UPDATED

US bans palm oil imports from Malaysian company over abuses

The ban on Sime Darby is another blow to an industry that has faced mounting allegations of labour and human rights abuses.

DESTRUCTION OF FOREST HABITAT ENDANGERING ORANGUTANS

A worker collects palm oil fruit inside a palm oil factory in Sepang, outside Kuala Lumpur, Malaysia, on June 18, 2014. (Reuters)

The United States has banned imports from a Malaysian palm oil giant whose products are found in numerous household goods over concerns that its workers face a litany of abuses.

The move against Sime Darby Plantation, one of the world's biggest producers, marks the second time the US has blocked shipments from a palm oil company in the Southeast Asian nation in recent months.

Palm oil is a common ingredient in items ranging from processed foods to cosmetics, with Malaysia and neighbouring Indonesia producing 85 percent of the world's supply.

But activists have long claimed that low-paid workers on plantations face abuse, and also blame the industry for driving destruction of rainforests to make way for plantations.


Workers facing abuse

Announcing the ban late on Wednesday, US Customs and Border Protection (CBP) said there was evidence Sime Darby workers face abuses including sexual and physical violence, withholding of wages and restrictions on movement.

The CBP said it issued a 'withhold release order' on Sime Darby, which will allow it to detain shipments based on suspicion of forced labour involvement under longstanding US laws aimed at combating human trafficking, child labour and other human rights abuses.

The CBP said the order was based on a months-long investigation that reasonably indicated the presence of the International Labour Organization's forced labour indicators at Sime Darby plantations.

"We do believe that there are some issues that are systemic across all of Sime Darby's plantations," Ana Hinojosa, executive director of CBP's Trade Remedy Law Enforcement Directorate, said on a call with reporters.

READ MORE: True face of beauty brands: Women palm oil workers raped and abused


Malaysian companies on radar

Sime Darby is the third Malaysian company to be slapped with a US ban this year over forced labour allegations after FGV Holdings, another Malaysian palm oil producer, and Top Glove, the world's biggest producer of medical-grade latex gloves.

Malaysia relies on over 337,000 migrant workers from countries like Indonesia, India and Bangladesh to harvest the palm fruit.

The CBP said the United States imported about $410 million worth of crude palm oil from Malaysia in the fiscal year that ended in September 2020, accounting for just over 30 percent of the United States' total palm oil purchases.

Sime Darby says its annual exports to the United States total about $5 million.

The company, which supplies major firms like Nestle and Unilever, runs a network of sprawling plantations, and employs migrant workers from countries including Indonesia and Bangladesh.

Earlier this year, anti-trafficking group Liberty Shared had petitioned the CBP to ban imports from Sime Darby over concerns about labour abuse.

In October, the US banned imports from another Malaysian palm oil producer, FGV Holdings, following a lengthy probe that found indications its workers faced abuse.

Sime Darby did not respond to requests for comment.

It supplies to some of the biggest names in the business, from Cargill to Nestle, Unilever and L'Oreal, according to the companies’ most recently published supplier and palm oil mill lists.

The ban "demonstrates how essential it is for Americans to research the origins of the everyday products that they purchase," said CBP acting commissioner Mark A. Morgan.

READ MORE: Malaysia PM stands by Kashmir comments as India calls for palm oil boycott

  

US bans second Malaysian palm oil giant over forced labor

By MARGIE MASON and ROBIN McDOWELL

today

FILE - In this Nov. 11, 2020, file photo, women from age 6 to 102 in a family that has worked on a palm oil plantation for five generations hold out the palms of their hands in Malaysia. The U.S. said it will ban all shipments of palm oil from one of the world’s biggest producers after finding indicators of forced labor and other abuses on plantations that feed into the supply chains of some of America’s most famous food and cosmetic companies. (AP Photo/File)


The U.S. said it will ban all shipments of palm oil from one of the world’s biggest producers after finding indicators of forced labor and other abuses on plantations that feed into the supply chains of some of America’s most famous food and cosmetic companies.

The order against Malaysian-owned Sime Darby Plantation Berhad and its local subsidiaries, joint ventures and affiliates followed an intensive months-long investigation by the U.S. Customs and Border Protection’s Office of Trade, said Ana Hinojosa, one of the agency’s executive directors.

Hinojosa said the investigation “reasonably indicates” abuses against workers that included physical and sexual violence, restriction of movement, intimidation and threats, debt bondage, withholding of wages and excessive overtime. Some of the problems appeared to be systemic, occurring on numerous plantations, which stretch across wide swaths of the country, she said.

“Importers should know that there are reputational, financial and legal risks associated with importing goods made by forced labor into the United States,” Hinojosa said in a telephone press briefing.

The order was announced just three months after the federal government slapped the same ban on another Malaysian palm oil giant, FGV Holdings Berhad -- the first palm oil company ever targeted by Customs over concerns about forced labor. The U.S. imported $410 million of crude palm oil from Malaysia in fiscal year 2020, representing a third of the total value shipped in.

