Malaysia looks to meet global palm oil demand after Indonesia's export ban,

 but labour shortage an issue

Malaysia is the world's second-largest producer of palm oil after Indonesia.

25 Apr 2022

KUALA LUMPUR: The global demand for palm oil is likely to switch to Malaysia after Indonesia's export ban, but industry players warned that labour shortage could hamper output.

Plantation Industries and Commodities Minister Zuraida Kamaruddin told the media on Sunday (Apr 24) that Malaysia should be able to increase its production of palm oil with the reopening of the country’s borders.

“I am confident that Malaysia is ready and able to supply palm oil to global markets because our production is expected to rise following the reopening of its borders, which has enabled the hiring of foreign workers,” Mdm Zuraida was quoted as saying by Bernama.

In an announcement last Friday, Indonesian President Joko Widodo said the exports of cooking oil and crude palm oil (CPO) would be suspended starting this Thursday in a bid to stabilise prices in the country.

“The government prohibits the exports of palm oil used in cooking oil,” said Mr Widodo, who is also popularly known as Jokowi.

In recent months, cooking oil prices have soared in Indonesia amid an increase in global CPO prices, prompting the government to implement price ceilings and export restrictions.

In a separate event on Sunday, Deputy Plantation Industries and Commodities Minister Wee Jeck Seng said the local palm oil production is currently being affected by the ongoing labour shortage issue, and therefore it is unlikely that Malaysia will be able to fulfil the high export demand gap left by Indonesia.

“This imbalance in demand and supply would see prices of palm oil and other competing oils soaring," he was quoted as saying by Bernama.

Related:


As global palm oil prices rise, cooking oil stock runs low in Indonesia’s retail outlets

Indonesian farmers support palm oil export ban

Dr Wee said as of last year, Indonesia's palm oil accounted for 59 per cent and 56 per cent of the world’s palm oil production and exports respectively, adding that Indonesian palm oil exports represented 30 per cent of total world oils and fats exports.

“As such, this drastic step taken by Indonesia will definitely have a massive impact on other countries, especially major palm oil importers such as China, India and the European Union,” he said after attending his constituency’s Muslim breaking of fast event.

The deputy minister added that the Malaysian government’s move to set price control and a ceiling price for palm cooking oil could also help protect the consumers from the effects of surging palm oil prices in the global market.

However, Dr Wee said that this also means that the government will have to bear the higher cost of cooking oil subsidies due to the increase in palm oil prices in the market to ensure that the welfare and interests of Malaysian consumers are protected.

ADVANTAGE TO MALAYSIAN PALM OIL INDUSTRY

Meanwhile, the Malaysian Palm Oil Association (MPOA) said the Indonesian export ban is likely to be an advantage to the Malaysian palm oil industry.

The Star quoted MPOA chief executive officer Nageeb Wahab as saying that he envisaged the local palm oil industry would be able to reap higher export earnings this year, particularly in the next two to three months.

Related:

Malaysia's palm oil board urges countries to reconsider food versus fuel priorities

Malaysian Palm Oil Board (MPOB) director-general Ahmad Parveez Ghulam Kadir said that “any policy changes by Indonesia will definitely affect Malaysia” as the latter is the second-largest producer and exporter of palm oil after Indonesia.

“The ban will definitely see most of the global palm oil demand switching to Malaysia,” he said, as quoted by the Star.

However, he also noted that Malaysia is facing an issue with palm oil supply due to the severe labour shortage and the country may not be able to absorb much of the excess global demand.

Indonesia's palm oil export ban leaves global buyers with no plan B

 People shop for cooking oil made using palm oil at a supermarket in Jakarta

Sun, April 24, 2022
By Rajendra Jadhav

MUMBAI (Reuters) - Global edible oil consumers have no option but to pay top dollar for supplies after Indonesia's surprise palm oil export ban forced buyers to seek alternatives, already in short supply due to adverse weather and Russia's invasion of Ukraine.

