Growing palm oil market needs sustainable supplies

Related tags Palm oil Fat

A common, but increasingly expensive and popular, food ingredient
is the focus of a new global initiative to protect production.
Ingredients firm Aarhus United has linked up with other
stakeholders in the food industry to push a plan for the
sustainable production of palm oil. Second only to soybean oil in
world demand, palm oil is witnessing a growing share of the global
oilseed market, reports Lindsey Partos.

Consumed in a wide variety of food products from instant noodles and crisps to cake mixes and snacks, palm oil has reaped a 28 per cent share of the total global supply and demand oil market. Today, soybean oil and palm oil account for over half of all oil consumed in the world, and as demand for palm oil from China and India sets to rise, supplies will be spread thinly.

Sustaining sources of palm oil has ever growing significance as the price of the oil has risen sharply in the past two years on the back of growing demand.

"In early 2002 palm oil reached $300 per metric tonne, but over the last few weeks this figure has tipped $500,"​ an analyst at the US Department of Agriculture Foreign Agriculture Service told

Reasons postulated for the rise in price are various. Recent crops for the leading oilseed rapeseed have lifted demand for the neutral tasting, non-genetically modified palm oil. And in recent months the soaring price for soybeans due to poor global crops and increased demand from Asia has helped sales for palm oil and boosted the price. Added to this is the ongoing debate concerning trans fatty acids.

"The EU has seen a rise in demand for palm oil, possibly linked to the anti-GM issue as well as the debate about trans fatty acids,"​ added the spokesperson.

Linked to raised blood cholesterol levels and heart disease in animal fats, trans fats have come under fire from consumer organisations, in particular in the US, pressing the food industry to cut the ingredient out of foods.

As such market demand for trans fatty acids is on the up as food manufacturers call for alternatives, such as palm oil, to trans fats, created by a chemical process called hydrogenation in the production process for longer shelf life.

"It can be a major ingredient in most food formulations and in most cases you would not even have guessed the inclusion of palm oil in such products. Take different types of margarine for example - palm oil provides the body or texture to these products in such a manner that no further modification of the oil is necessary,"​ Dr. Kalyana Sundarm, head of the food technology and nutrition unit at the Malaysian Palm oil board told

While the rest of the globe gropes with the issue of hydrogenation and ill effects of trans fatty acids, palm oil stands tall and alone in being able to provide a natural trans free choice, he added.

Last year the US Food and Drug Administration (FDA) ruled that by 2006 all manufacturers will have to clearly label the levels of these fats in their foods.

While there are no such labelling rules in the European Union certain national governments are pushing for change. Last year Denmark became the first country in the world to introduce restrictions on the use of industrially produced trans fatty acids. Oils and fat are now forbidden on the Danish market if they contain trans fatty acids exceeding 2 per cent.

"With 1.5 million metric tonnes to biofuels, and 4 million to food, the rise in rape seed use for biofuels has also contributed to the rise in palm oil consumption,"​ said the FAS analyst. "If a manufacturer is going to avoid soy over potential GM issues and consumer concerns then the only real alternative is palm oil."

Over 26 million tonnes of palm oil are produced worldwide in tropical countries, with the number one supplier being Malaysia - producing 13.3 million tonnes last year - followed by Indonesia and a raft of smaller producers.

The new initiative on sustainable palm oil in which Aarhus United is participating was formally established in April, 2004 as the "Roundtable on Sustainable Palm Oil" (RSPO). The principal objective of RSPO is to promote the growth and use of sustainable palm oil through co-operation within the supply chain and open dialogue with stakeholders.

The non-profit association will have members representing major players along the palm oil supply chain, namely the oil palm growers, palm oil processors and traders, consumer goods manufacturers, retailers, banks and investors, environmental/nature conservation NGOs and social/development NGOs.

Palm oil crops tend to be highly dependent on rainfall with a 6 to 9 month lag. In the late 1990s the dry conditions caused by 'El -Nino' saw palm oil production depleted, which was in turn reflected in the prices. But since this time, according to the USDA analyst there 'is nothing out there hindering supplies.'

Danish firm Aarhus United operates vegetable oil refineries in UK, USA, Mexico and Denmark, working closely with its associated company United Plantations of Malaysia.

Europe will imminently welcome a new palm oil plant at Rotterdam port in the Netherlands with supplier of palm oil based ingredients Loders Croklaan announcing in February this year it would break ground on the biggest palm oil refinery in Europe.

The new factory, due to open in mid-2005, is earmarked to process some 2,500 - 3,000 tons of palm a day, carving immediate entry for the Dutch firm into the large volume supply of palm oil based ingredients.

"Palm opens real market opportunities for Loders Croklaan, as well as for our client companies who are looking to eliminate trans fats from their food products,"​ said Loders Croklaan CEO Etienne Selosse, at the time.

Spun off from Unilever last year, the speciality oils and fats company will source the raw material from its new parent, the Malaysian palm plantation owner IOI group. A synergy that is now the backbone of the company's 'Growing with Palm' strategy.

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