The bans, triggered by petitions filed by non-profit groups and a law firm, came in the wake of an in-depth investigation by The Associated Press into labor abuses on plantations in Malaysia and neighboring Indonesia, which together produce about 85% of the $65 billion supply of the world’s most consumed vegetable oil. Palm oil can be found in roughly half the products on supermarket shelves and in most cosmetic brands. It’s in paints, plywood, pesticides, animal feed, biofuels and even hand sanitizer.

The AP interviewed more than 130 current and former workers from two dozen palm oil companies, including Sime Darby, for its investigation. Reporters found everything from rape and child labor to trafficking and outright slavery on plantations in both countries.

Earlier this month, 25 Democratic lawmakers from the U.S. House Ways and Means Committee cited AP’s investigation in a letter calling for the government to come down harder on the palm oil industry in Malaysia and Indonesia, asking Customs and Border Protection if it had considered a blanket ban on imports from those countries.

“In our view, these odious labor practices and their pervasive impact across supply chains highlight the need for an aggressive and effective enforcement strategy,” the letter said.

Sime Darby, which did not immediately comment, has palm oil plantations covering nearly 1.5 million acres, making it one of Malaysia’s largest producers. It supplies to some of the biggest names in the business, from Cargill to Nestle, Unilever and L’Óreal, according to the companies’ most recently published supplier and palm oil mill lists.

Hinojosa said the agency’s decision to issue the ban should send an “unambiguous” message to the trade community.

“Consumers have a right to know where the palm oil is coming from and the conditions under which that palm oil is produced and what products that particular palm oil is going into,” she said.

Meanwhile, Duncan Jepson of the anti-trafficking group Liberty Shared, which submitted the petition leading to the Sime Darby ban, filed two additional complaints Wednesday — one to the UK’s Home Office, questioning the company’s disclosure about its protection of human rights under the country’s Modern Slavery Act, and the other to the Malaysian stock exchange, regarding the company’s stated commitments to sustainability. Both complaints questioned the accuracy of Sime Darby’s disclosures in light of the CPB’s findings.

Jepson said the U.S. ban also should be a red flag for Asian and Western financial institutions that have helped support the industry, saying ties to forced labor could have serious consequences for banks and lenders.

The U.S. government’s announcement about Sime Darby marked the 14th time this year Customs has issued an order to detain shipments from an array of sectors following similar investigations into forced labor. They include seafood and cotton, along with human hair pieces believed to have been made by persecuted Uighur Muslims in Chinese labor camps.

Under Wednesday’s order, palm oil products or derivatives traceable to Sime Darby will be detained at U.S. ports. Shipments can be exported if the company is unable to prove that the goods were not produced with forced labor.

#BANPALMOIL

 

Is there more to palm oil than deforestation?

by University of Göttingen

Palm oil fresh fruit bunches. Credit: Sophie-Dorothe Lieke

Palm oil is the world's most produced and consumed vegetable oil and everyone knows that its production can damage the environment. But do consumers have the full picture? In fact, replacing palm oil with rapeseed oil would require a four to five-fold increase in the amount of land needed.

Research led by the University of Göttingen investigated the attitudes, beliefs and understanding about palm oil of the general public in Germany, and how this links to land use. The researchers show that people find it hard to know the consequences of their buying choices, even when extra information is supplied. The results were published in Sustainable Production and Consumption.

For this study, researchers first conducted an in-depth literature review on the effects of "indirect land use change" to assess the effects of switching from palm oil production. "Indirect land use change" refers to the effects on the environment due to land use change resulting from the increased demand for certain agricultural crops or biofuels. They then conducted an online survey on a sample of 1,247 people in the German population.

Among other issues, questions covered the overall importance of palm oil in the food industry and explored how people felt about the "free from palm oil" claim compared to a certification label, the consequences of land use change and comparisons with using other vegetable oils. They then measured the effect of providing consumers with extra information in the form of two separate infographics: one on palm oil generally and the other on indirect land use change specifically.

Bottles and bags of palm oil often found in Indonesian corner stores and supermarkets. Credit: Sophie-Dorothe Lieke

The results showed that product information and labeling can produce a confusing and misleading picture for consumers. The provision of extra information influenced responses but the effect was small. Customers were attracted to the "free from palm oil" label.

They showed more trust towards it and perceived it as superior from both health and environmental perspectives, even if for the latter sustainably produced palm oil might be a more environmentally-friendly option. After receiving the additional information, many consumers were still skeptical about the potential benefits of sustainably produced palm oil in comparison with other vegetable oils such as soybean, sunflower and rapeseed oil.

Findings from this study are important as they provide insights into how consumers can be encouraged to grapple with complex and often controversial food choices. "Consumers have limited time to weigh up the social, environmental or health attributes of products," says Sophie-Dorothe Lieke from Göttingen University's Department of Agricultural Economics and Rural Development.

Lieke adds, "Our research shows that many find the information overwhelming and want clear, reliable guidance. This could be in the form of introducing an 'eco-label' which would not only pick up differences in production systems but also help guide shoppers in making more informed decisions about the environmental impact their purchases have."

More information: Sophie-Dorothe Lieke et al, Can consumers understand that there is more to palm oil than deforestation?, Sustainable Production and Consumption (2023). DOI: 10.1016/j.spc.2023.05.037

Provided by University of Göttingen Sustainable palm oil? How environmental protection and poverty reduction can be reconciled

JUST SAY NO TO PALM OIL
What are EU's options in palm oil row with Malaysia and Indonesia?

