Climate deal puts brakes on Indonesian palm oil plan

By Jess Halliday

- Last updated on GMT

Related tags: Palm oil, Board of directors

Indonesian palm oil producers will need to increase productivity to meet output targets following signature of a climate deal with Norway that would curb expansion of oil palm estates.

Indonesia is currently the world’s biggest palm oil producer and the 2009 yield was around 20m MT. Given growing demand for the commodity oil, used by food, personal care and other industries, it has been aiming at an output of 40m tonnes by 2020.

But last week the country signed a $1bn financing deal with Norway that includes revoking existing forestry licenses in a bid to protect rainforests and peat lands. The government has promised a land swap, but palm oil producers expect this process to take years.

Vice chairman of the Indonesian Palm Oil Board Derom Bangun said the 40m tonne goal would be achievable if oil palm estates expanded by 200,000 – 300,00 hectares a year, according to Reuters​ – but the deal may see expansion slowed to just 50,000 hectares a year.

“We will need to boost productivity,”​ Bangun told Reuters.

Expansions are already understood to have dropped back from highs of 300,000 to 400,000 hectares a year in 2007-8, following pressure from green groups.

More productive

In a recent interview with FoodNavigator.com Marc den Hartog, executive board member of the Roundtable on Sustainable Palm Oil and sales and marketing director of IOI Loders Croklaan emphasised the need for better land management practices.

IOI is working with smallholders in Malaysia on projects to educate over effective use of land. Palm plantations already give a 5 to 10 times higher yield per hectare than other oilseed plantations, and IOI manages to increase this another 1.5 times.

“Using land more effectively can help avoid issues like deforestation,”​ den Hartog said.

IOI-Loders Croklaan is one of several palm oil suppliers that is now able to supply segregated certified sustainable palm oil in Europe, thanks to the commissioning of a dedicated refinery. Others are New Britain Palm Oil, which announced this week that its new Liverpool refinery is fully up and running; and Spain’s Lipsa, which is receiving shipments from New Britain.

Indonesian palm oil producers will need to increase productivity to meet output targets following signature of a climate deal with Norway that would curb expansion of oil palm estates.

Indonesia is currently the world’s biggest palm oil producer and the 2009 yield was around 20m MT. Given growing demand for the commodity oil, used by food, personal care and other industries, it has been aiming at an output of 40m tonnes by 2020.

But last week the country signed a $1bn financing deal with Norway that includes revoking existing forestry licenses in a bid to protect rainforests and peat lands. The government has promised a land swap, but palm oil producers expect this process to take years.

Vice chairman of the Indonesian Palm Oil Board Derom Bangun said the 40m tonne goal would be achievable if oil palm estates expanded by 200,000 – 300,00 hectares a year, according to Reuters​ – but the deal may see expansion slowed to just 50,000 hectares a year.

“We will need to boost productivity,”​ Bangun told Reuters.

Expansions are already understood to have dropped back from highs of 300,000 to 400,000 hectares a year in 2007-8, following pressure from green groups.

More productive

In a recent interview with FoodNavigator.com Marc den Hartog, executive board member of the Roundtable on Sustainable Palm Oil and sales and marketing director of IOI Loders Croklaan emphasised the need for better land management practices.

IOI is working with smallholders in Malaysia on projects to educate over effective use of land. Palm plantations already give a 5 to 10 times higher yield per hectare than other oilseed plantations, and IOI manages to increase this another 1.5 times.

“Using land more effectively can help avoid issues like deforestation,”​ den Hartog said.

IOI-Loders Croklaan is one of several palm oil suppliers that is now able to supply segregated certified sustainable palm oil in Europe, thanks to the commissioning of a dedicated refinery. Others are New Britain Palm Oil, which announced this week that its new Liverpool refinery is fully up and running; and Spain’s Lipsa, which is receiving shipments from New Britain.

Related topics: Market Trends

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