Harder-to-sell crop for cash
Credit to Author: EI SUN OH| Date: Wed, 02 Jan 2019 18:23:28 +0000
As the new year unfolds, and while it is customary to exhort positive wishes and lofty expectations for the days and months ahead, this must, nevertheless, be tempered with at least a pinch of socioeconomic realities. These realities are usually more bitter than sweet. For one, the world economy continues to wallow in the doldrums and exhibit no signs of picking up in the near to medium term.
For large parts of Southeast Asia, exports of commodities remain the main engines of growth for the economy. And commodities, alas, are subject to the often ruthless up-and-down price cycles. For Malaysia and Indonesia, the major cash crop is undoubtedly oil palm, making the two neighboring countries the world’s top two producers of crude palm oil.
I can still recall vividly, back to the turn of the millennium, when I returned to Sabah from many years of studying and working abroad, that many business friends were sighing over the low prices of palm oil. As for an oil palm-planting state such as Sabah, the low prices affected not only the planters but also many other businesses that relied on the spending power of those who are somewhat related to the oil palm industry.
In the ensuing years, the oil palm planters and associated businesses breathed a collective sigh of relief as oil palm prices recovered, and many of them made handsome bundles. Some planters upgraded their business to become palm oil mill owners and even developed some downstream industries that added value to palm oil products.
I even have friends who collect oil palm wastes and convert them into energy generating fuels, or high fiber-yielding raw materials. But for a majority of those who came to be called oil palm smallholders, those who owned perhaps a few hundreds, or even thousands, of acres of oil palm plantations, the capriciousness of the commodity cycles is still their main scourge. And the screw is currently once again being turned against them, as another low is hit during the current commodity downcycle.
Another low in palm oil prices has been attributed to various reasons. For one, market demand over time for palm oil does not grow as fast in major markets, such as China and India, as production capacities do in Malaysia and Indonesia. Especially so in the latter, which saw a vast expansion of oil palm plantation lands over the last decade. Higher labor costs and a worsening land scarcity drove many Malaysian planters to seek expansion for their plantations into Indonesia, adding to the already sizable Indonesian planters population. And this happened at a time when a third large palm oil market, Europe, has expanded gradually its (some say self-serving) scope of skepticism over oil palm production.
Until not so long ago, the Americans and Europeans focused their criticisms of palm oil products mainly on the health aspects of consumption. Over the years, there have been various arguments and controversies over the alleged health benefits and harm of palm oil products.
I am no medical or nutritional expert to add my predictably non-professional comments on this subject. Personally, I try my best to minimize my intake of edible palm oil products (which, of course, is difficult as I eat out a lot, and a lot of the cooking oil used in those places are palm oil-based), but I have no hesitation in using other, non-edible, products that have palm oil derivatives such as toothpaste and soap. That is, however, just my personal preference, and I am realistic enough to recognize that oil palm is the most important economy-driving cash crop in my home state of Sabah.
In the United States (US), the debates over the health effects of palm oil products might be said to have been won hands down by those who are critical, such as the powerful lobby of the soy bean industry there. That is probably the main rival of palm oil, and it proved too politically and financially overwhelming to counter. The American market for palm oil is largely abandoned nowadays. The debates over the health effects of palm oil rage on in Europe, which does not have a soy bean lobby as powerful as that in the US, but produces large quantities of edible oils from flowers, seeds and plants.
In recent years, however, the increasingly gentrified Europeans came to advance another line of attack on oil palm. This concerns the so-called ethical aspects of palm oil production, or oil palm planting. First, there are the environmental concerns, such as that oil palm planting could lead to an irreversible depletion of tropical rain forests, given that forested lands that are otherwise considered primeval would have to be cleared for planting oil palms. The Europeans’ environmental fears are supposedly manifold: that the diverse flora and fauna species of such tropical rainforests would become extinct, some even before they are discovered and named; that the global warming effects of such large-scale clearing would be serious; and that the soil quality after intensive oil palm planting would deteriorate to such an extent that it might not be arable anymore in the future.
Then there are the Europeans’ ethical concerns on the socioeconomic front: that indigenous populations traditionally dependent on tropical rainforests may be displaced by oil palm plantations and, thus, deprived of their traditional livelihoods; and that the labor conditions for the oil palm plantation workers may be less than desired, to name a few.
Locally, perhaps the only tangible expressions of such “ethical” concerns come in two manifestations. Almost every year, the burning of forests to clear land areas for plantation in Indonesia created serious smog problems for quite a few neighboring countries, depending on which direction the prevailing winds blow.
And from time to time, the more vocal indigenous groups would stage protest or blockades in remote clearings, often to no avail. The mainstream of public opinions on these oil palm-related ethical matters is still decidedly in favor of the supposed socioeconomic benefits that oil palm planting could engender.
Over the years, many attempts have been employed to ameliorate the Europeans’ ethical concerns, such as the setting up of groups of sustainable oil palm planters, but the Europeans’ ethical demands appear to become ever stricter over time, with boycotts against buying what they considered to be unsustainable or unethical palm oil products ever ready to be employed, much to the chagrin of palm oil producing states.
In a sense, this whole episode on the tug-of-war over oil palm illustrates the dilemma of many developing countries still dependent on commodity exports. They need the cold harsh cash from these exports for their developmental needs. But the cash comes in diminishing quantities nowadays, and with more strings attached.
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