Indonesia and Malaysia say the EU's palm oil restrictions are unfair and "discriminatory" and are hoping for the WTO to resolve the dispute. Meanwhile, the EU has been introducing new limits on using palm oil as fuel.



Palm oil can be used to produce fuel, but emissions are very high

The World Trade Organization could soon rule on two cases brought against the European Union over its decision to phase out the import of unsustainable palm oil by 2030.

The complaints were filed by Indonesia and Malaysia, the world's two largest palm oil producers, who slammed Brussels' Renewable Energy Directive II as unfair and "discriminatory."

The EU has been sending mixed signals on the controversial issue.

On one hand, its officials have made clear that oil production is a leading cause of deforestation and so cannot comply with renewable energy targets. There is also an issue of pollution — palm oil diesel releases up to three times as many emissions compared to traditional petroleum-based fuel.

In early July, EU lawmakers adopted draft rules for the ReFuelEU initiative, which would mean 85% of all aviation fuel would have to be "sustainable" by 2050. Palm oil byproducts would not be acceptable. And there is now talk in the European Parliament of bringing forward the final phaseout date for palm oil imports, currently set at 2030.

At the same time, Brussels has attempted dialogue with palm oil exporters in recent months, including through the ASEAN-EU Joint Cooperation Committee meeting in Jakarta in late June.

And since the introduction of a renewable energy directive in 2018, the EU's imports of palm oil have actually increased. In 2021, the EU imported €6.3 billion ($6.4 billion) worth of palm oil and palm oil products, most used for biofuels.

Indonesia and Malaysia accounted for 44.6% and 25.2% of those imports, respectively. EU imports from Indonesia were up 9% last year, compared to 2020, according to Indonesian government data. Russia's war in Ukraine, which started in late February, has put additional pressure on Brussels to secure its fuel supply.

Indonesia and Malaysia together dominate the world's palm oil supply

Malaysia decries 'crop apartheid'

The Malaysian and Indonesian governments have also tried to keep their options open in the EU row.

"Malaysia has often employed both a cordial and confrontational approach over palm oil with the EU, not exclusively one or the other," explained Helena Varkkey, associate professor at the Department of International and Strategic Studies at the University of Malaya.

Earlier this year, Malaysian Plantation Industries and Commodities Minister Zuraida Kamaruddin slammed what she called "crop apartheid."

"We will show them that Malaysia is not a nation to be fooled around with," she said.

Last month, however, she said Kuala Lumpur wants a cordial, "win-win" solution to this problem, referencing the World Trade Organization.

"WTO cases take a long time to resolve, so it would still be necessary for countries to engage outside of the WTO during this process, and Malaysia probably sees the benefit of doing so amicably," said Varkkey.

And with the dispute ongoing, the Malaysian government is busy finding new markets. During his visit to Kuala Lumpur this month, China's Foreign Minister Wang Yi vowed that Beijing would increase imports of palm oil from the country. China is currently the world's second-largest importer of the product, after India.
What if the WTO rules against the EU?

The WTO decision seems to be drawing near. The panel to decide Indonesia's case was formed in November 2020. A panel of the same members was formed for Malaysia's case in July 2021. Both are chaired by Manzoor Ahmad, Pakistan's former permanent representative to the WTO. Members are Sarah Paterson, of New Zealand, and Arie Reich, of Israel.

A senior EU official, who requested anonymity, said they expect a decision before the end of the year.

If the WTO panels were to rule in favor of Indonesia and Malaysia, Brussels has three options, explained Stefan Mayr, a senior scientist at the Institute for Law and Governance at Vienna University of Economics and Business.

First, the EU could appeal the panel report. But that could set back a final ruling by years, as any decision would have to come after new members are appointed to the WTO's Appellate Body. The body is currently not functioning due to the US blocking new appointees.

The second option, Mayr noted, would be for the EU to comply with the WTO ruling and adapt the environmental policies established by the Renewable Energy Directive II. Whether the EU could make cosmetic changes to its palm oil phaseout, while keeping the essence of the policy, is unclear.

Lastly, the EU could simply carry on regardless and accept any retaliatory measures imposed by Indonesia and Malaysia.

This last option, however, doesn't seem too likely. A senior EU source with knowledge of this issue, who requested anonymity, said: "we will, of course, abide by whatever the WTO decides."

Geopolitics and palm oil

If the EU was to ignore the ruling, Indonesia and Malaysia would struggle to retaliate economically, analysts reckon. According to European Commission data, Malaysia is only the EU's 20th largest trading partner in goods; Indonesia is 31st.

But another EU official, also not authorized to speak publicly on the issue, speculated that Brussels would not want to unnecessarily frustrate two key actors in Southeast Asia, where the EU is keen on boosting its reputation and signing new free trade deals. Because of the energy crisis caused by the Ukraine war, the official also expects EU imports of palm oil to continue growing in the coming years.

Moreover, Jakarta has one more card to play — it could limit the export of raw materials necessary for the production of stainless steel. The EU brought a case against Indonesia to the WTO on this issue in November 2019.