The move by the world's biggest palm oil producer to ban exports from Thursday will lift prices of all major edible oils including palm oil, soyoil, sunflower oil and rapeseed oil, industry watchers predict. That will place extra strain on cost-sensitive consumers in Asia and Africa hit by higher fuel and food prices.

"Indonesia's decision affects not only palm oil availability, but vegetable oils worldwide," James Fry, chairman of commodities consultancy LMC International, told Reuters.

Palm oil - used in everything from cakes and frying fats to cosmetics and cleaning products - accounts for nearly 60% of global vegetable oil shipments, and top producer Indonesia accounts for around a third of all vegetable oil exports. It announced the export ban on April 22, until further notice, in a move to tackle rising domestic prices.

"This is happening when the export tonnages of all other major oils are under pressure: soybean oil due to droughts in South America; rapeseed oil due to disastrous canola crops in Canada; and sunflower oil because of Russia's war on Ukraine," Fry said.

Vegetable oil prices have already risen more than 50% in the past six months as factors from labour shortages in Malaysia to droughts in Argentina and Canada - the biggest exporters of soyoil and canola oil respectively - curtailed supplies.

GRAPHIC-Global edible oil prices scale record highs after every major oil suffers supply setbacks https://fingfx.thomsonreuters.com/gfx/ce/gdpzyawzovw/GlobalVegOilsApril2022.png

Buyers were hoping a bumper sunflower crop from top exporter Ukraine would ease the tightness, but supplies from Kyiv have stopped because of what Russia calls its "special operation" in the country.

This had prompted importers to bank on palm oil being able to plug the supply gap until Indonesia's shock ban delivered a "double whammy" to buyers, said Atul Chaturvedi, president of trade body the Solvent Extractors Association of India (SEA).

NO ALTERNATIVE

Importers such as India, Bangladesh and Pakistan will try to increase palm oil purchases from Malaysia, but the world's second-biggest palm oil producer cannot fill the gap created by Indonesia, Chaturvedi said.

Indonesia typically supplies nearly half of India's total palm oil imports, while Pakistan and Bangladesh import nearly 80% of their palm oil from Indonesia.

"Nobody can compensate for the loss of Indonesian palm oil. Every country is going to suffer," said Rasheed JanMohd, chairman of Pakistan Edible oil Refiners Association (PEORA).

GRAPHIC-Key global edible oil statistics 

https://fingfx.thomsonreuters.com/gfx/ce/qmypmeaeopr/EdibleOilStats.png

In February, prices of vegetable oils jumped to a record high as sunflower oil supplies were disrupted from the Black Sea region.

The price rise raised working capital requirements for oil refiners, who were holding lower inventories than normal in anticipation of a pullback in prices, said a Mumbai-based dealer with a global trading firm.

Instead, all oil prices have rallied further.

"Refiners have been caught on the wrong foot. Now they can't afford to wait for a few weeks. They have to make purchases to run plants," the dealer said.

As Indonesia has allowed loading until April 28, consuming countries will have enough supply for the first half of May, but could face shortages from the second half, said a refiner based in Dhaka.

South Asian refiners will only slowly release oil into the market as they know supplies are limited, he said.

In India, the world's biggest vegetable oil importer, palm oil prices rose by nearly 5% over the weekend as industry prices in shortages in the coming months. Prices also rose in Pakistan and Bangladesh.

(Reporting by Rajendra Jadhav; Editing by Gavin Maguire and Kenneth Maxwell)

Indonesia, the world's top cooking-oil exporter, says it's going to ban exports of the oil this week, and it's sent the global prices of edible oils soaring

Huileng Tan
Sun, April 24, 2022


Indonesia, a top palm-oil exporter, is planning to ban exports beginning on Thursday.


Palm oil, the world's most used vegetable oil, is used in cooking and a range of consumer products.


Palm-oil and competing soybean-oil prices are jumping after news of the ban.

