regular supply of the product. This stable oil has the largest share of production of all vegetable oil production. The world's consumption of vegetable oils has more than doubled in the past two decades, from 87 million tonnes in 2000/2001 to 237.5 million tonnes in 2020. Palm oil is the only vegetable oil that can feed growing populations.
This is because it tops the list of oil crops for yield as it needs less than one-eighth as much land as soy to produce the same quantity of oil. Palm oil accounts for six percent of all cultivated land for oil crops globally but produces over one-third of the total output.
The Malaysia Palm Oil Board (MPOB) engages in research and development initiatives aimed at advancing palm oil production, quality, and sustainability. Through its research findings, the MPOB contributes to the adoption of more efficient and sustainable practices, thereby bolstering food security. The board plays a pivotal role in supporting the oil palm industry's global contribution to the food supply by addressing critical aspects such as quality, safety, nutrition, and sustainability. Palm oil, furthermore, is affordable compared to other vegetable oils and serves communities with lower income levels, especially in developing countries.
Palm oil production in Malaysia is characterized by a commitment to sustainability and environmental friendliness. As the world's second-largest producer of palm oil, Malaysia has undertaken a global leadership role to ensure the adherence to these principles.
Malaysia has embraced the United Nations Sustainable Development Goals (UNSDGs) Agenda 2030 and has reasserted its dedication to implementing these goals as the primary framework to elevate sustainability commitments within the country's oil palm industry. This commitment is evident in Malaysia's national development blueprint, the 12th Malaysia Plan.
In 2015, Malaysia implemented the Malaysian Sustainable Palm Oil (MSPO) certification scheme, making it mandatory for its oil palm industry. The MSPO Standards, revised in 2022, encompass five principles rooted in the three pillars of sustainability: economic viability, social acceptability, and environmental soundness.
The MSPO stands as a dynamic initiative aimed at fostering the long-term productivity of palm oil. Through this certification, plantation owners and smallholders are required to uphold environmental sustainability, preventing any compromise to the surrounding ecosystems. Malaysia's commitment to safeguarding its forests and biodiversity is crucial for maintaining a stable and sustainable food supply. By championing ecosystem protection, advocating for sustainable land management, and addressing climate change, Malaysia not only enhances its own food security but also actively contributes to global initiatives striving for food security for all.
Palm oil assumes a crucial role in addressing global food security due to its advantages in terms of availability, affordability, and sustainability.
References
- Oil Palm in the 2020's and beyond: challenges and solutions, Murphy.D, Goggin.K, Paterson.R, Accessed 10/1/2024
- Palm Oil: The Pro's and Con's of a Controversial Commodity, China Dialogue, Shanahan.M, Accessed 12/1/2024
- Sustainable Palm Oil, Sainsbury's, Accessed 12/1/2024
- MPOA: Entry of foriegn workers to plantation industry set to generate Rm 4b revenue, The Sun, Accessed 14/1/2024
- Malaysian palm oil's key role in global food security, NST Business Times, Accessed 14/1/2024