"Which option the EU would choose is obviously not a purely legal question," said Mayr.

"There are conflicting interests at play and in light of the current geopolitical situation, it seems even more difficult to gauge how the EU would react to an unfavorable outcome in the WTO disputes."

Edited by: Darko Janjevic

BOYCOTT PALM OIL

Malaysia plans ‘orangutan diplomacy’ in palm oil pitch

Commodities minister says critically endangered animals could be given to countries that buy Malaysia’s palm oil.

In the wild, orangutans survive only in Borneo and Sumatra [File: Mohd Rasfan/AFP]

Published On 8 May 2024

Malaysia has said it plans to start an “orangutan diplomacy” programme for countries that buy its palm oil.

The Southeast Asian nation is the world’s second biggest producer of the edible oil after Indonesia, but critics say the mass development of the industry has fuelled deforestation and destroyed the habitat of critically endangered orangutans and other emblematic species in one of the world’s biodiversity hotspots.

Orangutans live only on the island of Borneo and the Indonesian island of Sumatra.

The International Union for Conservation of Nature’s Red List estimates the orangutan population on Borneo, which is shared between Brunei, Indonesia and Malaysia, will decline to about 47,000 by 2025 as a result of human pressures and loss of habitat. It estimates there are about 13,500 orangutans left in Sumatra.

Minister of Plantation and Commodities Johari Abdul Ghani said the orangutan programme was inspired by China’s panda diplomacy and would target countries buying palm oil to “prove” Malaysia’s commitment to conservation and biodiversity.

He said leading importing countries, such as China, India and some European Union members, would likely receive the orangutans. He did not elaborate on how the programme would work or when it would start.

“Malaysia cannot take a defensive approach to palm oil,” he told delegates at a biodiversity forum in Genting, east of Kuala Lumpur, that he later shared on social media. “We need to show the countries of the world that Malaysia is a sustainable oil palm producer and committed to protecting forests.”

Beijing, which operates a giant panda breeding programme, generally loans pandas for 10 years providing the countries meet certain conditions for their care. Malaysia received two pandas in 2014, building them a multimillion-dollar air-conditioned enclosure at the National Zoo in Kuala Lumpur.

Malaysia does not have a breeding programme for orangutans, although there are conservation centres for them in Sarawak and Sabah on Borneo. NGOs also run conservation programmes to restore their habitat.

Johari urged large palm oil producers to collaborate with NGOs on conservation and sustainability.

Palm oil is used in a huge variety of products, from shampoo to ice cream and bread.

The industry has been trying to improve sustainability amid pressure from campaigners over its effect on the environment through groups such as the Roundtable for Sustainable Palm Oil (RSPO).

KEEP READINGl

Can plantations value more than profit? Some in Malaysia think so

Malaysian palm oil giant seeks to repair image after abuse claims

Can Brazil and Argentina satiate India’s food oil hunger?

Deforestation: The $53bn threat to agri-businesses

Malaysia eyes ‘orang utan diplomacy’ with nations that import palm oil

As part of a diplomatic strategy, Malaysia will offer gifts of orangutans to trading partners. 

MAY 08, 2024, 03:57 PM

KUALA LUMPUR – Malaysia plans to introduce “orang utan diplomacy” in its relations with major palm oil-importing countries, offering the animals as trading gifts in an effort to allay concerns about the environmental effects of growing the commodity.

The plan, likened to China’s “panda diplomacy” by the commodities minister, comes after the European Union (EU) approved a ban in 2023 on imports of commodities linked to deforestation, which could hurt palm oil.

Malaysia, the world’s second-largest producer of palm oil after Indonesia, has said the law is discriminatory and aimed at protecting the EU’s oilseeds market. Palm oil is used in everything from lipstick to pizza.

As part of a diplomatic strategy, Malaysia will offer gifts of orang utans to trading partners, particularly major importers such as the EU, India and China, Plantation and Commodities Minister Johari Abdul Ghani said.

“This will prove to the global community that Malaysia is committed to biodiversity conservation,” Mr Johari said on social media platform X late on May 7.

“Malaysia cannot take a defensive approach to the issue of palm oil,” he added.

“Instead we need to show the countries of the world that Malaysia is a sustainable oil palm producer and is committed to protecting forests and environmental sustainability.”

No further details of the plan were immediately available.

On its website, conservation group WWF says the apes, distinguished by its red fur, and a name that means “man of the forest” in Malay, is critically endangered, with a population of less than 105,000 on the island of Borneo. REUTERS

Explainer-Indonesia's stop-start controls on palm oil exports

A woman shops for cooking oil made from oil palms at a supermarket in Jakarta, Indonesia, March 27, 2022. REUTERS/Willy Kurniawan

24 May 2022

Indonesian President Joko Widodo has agreed to allow palm oil exports to resume after a three-week ban, though it is unclear how rapidly shipments will resume given accompanying rules aimed at securing domestic supply.

Indonesia's frequent export policy changes have unnerved the edible oil markets and heightened concerns about global food prices.

The country is the biggest exporter of palm oil - used in everything from margarine to shampoo - accounting for about 60 per cent of world supply.