The world's top palm-oil producer announced that it would ban exports of the commodity starting on Thursday, sending the prices of edible oils soaring.

Indonesia accounts for about half of the world's supply of palm oil, the world's most widely used vegetable oil. Palm oil is used for cooking and for the production of thousands of consumer products, including biscuits, detergents, and lipsticks.

In a video statement on Friday, Indonesian President Joko Widodo said the move was designed to bring down domestic palm-oil prices and ensure domestic food availability in the wake of global food inflation.

"I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable," Widodo said, a Reuters translation reported.

The move comes as Indonesia has seen recent protests over the high prices of cooking oil, with retail prices gaining more than 40% so far this year, Reuters reported.

The ban is expected to be in place until further notice. Indonesian palm-oil exports were worth about $30 billion in 2021, the data provider Statista showed.

Sri Mulyani Indrawati, Indonesia's finance minister, told Reuters on Friday that the palm-oil ban would hurt other countries, but that it was necessary to contain the soaring domestic prices of cooking oil.

Benchmark crude palm-oil futures on the Bursa Malaysia exchange jumped as much as 7% on Monday morning. They are up over 40% year to date.

Prices for alternative vegetable oil also spiked in response to the impending ban on palm-oil exports in Indonesia. Benchmark Chicago soybean oil prices hit their highest levels since 2008, Reuters reported.

Prices of edible oil — including palm oil — have been rising because of the war in Ukraine, as the country is a large sunflower-oil exporter. "Edible oils are often interchangeable, so a shortage of one type exerts pressure on the others," Gro Intelligence, a global agriculture data-analysis firm, wrote in an April 23 note.

Gains in vegetable-oil prices are outpacing overall food-price increases, Gro Intelligence wrote in the report. US prices of a basket of common vegetable oils are up 41% on year, while food prices are up 25% on year.

"Indonesia's ban on exports is likely to further fuel global food inflation," the firm added.

https://news.yahoo.com/malaysia-urges-countries-prioritise-food-050134644.html#:~:text=Malaysia%20urges%20countries,Kapoor%2C%20Martin%20Petty)

Understanding Peak Oil: What It Is And Why It Matters

By Michael Kern - Aug 29, 2024

• Peak oil and peak oil demand are two separate phenomena with different implications for our society and economy.
• 
  
• It is important to understand the complex factors driving peak oil, from geopolitics to technology.
• 
  
• We need to prepare ourselves for a sustainable future based on renewable energy sources by navigating the uncertainty of peak oil demand and production.
• 
  

Are we running out of oil? 

This question has been on the minds of many experts in recent years.

The world consumes a staggering 100 million barrels of oil every single day. This dependence on fossil fuels has powered our modern society, but recent events like the war in Ukraine and the resulting energy crisis have underscored our vulnerability to disruptions in the global oil supply.

But what does this mean for our future? Will we have to give up our cars and switch to bicycles? Or will new technologies save us from a world without oil? 

Understanding the concept of "peak oil " is crucial in navigating this uncertain energy landscape.

In this article, we'll dive deep into the topic of peak oil and explore its causes, implications, and potential solutions. 

What Is Peak Oil

Peak oil refers to the point in time when global petroleum production reaches its maximum point and subsequently begins an irreversible decline. This occurs when readily accessible oil reserves are depleted, forcing us to rely on more challenging and expensive extraction methods.

The concept was first introduced by M. King Hubbert in the 1950s. His theory proposed that oil production would follow a bell-shaped curve, with a peak representing the point at which half of the total recoverable reserves had been extracted. This prediction has been largely accurate, as we have witnessed a steady increase in global oil production followed by signs of plateauing and even decline in recent years.

The implications of peak oil are far-reaching. As we deplete the most accessible oil reserves, extracting remaining resources becomes increasingly challenging and expensive. This leads to higher production costs, which are eventually passed on to consumers in the form of higher prices for gasoline, diesel fuel, and other petroleum-based products. Additionally, the transition to less accessible reserves can disrupt supply chains and geopolitical stability, further exacerbating the challenges associated with peak oil.

