Published July 8, 2009

Producers may abandon pricier 'green' palm oil

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(KUALA LUMPUR) The slow uptake of pricier 'green' palm oil in European supermarkets may see Asian producers focus on cheaper variants that have been sustainably sourced in the first place, a Malaysian palm industry official said yesterday.

The extra cost lies in hiring auditors to ensure that palm oil is produced without felling rainforests and building new storage tanks and processors to keep the supply chain 'clean', but this has not worked with consumers, Malaysian Palm Oil Council chief executive Yusof Basiron said.

Price-conscious shoppers are now finding it difficult to think green in the global economic downturn, food manufacturers and supermarket chains have said, and the economics does not help.

Palm oil undergoing an ethical certification process trades at a US$50 premium to wholesale prices, currently at US$600 a tonne, halving its discount to rival soyoil, industry watchers say.

Malaysia and Indonesia, the top palm oil suppliers, ship 34 million tonnes of the vegetable oil globally, with the European Union taking up roughly 15 per cent for food and fuel requirements, industry data showed.

In recent years, European lawmakers and green groups moved to cut the region's targets on traditional biofuel use and called for an ethical certification system in the food sector because of fears that rapid estate expansion to keep up with booming global demand encouraged deforestation.

The Roundtable on Sustainable Palm Oil (RSPO), created in 2004, had seen only 15,000 tonnes of certified green palm oil sold since the first shipment last November, just 2.5 per cent of total certified output so far, a top RSPO official said in May.

'The market signal is very clear. We can supply at a premium but if buyers are clearly not interested, the palm oil suppliers will have to change tack. This is still a business, after all,' Mr Yusof said.

He said demand for palm oil produced without the certification process was still strong, thanks to the Middle Eastern countries as well as top consumers China and India, whose populations are expanding. -- Reuters