WHAT ARE THE LATEST CHANGES?

Indonesia reopened exports for crude palm oil (CPO) and some of its derivative products from May 23 but export permits will be required to show companies have met a so-called Domestic Market Obligation (DMO).

The government has yet to make public details of the DMO, but chief economics minister Airlangga Hartarto said the target was to keep 10 million tonnes of cooking oil at home.

Last year, Indonesian produced 51 million tonnes of CPO and kernel oil, with around 9 million tonnes consumed locally for food.

Asked what portion of palm oil production would be sold domestically under the DMO, Hartarto said it would be 30 per cent with a target to lower it to 20 per cent.

WHY HAS INDONESIA BEEN SEEKING TO CONTROL PALM OIL EXPORTS?

Since November, authorities have unrolled a bewildering array of measures including subsidies, export permits and a palm oil levy as well as export bans to contain cooking oil prices.

However, this has failed to bring the cost of the household necessity made from palm oil into line with a government target of 14,000 rupiah ($0.9554) per litre.

Nonetheless, Indonesia removed the export ban, claiming prices were heading lower and following protests by farmers and calls by lawmakers to reconsider the policy.

Trade ministry data showed as of Monday cooking oil averaged 16,900 rupiah per litre, down from an average of 18,000 rupiah in April but up from 13,300 rupiah in July.

HAVE EXPORTS RESUMED?

While there has been anger over Indonesia's policy flip-flops among some major buyers in countries such as India and Bangladesh, analysts do not expect many to cut off buying.

Traders in India said Indonesian sellers have started to accept new orders, but were not rushing to sign business before understanding the DMO rules.

Palm oil producer Musim Mas, for example, said on Monday it was still focused on "flooding the domestic markets with cooking oil", noting concern about stubbornly high retail prices.

Palm oil companies are awaiting further guidance from the government, with authorities holding meetings with industry participants to explain changes.

WHAT HAS BEEN HINDERING COOKING OIL DISTRIBUTION?

Trade Minister Muhammad Lutfi on March 18 blamed a "palm oil mafia" for exploiting the situation.

Still, red tape has also been blamed, with palm refiners wary of releasing cooking oil supplies because of a complicated process of getting subsidies. On Tuesday, a government official said the subsidy would be replaced by another policy to control prices.

The government has also assigned state food procurement agency Bulog to distribute more cooking oil, but last week it said regulations were needed to allow it to start.

Asked about distribution issues, an industry ministry official said there were many components but logistics and transport limitations were key obstacles.

WHAT WILL THE ENDGAME BE?

As was the case with Indonesia's ban of coal exports in January, the government has eased the ban on palm oil shipments in less than a month.

Still, despite the ban costing hundreds of millions of dollars in lost state revenue, the president appears ready to make further policy changes if needed, particularly after his approval rating hit a six-year low in a recent survey.

He has appointed senior minister Luhut Pandjaitan to oversee cooking oil distribution in the populous islands of Java and Bali.

"The objective is for bulk cooking oil to reach the price level targeted by the government, and to be evenly and amply distributed," said Jodi Mahardi, a spokesperson for Luhut.

($1 = 14,645.0000 rupiah)

(Editing by Ed Davies and Jason Neely)
Source: Reuters

BAN PALM OIL SAVE ORANGUTANS


Malaysia aims to regain palm oil market share in EU amid global shortage

KUALA LUMPUR (Reuters) - Malaysia, the world's second largest palm oil producer, on Friday said it plans to leverage the global edible oil shortage and "political tension in Europe" to regain market share after buyers shunned the commodity over environmental concerns.

Palm oil is used to make everything from lipstick to noodles, but top producers Indonesia and Malaysia have faced boycotts after being accused of clearing rainforests and exploiting migrant workers for the rapid expansion of plantations.

Some companies have introduced "palm oil-free products" in recent years, and the European Union (EU), the world's third-biggest palm buyer, has ruled to phase out palm oil-based biofuels by 2030.

But retailers like British supermarket chain Iceland, which removed palm oil from its own-brand food starting in 2018, have been forced to return to the controversial commodity in recent months due to a global edible oil shortage triggered by the Russia-Ukraine war and Indonesia's ban on palm oil exports.

Zuraida Kamaruddin, Malaysian Minister for Plantation Industries and Commodities, said in a statement the government "will not want to waste a good crisis".

"It is time we step up efforts to counter adverse propaganda to undermine palm oil's credibility and for us to showcase the numerous health benefits the golden oil has to offer," she said.

Zuraida said global edible oil prices are likely to remain high in the first half of 2022 and EU demand is expected to increase in the near term due to tight sunflower and soy oil supplies.

EU vegetable oil group FEDIOL on Tuesday said Indonesia's ban is not a concern as it has palm oil reserves for several weeks.

Uncertainty over sunflower oil supplies due to Russia's invasion of Ukraine has spurred demand for rivals palm and soy oil as importers seek alternatives, fuelling a red-hot vegetable oil market.

Zuraida said Malaysia stands to benefit from this shifting demand and will undertake "aggressive efforts and campaigns" to fill the global supply gap in the long run.