What Will Cause Peak Oil?

The inevitability of peak oil is driven by a confluence of factors:

• Geological Constraints: One of the primary reasons for peak oil is geological constraints. Most of the world's easily accessible oil reserves have already been discovered and exploited, meaning that oil companies must turn to more difficult-to-reach reserves, such as deepwater offshore drilling or unconventional sources like shale oil. These reserves are often more expensive to extract and produce smaller yields than traditional wells. As a result, the cost of producing each barrel of oil increases over time.
• Geopolitical Instability: Geopolitical instability can also play a role in peak oil. Many of the world's largest oil-producing regions are located in politically unstable areas where conflict and unrest can disrupt production and supply chains. For example, wars in Iraq and Syria have led to significant disruptions in global petroleum production in recent years. And Venezuela’s ongoing economic crisis has absolutely crushed its ability to produce oil.
• Technological Limitations: Despite advancements in drilling technology, there are limits to how much oil can be extracted from a given reserve. Environmental concerns also restrict new drilling sites and expansions, making it more challenging to increase production.
• Rising Demand: The growing energy needs of developing economies, particularly China and India, put additional strain on the global oil supply. As these countries continue to industrialize and urbanize, their demand for oil is expected to rise, further accelerating the depletion of reserves.
• Environmental Pressures: The increasing awareness of climate change and the associated environmental impacts of fossil fuel consumption have led to growing pressure to reduce reliance on oil. This includes efforts to transition to renewable energy sources and to implement policies that limit the use of fossil fuels.

The consequences of this decline could be catastrophic if we do not take action now to transition away from fossil fuels towards renewable energy sources or invest heavily in carbon capture technologies designed to mitigate their impact on the environment.

Peak Oil Is Not The Same As Peak Oil Demand

One common misconception about peak oil is that it is the same as peak oil demandhttps://oilprice.com/Energy/Crude-Oil/How-Close-Are-We-To-Peak-Oil-Demand.html. While both concepts are related to the future of global petroleum production, they represent different phenomena.

Peak oil refers to the point at which global petroleum production reaches its maximum point and begins to decline. This means that we will have extracted all of the easily accessible and cost-effective reserves, and will need to turn to more expensive and difficult-to-reach sources to meet our energy needs. The consequences of peak oil could be significant, including higher prices for gasoline, diesel fuel, and other petroleum-based products.

On the other hand, peak oil demand refers to the point at which global demand for petroleum products begins to decline. 

This could happen for a variety of reasons, including: 

• Increased adoption of electric or hydrogen vehicles
• Increased availability of consistent renewable energy
• Rising oil prices 
• Environmental concerns

While these two concepts are related in that they both relate to the future of global energy production and consumption, they represent fundamentally different phenomena with distinct implications for our society and economy.

It's worth noting that while peak oil demand may not necessarily coincide with peak oil production, there is some evidence suggesting that it may be coming sooner than previously thought. 

For example, several countries have announced plans to phase out gasoline-powered cars within the next few decades in favor of electric vehicles.

Additionally, advances in lithium battery technology, alternative battery technology and renewable energy could make it increasingly cost-effective for individuals and businesses alike to switch away from fossil fuels.

What's Next? Navigating a Post-Peak Oil World

As global oil production eventually declines, several scenarios could unfold:

• Complete Transition to Renewables: A shift towards solar, wind, and other renewable energy sources to meet all our energy needs.
• Reduced Fossil Fuel Use with Carbon Capture: Continued but diminished fossil fuel use, coupled with technologies to mitigate their environmental impact.
• New Technologies: Development of innovative extraction methods or synthetic alternatives to access previously inaccessible reserves.

Regardless of the path we take, proactive measures are necessary to avoid a chaotic transition.

