An international environmental group is calling for a ban on palm oil production on peatlands and natural areas.
Wetlands International released a report last week saying Malaysia’s palm oil industry is destroying more environmentally sensitive land than its government contends.
The group used satellite images combined with existing data and field surveys to determine that 20 percent of the country’s palm oil is produced on peatlands, compared to government estimates of eight to 13 percent.
Conversion of those 1.26 million acres is destroying the habitat for many endangered species and releasing 20 to 40 million tonnes of carbon dioxide into the atmosphere annually.
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Analysts say the battle over palm acres in Southeast Asia could have a major impact on Canadian canola markets in years to come.
Thomas Mielke, one of the world’s leading oilseed analysts, said pressure from environmental groups to curtail palm tree plantings in Malaysia and Indonesia is long-term bullish for the canola sector.
The Oil World analyst told farmers attending a Farm Leadership Council meeting in Saskatoon this fall that the pace of global palm acreage expansion was halved in 2009, which will contribute to a further global vegetable oil shortage by 2013.
Mielke said the world needs palm oil output to continue expanding by three million tonnes per year for the next 10 years, which will be hard to accomplish if the growth in palm acreage continues to slow.
A slowdown in palm oil acres would require soybeans and canola to meet more of the future demand for vegetable oil, he added.
Michael Shean, international crop analyst with the U.S. Department of Agriculture’s world agricultural supply and demand estimates board, isn’t convinced palm expansion is slowing down.
Indonesia and Malaysia account for 88 percent of global palm production. There is a tug-of-war in both countries between those who want to encourage and restrict plantation sprawl.
The Malaysian government is committed to keeping 50 percent of the nation in native vegetation. It is rapidly approaching that threshold because of urban encroachment and agricultural expansion.
“(Palm oil companies) see the writing on the wall that they don’t have that many more years left to see acreage expand,” said Shean.
In response, Malaysian firms have been building plantations in Indonesia where there is more available land.
Indonesia has been expanding palm area by 865,000 acres a year, and there is plenty of room for future growth. An estimated 14.8 million acres of land have been licensed to the palm industry but not yet developed.
However, it’s uncertain whether all of that licensed land will be developed because of mounting pressure from environmental groups.
Shean said there is similar pressure from other interest groups that are pushing an economic development and social policy agenda.
Indonesia’s palm industry employs more than three million people, many of whom are subsistence farmers. The country’s pro-growth government would have a tough time curtailing an industry that provides a good living for small farmers.
“The economics behind that commodity just trumps the environmental concerns by a large margin,” said Shean.
He said the government will eventually have to develop a policy on future plantation development.
One solution might be to commit to better management and monitoring of expansion, he added.