Malaysia and Indonesia, which account for 85% of global palm oil output, have maintained that EU restrictions on palm oil-based biofuels are discriminatory and have launched separate cases with the World Trade Organisation.

($1 = 4.3700 ringgit)

(Reporting by Mei Mei Chu; Editing by Kanupriya Kapoor)

Recriminations fly as Indonesia resumes palm oil exports

Trucks with palm fruit queue for unloading at a factory in West Aceh, Indonesia, on May 17, 2022. 

PHOTO: REUTERS

JAKARTA (REUTERS) - Long lines of trucks trying to unload palm fruit formed outside Indonesian processing mills this week, illustrating the growing cost of a palm oil export ban by the world's biggest producer.

The trucks were stuck for days as storage space for palm oil neared capacity and, with local crop prices slumping by 70 per cent, farmers took to the streets to demand a policy change.

President Joko Widodo has now agreed to lift the export ban, despite a bid to flood the local market with palm oil failing to bring down the price of cooking oil to a government target.

"Ultimately, an increasing realisation that the export ban was starting to hurt palm oil producers without benefiting the end-consumers all that much prompted the reversal," Mr Wellian Wiranto, an economist at OCBC Bank in Singapore, said in a note.

A oil palm farmer in West Sulawesi told Reuters trucks in his area had been stuck for days as farmers desperate to try to limit losses bypassed agents and offloaded their crop.

"But the mill is prioritising their partners, so the number of non-partner farmers is rising and waiting in a long queue," said Mr Irfan, who uses one name.

The pain caused to farmers comes after a string of policy changes aimed at containing the soaring price of palm oil, a staple for Indonesian families.

Mr Widodo, or Jokowi, as the president is popularly known, imposed the export ban, saying a need for affordable food trumped revenue concerns.

The President then justified ending the export ban by arguing cooking oil prices were expected to come down in coming weeks.

On Friday (May 20), his government unsettled markets again by announcing a domestic sales requirement to ensure supply at home.

Damage to trade relationships?

The cost of the export ban was estimated by the government at US$400 million (S$552 million) a month in lost state revenue, but there are also questions over longer-term damage in the eyes of Indonesia's trading partners.

India, the world's biggest buyer of palm oil, previously bought two-thirds of its supplies from Indonesia but has started to buy more from Malaysia and Thailand.

"We incurred losses this month as Indonesian shipments couldn't land because of the ban. We bought from other suppliers at a higher price," said a Mumbai-based palm oil buyer.

A Bangladesh-based vegetable oil refiner also expressed frustration over Indonesian flip-flops.

"Indonesia was our biggest supplier with a market share of more than 80 per cent. But we will bring down reliance even if Indonesia removes all the restrictions," said the Dhaka-based refiner.

Pakistan, another big buyer, was also looking to balance out it suppliers, including from the world's second-biggest producer, Malaysia.

"Pakistan would love to buy more from Malaysia, but they don't have enough stocks," said Mr Rasheed Jan Mohd, chairman of the Pakistan Edible oil Refiners Association.

Malaysia's Plantation Industries and Commodities Minister Zuraida Kamaruddin said in a May 10 interview that some importing countries had sought to increase supplies of Malaysian palm oil.

Still, Mr Julian McGill, head of South-east Asia at LMC International, said importers were unlikely to cut themselves off from Indonesia.

"When Indonesia re-enters the market, as a distress seller of the large stocks that have accumulated during the export ban, they should find plenty of buyers," he said.

MORE ON THIS TOPIC

Why Indonesia's palm oil export ban has not cooled cooking oil prices

Indonesian farmers stage protests against palm oil export ban

Indonesia to impose local sales rule when palm oil exports restart May 23

Palm oil futures up over 3% in Malaysia on Indonesia's new domestic sales plan

‘We Work Until We Are Dying’: Palm Oil Labour Abuses Linked To Top Brands

Workers claim they've been cheated, threatened and forced to work off insurmountable debts despite some only making $2 per day.

• Margie Mason and Robin McDowellAssociated Press via CP

ORE HUIYING/AP VIA CP

An Indonesian migrant worker rests after working on a palm oil plantation run by the government-owned Felda in Malaysia in early 2020.

PENINSULAR, Malaysia — An invisible workforce of millions of labourers from some of the poorest corners of Asia toil in the palm oil industry, many of them enduring various forms of exploitation, with the most serious abuses including child labour, outright slavery and allegations of rape, an Associated Press investigation has found.

In Malaysia and Indonesia, these workers tend the heavy reddish-orange palm oil fruit that makes its way into the supply chains of many iconic food and cosmetics companies like Unilever, L’Oreal, Nestle and Procter & Gamble.

Together, the two countries produce about 85 per cent of the world’s estimated $87 billion (US$65 billion) palm oil supply.

Palm oil is virtually impossible to avoid. Often disguised on labels as an ingredient listed by more than 200 names, it can be found in roughly half the products on supermarket shelves and in most cosmetic brands. It’s contained in paints, plywood, pesticides and pills. It’s also present in animal feed, biofuels and even hand sanitizer.