One thing is certain: our reliance on fossil fuels cannot continue indefinitely. By investing in new technologies now, we can help ensure a smooth transition away from petroleum-based products over time.

Peak oil represents a major challenge for humanity as we seek ways to meet our growing energy needs. 

At least for now, we’re dependent on oil. And while no one knows exactly when or how this process will unfold, one thing is clear: change is coming whether we're ready for it or not.

Peak Oil Frequently Asked Questions

Will peak oil ever happen?

Yes, peak oil is highly likely to happen. It is a matter of when, not if. While new discoveries and technological advancements can extend the timeline, geological limitations and increasing demand will eventually lead to a decline in global oil production.

When was peak oil in the US?

The United States experienced its first peak oil in conventional oil production in 1970, reaching around 9.6 million barrels per day. However, with the advent of fracking and other technological advancements, the U.S. has seen a resurgence in production, reaching a new peak of approximately 13 million barrels per day in 2019. It's worth noting that this new peak is primarily driven by unconventional sources like shale oil, which are more expensive and environmentally impactful to extract. Experts predict a decline in U.S. oil production in the coming years as shale oil wells deplete faster than conventional ones.

How many years of oil is left in the world?

Estimates vary, but based on current proven reserves and consumption rates, we have roughly 50 years of oil left at current production levels. However, this is a dynamic figure influenced by new discoveries, technological developments, and changes in demand. As we transition to cleaner energy sources, oil consumption might decrease, extending the timeline.

How does peak oil affect humans?

Peak oil has the potential to cause significant disruptions to human society, including:

• Economic Impacts: Rising energy prices and supply disruptions can lead to increased transportation costs, higher food prices, and economic recession, particularly affecting industries heavily reliant on oil.
• Social and Political Unrest: Economic hardship and energy insecurity can trigger social unrest and political instability.
• Geopolitical Conflicts: Competition for dwindling oil resources can exacerbate existing geopolitical tensions and even lead to new conflicts.
• Environmental Impacts: Increased reliance on unconventional oil sources can lead to heightened environmental damage due to more intensive extraction processes.

It is crucial to proactively mitigate these potential impacts through a multifaceted approach, encompassing investments in renewable energy, energy efficiency measures, and sustainable transportation solutions.

 

By Michael Kern for Oilprice.com 

Is the Food Industry Concealing Possible Destruction of the Tropics From the Public?

BY EMMA RAE LIERLEY

 JULY 24, 2024
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Photograph Source: Photo by CEphoto, Uwe Aranas – CC BY-SA 3.0

Palm oil is one of the most used vegetable oils in the world and is found in a large variety of packaged products, from shampoos and lipstick to cookies and frozen pizza. Unfortunately, the production of palm oil has been linked to severe environmental and social costs, including significant rainforest destruction and human rights abuses, particularly in countries like Indonesia and Malaysia, which together account for around 85 percent of global exports.

In the United States, out of the seven commodities that were linked to forest destruction, palm oil was the most “significant contributor” to deforestation, according to a March 2024 report. This report by Trase, a “data-driven transparency initiative,” is based on an analysis of figures from October 2021 to November 2023. “[T]he United States’ direct imports of seven forest risk commodities… [are] exposed to at least 122,800 hectares of tropical and subtropical deforestation. This is an area comparable in size to the city of Los Angeles,” states the report.

If any part of the palm oil supply chain is linked to the destruction of rainforests and peatlands or human rights abuses, the product is known as Conflict Palm Oil.

According to a May 2024 report by my organization, Rainforest Action Network (RAN), palm oil is increasingly being used “as an animal feed additive,” however, “much of the international trade in palm oil-based animal feed is obscured for consumers and other stakeholders.”. This lack of transparency raises questions about the actual role of the world’s largest palm oil traders in deforestation and social conflict.

Responding to this crisis and bowing to consumer and stakeholder pressure, many companies have adopted the “No Deforestation, No Peatland, No Exploitation” (NDPE) policy to ensure responsible production. This corporate pledge is meant to prevent further deforestation, safeguard “High Conservation Value” (HCV) areas, eliminate new development on peatlands, and protect Indigenous communities.

