Welcome to the first weekly update of the Palm Oil Monitor. The authors of this blog, Khalil Hegarty and Pierre Bois d’Enghien, will provide our opinions on the state of the global palm oil sector. We are experts in the fields of trade, sustainability and environmental conservation. We have worked on palm oil for years – and all over the world. Now we want to share our views often and with a global audience. Too often, the debate is dominated by the extremes, so we intend to offer a little dose of reality and good old-fashioned analysis along the way. In addition to our weekly update, we will provide both longer and shorter commentary as news and events unfold. Our opinions are ours, and if you disagree, that is just fine with us.
Upsides in the US-China Trade Spat
President Trump’s decision to slap China with tariffs have potential upsides for CPO going into China.
China is hitting US soybeans with a 25 per cent tariff. Brazilian soybeans will make up some of the shortfall, but Chinese markets use palm oil and soybean oil interchangeably.
Around two-thirds of US soybean goes to China. China gets around 40 per cent of its soybean from the US.
Some analysts also note that replanting in Indonesia, ongoing labour shortages and lower inventories mean that any supply response for palm may come up short – which means better prices going into China. Though others think, any gains will be undone by US soybeans dumped on other markets.
The US-China developments combined with changes in the EU biofuel trade means there’s some turbulence in the market – all caused by policy changes.
EU Drops Dumping Duties on Indonesian Palm Oil
Continuing on trade, the EU has finally given way to the inevitable, dropping antidumping duties on palm oil from Indonesia. The ruling came through from the WTO in late January, but the EU only removed the tariffs in March. Just to refresh the memory: this case goes all the way back to 2012.
The EU investigated at the behest of the European Biodiesel Board. The tariffs were imposed roughly a year later in late 2013 at up to 23 per cent. Wilmar – one of the world’s largest palm oil groups – was arguably the hardest hit. Indonesia didn’t waste any time taking it to the WTO in 2014, but it has taken around four years for this to be resolved.
The EU’s approach didn’t wash with the WTO, hence the ruling. Indonesia will now be exporting biodiesel to the EU again
But this isn’t over. The tariffs were also applied to Argentina’s biofuels; they have also been lifted. The EU has now launched an investigation into Argentine subsidies.
Just to give an indication of how big this is for EU biodiesel, Platts noted the following in relation to Argentina’s exports:
“These duties against Argentinian biodiesel were reduced on 7 September, paving the way for SME (soybean derived biodiesel) to flood back into Europe, and that is not hyperbole … the extent of this trade flow has shocked many market participants, with over 700kt booked in 2017 alone, from virtually none.”
Indonesia’s exports aren’t as significant as many other players, but they are significant enough to make a dent. By way of indication, the US slapped antidumping duties on Indonesian exports last year.
Greenpeace Pushes Traceability…
On the sustainability side, in case you missed it, in mid-March Greenpeace published a report calling on major users of palm oil to disclose their sources and live up to deforestation commitments. These promises – made in 2012 – were to have deforestation removed from product supply chains by 2020.
Interesting to see that Unilever published its traceability report a couple of weeks before everyone else, becoming the ‘first consumer goods company to publicly’ disclose the suppliers and mills they source from.
The timing of the report released also coincides very much with discussions ongoing at the European level on the Renewable Energy Directive (RED) that looks to phase out palm oil biofuels from 2021.
Moreover, Greenpeace has followed this up with a fancy-looking video asking the question: ‘where did the palm oil in my chocolate bar come from?’
Greenpeace got plenty of media mileage out of its campaign against Nestle in 2010. Any company that was a target jumped on to RSPO certification. Moreover, for most companies and most consumers, that’s probably commitment enough.
… And withdraws from FSC
The announcement by Greenpeace that it was withdrawing from the Forest Stewardship Council (FSC) is a surprise.
What has this got to do with palm oil? FSC laid down the model for the RSPO. It is one of the two major timber/paper certification schemes in the world.
Like RSPO, Greenpeace’s relationship with FSC has always been up and down. Greenpeace helped establish FSC, it participates where it can, and will attack the organisation if it’s dissatisfied.
But it needs to be in the room to make a difference. The reporting on the announcement sounded like Greenpeace was disgusted with FSC. The Greenpeace announcement contained text as follows:
“FSC, as a forest certification scheme, is a tool for forestry and timber extraction and Greenpeace believes it is not doing enough on protection. While it has rules for conservation built-in, and can contribute to conservation outcomes, we believe the FSC system is currently focusing on commercial forest operations and needs to carry out improvements to achieve large scale forest protection in all the forest regions of the world.”
This does strike us as odd. Customers for FSC certification – like RSPO – are timber companies. They’re interested in sustainability, but conservation isn’t what they do. Greenpeace wants to include a conservation objective into FSC.
But Greenpeace has only actually withdrawn at the international level; national Greenpeace offices are still able to participate in FSC.
Will Greenpeace follow suit on RSPO?
We don’t think so. In forestry, Greenpeace has almost been a victim of its own success. It spent years convincing major sellers and buyers to join FSC, which most of them did. And there’s little mileage left.
But there’s plenty of room for Greenpeace on palm and other commodities, e.g. it’s trying to ramp up the organisation’s commitments on carbon.
As we said at the top, these are our opinions. Make sure to subscribe to get a real feel about what is happening behind the scenes. If you have a tip, or have any input, feel free to send us an email.