The AP interviewed nearly 130 current and former workers from two dozen palm oil companies who came from eight countries and laboured on plantations across wide swaths of Malaysia and Indonesia. Almost all had complaints against their treatment, with some saying they were cheated, threatened, held against their will or forced to work off unsurmountable debts. Others said they were regularly harassed by authorities, swept up in raids and detained in crowded government facilities.

They included members of Myanmar’s long-persecuted Rohingya Muslim minority, who fled ethnic cleansing in their homeland only to be sold into the palm oil industry. Fishermen who escaped years of slavery on boats also described coming ashore in search of help, only to be trafficked onto plantations ― sometimes with police involvement. They said they worked for little or no pay and were trapped for years.

This has been the industry’s hidden secret for decades.Gemma Tillack, Rainforest Action Network

The AP used the most recently published data from producers, traders and buyers of the world’s most-consumed vegetable oil, as well as U.S. Customs records, to link the labourers’ palm oil and its derivatives from the mills that process it to the supply chains of top Western companies like the makers of Oreo cookies, Lysol cleaners and some of Hershey’s chocolatey treats.

AP reporters witnessed some abuses firsthand and reviewed police reports, complaints made to labour unions, videos and photos smuggled out of plantations and local media stories to corroborate accounts wherever possible. In some cases, reporters tracked down people who helped enslaved workers escape. More than a hundred rights advocates, academics, clergy members, activists and government officials also were interviewed. 

Though labour issues have largely been ignored, the punishing effects of palm oil on the environment have been decried for years. Still, giant Western financial institutions like JPMorgan Chase, Deutsche Bank and the Vanguard Group have continued to help fuel a crop that has exploded globally, soaring from just five million tons in 1999 to 72 million tons today, according to the U.S. Department of Agriculture.

Sometimes they invest directly but, increasingly, third parties are used like Malaysia-based Malayan Banking Berhad, or Maybank, one of the world’s biggest palm oil financiers. It not only provides capital to growers but, in some cases, processes the plantations’ payrolls, with arbitrary and inconsistent wage deductions that are considered indicators of forced labour.

ORE HUIYING/AP VIA CP    

A worker bathes at a palm oil plantation run by government-owned Felda in peninsular Malaysia in early 2020. 

“This has been the industry’s hidden secret for decades,” said Gemma Tillack of the U.S.-based Rainforest Action Network, which has exposed labour abuses on palm oil plantations. “The buck stops with the banks. It is their funding that makes this system of exploitation possible.”

The AP found widespread labour abuses on plantations big and small, including some that meet certification standards set by the global Roundtable on Sustainable Palm Oil (RSPO), an association that promotes ethical production ― including labour practices ― and whose members include growers, buyers, traders and environmental watchdogs.

Some of the same companies that display the RSPO’s green palm logo signifying its seal of approval have been accused of continuing to grab land from Indigenous people and destroying virgin rainforests that are home to orangutans and other critically endangered species.

As global demand for palm oil surges, plantations are struggling to find enough labourers, frequently relying on brokers who prey on the most at-risk people. Many foreign workers end up fleeced by a syndicate of recruiters and corrupt officials and often are unable to speak the local language, rendering them especially susceptible to trafficking and other abuses.

They sometimes pay up to $6,700 (US$5,000) just to get their jobs ― an amount that could take years to earn in their home countries ― often showing up for work already crushed by debt. Many have their passports seized by company officials to keep them from running away, which the United Nations recognizes as a potential flag of forced labour.

Countless others remain off the books, including migrants working without documentation and children who AP reporters witnessed squatting in the fields like crabs, picking up loose fruit alongside their parents. Many women also work for free or on a day-to-day basis, earning the equivalent of as little as $2 a day, sometimes for decades.

‘It makes us very sad’

The AP talked to some female workers who said they were sexually harassed and even raped in the fields, including some minors.

The workers AP interviewed came from Indonesia, Malaysia, Bangladesh, India, Nepal, the Philippines and Cambodia, along with Myanmar, which represents the newest army of exploited labourers. The AP is not fully identifying them or their plantations to protect their safety.

“We work until we are dying,” said one worker sitting in a room with two other colleagues at a Malaysian plantation run by Felda, a government-owned company. Their eyes filled with tears after learning Felda was one of the world’s largest palm oil producers.

“They use this palm oil to make all these products,” he said. “It makes us very sad.”

The Malaysian government was contacted by the AP repeatedly over the course of a week, but issued no comment. Felda also did not respond, but its commercial arm, FGV Holdings Berhad, said it had been working to address workers’ complaints, including making improvements in recruitment practices and ensuring that foreign labourers have access to their passports.

Nageeb Wahab, head of the Malaysian Palm Oil Association, a government-supported umbrella group, called the allegations against the industry unwarranted: “All of them are not true,” he said.

The Indonesian Palm Oil Association said it has been striving to improve labour conditions for the last five years. Soes Hindharno, spokesman for the country’s Ministry of Manpower and Transmigration, said any company violating government rules and regulations on serious issues like child labour and not paying women workers could face sanctions, including having their operations shut down.

Unilever, L’Oreal, Nestle and Procter & Gamble all said they do not tolerate human rights abuses and investigate allegations raised about companies that feed into their supply chains, taking appropriate action when warranted, which can include working with suppliers to improve conditions or suspending relationships when grievances are not properly addressed.