Hidden Palm Oil in Animal Feed

Palm oil is found in many foods and household products, but it’s also used in animal feed, especially for dairy cows, and ends up in products like milk, cheese, ice cream, and chocolate. Because it is an indirect ingredient, it is known as “embedded palm oil”—often hidden and not included in companies’ deforestation-free commitments. An analysis of 2022 data by RAN revealed that palm oil-based animal feed was the largest category of palm oil products imported to the United States.

Our research reveals that most companies—15 out of 17—importing palm oil-based animal feed into the U.S. lack NDPE policies, thereby increasing the risk of deforestation and human rights abuses. Companies must include palm oil-based animal feed in their NDPE policies and deforestation-free commitments and be transparent about using palm oil in their supply chains.

Major companies like Nestlé and Ferrero make claims about lessening the impact of deforestation across their product lines. These claims are misleading because vast amounts of palm oil are enteringtheir supply chain as animal feed is not included in their accounting.

Dairy companies like Lactalis, Danone, and Fonterra are not taking enough action to ensure their products, such as milk, cheese, and chocolate, do not contribute to deforestation. Only Unilever provided an estimate to our researchers about how much palm oil-based animal feed forms part of its supply chain. Swedish-Danish company Arla has promised that there will be no palm oil in its milk supply network by 2028, ensuring it is deforestation-free.

Our research estimates that if Nestlé accounted for the embedded palm oil in its supply chain, its claim of being 96 percent deforestation-free could drop to 72 percent (in terms of crude palm oil equivalent).

Increasing Demand for Palm Oil-Based Animal Feed

Initially, animal feed contained palm kernel expeller (PKE), a co-product of crushing palm kernels. Now, new palm oil additives, known as “palm fat,” “palmitic acid,” “rumen-protected fats,” or “calcium salt” (when fortified with calcium), are used in cow diets to boost milk production and quality. These additives have become popular, especially in North America. In Canada, up to 90 percent of farmers use these additives for their dairy cows. (Similar U.S. statistics are unavailable because there is very little industry oversight about its use.)

Palm oil-based animal feed, especially calcium salt, was mainly exported from Indonesia and Malaysia to countries with large dairy industries, including the U.S., the European Union, Japan, Australia, New Zealand, South Africa, and various Middle Eastern and South American countries from 2020 to 2021. Another additive, palm fatty acid distillate (PFAD), is a product of the palm oil refining process and was previously considered a waste product.

High demand for PFAD means it’s now considered an essential part of the palm oil market. Its use is not only limited to animal feed but extends to other products as well, such as biofuels, soaps, and candles. PFAD, therefore, sells for 80 percent more than palm oil. This raises concerns about its production, leading to deforestation and peatland loss, similar to virgin palm oil. Stearin, a triglyceride, is another co-product used in animal feed and foods like margarine and bakery shortening.

Tracking palm oil-based animal feed in global trade is challenging due to a lack of specific trade codes. According to our analysis of more than 30,000 shipments of palm oil products to the U.S. in 2022, feed-grade palm oil was the largest imported category of such products, making up more than a third of U.S. palm oil imports.

Most of these products came from Indonesia, where palm oil production is closely associated with deforestation. This illustrates the significant role of palm oil-based feed in causing environmental degradation.

Embedded Palm Oil Hidden in Global Supply Chains

Many consumer goods companies that adopt NDPE policies claim their supply chains are “deforestation-free,” but they often fall short and fail to meet these expectations. Our research, based on data from 2022 and 2023, indicates that only three of the ten leading consumer goods companies had NDPE policies that they implemented for all their forest-risk commodity supply networks. Additionally, none of these ten companies fully implemented NDPE policies, putting their deforestation-free claims into question.

One of the main issues is that palm oil supply chains, which comprise several co-products and intermediaries, are difficult to track. As a result, palm oil-based animal feed is often unmonitored in company reports. The best practice would be to ensure that all suppliers of palm oil products adopt NDPE policies. Some companies report on the use of soy-based animal feed but not palm oil. The Consumer Goods Forum, an industry-led network of more than 400 companies, includes soy-based feed in its roadmaps, created for various commodities to ensure “forest positive production,” but omits palm oil. If NDPE policies were to cover all parts of the supply chains that use palm oil-based products—including animal feed—companies could avoid sourcing Conflict Palm Oil and making misleading deforestation-free claims.

Major Dairy and Consumer Goods Companies Feeding the Demand

Our researchers analyzed the policies of 14 of the world’s largest dairy and consumer goods companies to see if they ensure that palm oil-based animal feed in their supply chains meets NDPE standards. These companies drive demand for palm oil-based animal feed by producing dairy, chocolate, and other processed foods. The companies analyzed include Arla, Dairy Farmers of America, Danone, Ferrero, Fonterra, FrieslandCampina, Lactalis, Mars, Mengniu, Mondelēz International, Nestlé, Saputo, Unilever, and Yili.

Out of the 14 major companies, only Arla has a strong NDPE policy that covers palm oil in animal feed. However, the company won’t execute the embedded palm oil part of the policy until 2028. This is later than the 2025 deadline set by the EU, where “products that contain palm oil will have to be proven deforestation-free by the beginning of 2025,” according to the RAN report. The other 13 companies either have weak policies or none, which means they might still be linked to deforestation and human rights abuses.

Only seven companies, including Arla, Danone, and Unilever, admit that palm oil-based animal feed is a risk for deforestation. Furthermore, most companies don’t discuss how much embedded palm oil they use. Unilever is an exception, revealing it used 30,000 tonnes of palm oil in its dairy products in 2022, though it didn’t explain how it calculated this figure.

Meanwhile, some companies make misleading claims about being deforestation-free. For instance, Nestlé says 96 percent of its “primary supply chain” of palm oil was deforestation-free in 2023 but doesn’t count the palm oil in animal feed. Without better policies and honest reporting, consumers cannot trust these claims. Companies must include embedded palm oil in their policies and be more transparent to ensure the protection of our forests.

The European Deforestation Regulation and Palm Oil-Based Animal Feed

In June 2023, the EU introduced regulation 2023/115, also called the EU Deforestation Regulation (EUDR). This regulation mandates companies trading in products like cattle, cocoa, coffee, palm oil, rubber, soy, and wood to ensure that these products are not linked to deforestation activities.

This policy affects companies that source their milk or dairy products from the region. European companies like Arla, Danone, Ferrero, FrieslandCampina, and Lactalis, as well as Nestlé and Unilever, have significant operations within the EU and are affected by this regulation. Danone claims 91 percent of its supply chain is deforestation-free. But if, for example, 10 percent of its dairy cows were to be given palm oil-based feed, substantial palm oil could enter its supply chain without NDPE guarantees.

Ferrero and Mars make deforestation-free claims for their palm oil supply chains but do not account for embedded palm oil in animal feed, making their claims misleading. Both companies lack transparency in their methodologies and rely on second-party rather than independent third-party verification.

Lack of Proper Regulation for Monitoring Palm Oil-Based Animal Feed Trade

Exporters are crucial in the palm oil supply chain, but it is challenging to identify them and ensure they follow the NDPE policy. RAN’s analysis of customs data from 2022 found that about 25 percent of exporters shipping palm oil-based animal feed from Indonesia and Malaysia to the U.S. were either unknown or listed as logistics companies.

Among the known exporters, around two-thirds of the feed-grade palm oil products entering the U.S. during the same year were not covered by public NDPE policies. The two largest exporters from Indonesia and Malaysia, Jati Perkasa Nusantara and Nutrion International, accounted for nearly one-third of total exports of palm oil products; they both lacked NDPE policies.