Deutsche Bank reiterated its support of human rights, Vanguard said it monitors companies in its portfolio for abuses, and JPMorgan Chase declined comment.

Maybank expressed surprise at the criticism of its standards, saying that “we reject any insinuation that Maybank may be involved in any unethical behaviour.”

This story was funded in part by the McGraw Center for Business Journalism at CUNY’s Newmark Graduate School of Journalism.

With files from Sopheng Cheang and Gemunu Amarasinghe.

Palm oil production can grow without converting rainforests and peatland

Nebraska agronomist: 'Potential impact is huge'

UNIVERSITY OF NEBRASKA-LINCOLN

Research News

 

IMAGE: BUNCHES IN AN OIL PALM PLANTATION IN INDONESIA. IT TAKES ABOUT 38 WEEKS FROM INITIATION UNTIL BUNCHES ARE READY FOR HARVEST. view more 

CREDIT: HENDRA SUGIANTO/UNIVERSITY OF NEBRASKA-LINCOLN

Lincoln, Neb., March 25, 2021 -- Palm oil, the most important source of vegetable oil in the world, is derived from the fruit of perennial palm trees, which are farmed year-round in mostly tropical areas. The palm fruit is harvested manually every 10 days to two weeks, then transported to a mill for processing, and ultimately exported and made into a dizzying array of products from food to toiletries to biodiesel.

"You probably ate palm oil for breakfast," said Patricio Grassini, an associate professor of agronomy at the University of Nebraska-Lincoln. "There is probably palm oil in your shampoo and for sure palm oil in your makeup."

Dozens of countries produce palm oil, but Indonesia produces approximately two-thirds of the world's supply, and demand for the product is ever-growing.

This is a double-edged sword for Indonesia and other palm-oil producing countries, Grassini said. Palm oil is a major export and contributes to the economic stability of countries that are major producers, as well as to the individual farmers who produce it. But to keep up with demand, rainforests and peatlands - valuable ecosystems that contribute greatly to biodiversity -- are often converted to palm production.

A four-year research project led by Grassini and supported by a $4 million grant from the Norwegian Ministry of Foreign Affairs suggests that keeping up with demand may not necessarily mean converting more valuable, fragile ecosystems into agricultural land.

According to research published March 25 in Nature Sustainability, palm oil yields on existing farms and plantations could be greatly increased with improved management practices. Researchers from the Indonesian Oil Palm Research Institute, the Indonesian Agency for Agriculture Research and Development, and Wageningen University in the Netherlands were also part of this project.

In Indonesia, about 42% of land used for palm oil production is owned by small holder farmers, with the rest managed by large plantations, said Juan Pablo Monzon, a UNL research assistant professor of agronomy and horticulture and first author of the published paper. "There is great potential to increase productivity of current plantations, especially in the case of smallholders' farms, where current yield is only half of what is attainable."

The research shows that palm farmers have significant opportunity to increase their production, said Grassini, one of the developers of the Global Yield Gap Atlas, a collaboration between UNL and Wageningen University in the Netherlands designed to estimate the difference between actual and potential yields for major food crops worldwide including palm oil.

"The potential impact is huge, and if we are able to realize some of that potential, that means a lot in terms of reconciling economic and environmental goals," Grassini said. "If we can produce more, we don't need to expand into new areas. But this would require the effective implementation of current Indonesia government policy and assuring that regulations are enforced so that intensification and productivity gains translate into sparing critical natural ecosystems."

The gap between the current and attainable yields could be bridged by implementing good agronomic practices, Monzon said. As a result, the country could produce 68% more palm oil on existing plantation area located in mineral soils.

Grassini and other researchers identified key management practices that could lead to larger yields. Those practices include improved harvest methods, better weed control, improved pruning and better plant nutrition. Grassini and other researchers now are working with producers, non-government organizations, Indonesian government officials and a host of other partners to put these management techniques into practice. Already they have begun to see improvements in yields.

This is exciting from both environmental and economic standpoints, Grassini said. It also stands to have a great impact on the millions of individual farmers who draw their livelihood from small palm farms often comprised of just a few acres.

"Whatever we do to help the farmers produce more palm oil on the land that they have directly impacts their income and directly impacts their families," Grassini said. "It could be the difference between sending kids to school or not."

The first phase of the research - the research that identified the yield gap - was surprising, Grassini said. Indonesia had already gone through a period of agricultural intensification that had resulted in better yields for rice and corn, and he hadn't anticipated quite so much room for improvement when it came to palm oil.

But it's the second phase of the research that really excites him. So many people from so many different backgrounds are all working together to fine-tune management strategies and put them into practice. After just 15 months, yields on test plots are already up, with potential for more growth in the future. Robust education and extension efforts will be key to fully exploit the potential for growth, Grassini said.

"I don't think you will find too many projects where people are working side-by-side on the production side, science side and environmental side," Grassini said. "All are bringing real solutions to the table and together can have a massive impact."

CAPTION

Young oil palm plantation in Indonesia. Each plantation cycle is about 25 years.

CREDIT

Hendra Sugianto/University of Nebraska-Lincoln