While nine exporters had NDPE policies, they were not reporting adequately on their implementation. These policies are only effective with proper monitoring and independent verification. Most exporters rely on self-reported compliance instead of independent checks regarding the execution of the policy guidelines. A lack of policies and traceability means European importers will struggle to ensure their products are deforestation-free, risking non-compliance with the EUDR.

Meanwhile, according to RAN’s report, out of 17 importers of feed-grade palm oil products to the U.S., most were not covered by NDPE policies.

Only two importers had published NDPE policies: Wilmar International and Perdue AgriBusiness, which accounted for just 12 percent of imports. The largest importers, Nutrition Feeds and Global Agri-Trade Corporation, responsible for 57 percent of palm oil products imports, didn’t adhere to NDPE commitments. Overall, 84 percent of the palm oil-based animal feed products imported by known companies to the U.S. in 2022 were not covered by NDPE policies.

The Paradox of Self-Governance

Profit-based corporations that have adopted NDPE policies are often in an uncomfortable position. By taking the pledge, a company would have to bear the financial cost of implementing it. By not taking the pledge, a company would sustain a blow to its public image. In a 2023 paper published in the Journal of Business Ethics, Janina Grabs, associate professor of sustainability research at the University of Basel, Switzerland, and Rachael D. Garrett, a professor of conservation and development at Cambridge University, United Kingdom, call this a “paradox” in “goal-based sustainability governance” while referring to the Indonesian palm oil sector.

“You cannot have both [no deforestation and smallholder inclusion]; you can have one, you can have the other,” a large integrated supply chain company representative told them during the anonymous interviews they conducted as part of their research. “And if you want to have both, you have to put some skin in the game and say, I will support change, and it will cost me. The problem is, if your neighbor doesn’t do it, your marketing team is going to say, ‘Why do we do that? We’re going to get hit, and we’re going to lose market shares.’ It’s an uncomfortable balance to find.”

The Role of the Consumer Goods Forum

The Consumer Goods Forum comprises leaders from 400 big retailers and manufacturers, including Danone, Nestlé, and Unilever. These companies sell products worth euro 4.6 trillion, many containing palm oil. In 2010, the CGF promised to stop deforestation by 2020 but has failed to meet this goal.

In 2020, the CGF started the Forest Positive Coalition to stop deforestation in supply chains. This coalition has a Palm Oil Roadmap to ensure responsible palm oil use by adopting NDPE policies. “However, the CGF’s methodology for calculating ‘Palm Oil Deforestation and Conversion Free’ volumes does not state the need to ensure volumes include the volume of palm oil used in animal feed. This is in contrast to the methodology for soy, which details the types of ‘embedded soy’ products that need to be included,” points out the RAN report. This omission could result in misleading deforestation-free claims by its members and the Forest Positive Coalition.

To stop deforestation, the CGF must enforce NDPE policies for all palm oil products, including animal feed, and ensure transparent reporting.

Policies and Transparency Are Essential

With climate change and biodiversity loss worsening, stopping the production and use of Conflict Palm Oil and preventing environmental and social injustices globally is crucial. Companies need transparent, well-monitored supply chains to ensure adherence to global regulations and sustainability promises. It is no longer acceptable to let millions of tons of palm oil, especially in animal feed, enter the U.S. without proper tracking.

The solution to this problem is simple: All companies must adopt a strict NDPE policy that includes embedded palm oil. The Consumer Goods Forum’s 400 companies and palm oil importers and exporters must also follow this policy. Brands must be honest about the products used in their supply chains and take tangible steps to stop human rights abuses and deforestation.

Transparency and companies taking responsibility for their actions are critical to protecting forests and upholding Indigenous Peoples’ rights.

This article was produced by Earth | Food | Life, a project of the Independent Media Institute. 

Emma Rae Lierley is a senior communications manager at Rainforest Action Network. She is a contributor to the Observatory.