Impacts of coronavirus epidemic on efforts to expand sustainable palm oil market yet to be evaluated, experts suggest

Author: Soumya Sarkar, China Dialogue, Published on: 14 April 2020

“Coronavirus thumps palm oil demand”, 8 April 2020

The global palm oil sector is feeling the effects of the coronavirus pandemic, as demand drops across the world, trade is disrupted and production is hampered in Indonesia and Malaysia, the top producers of the vegetable oil.

Although the short-term prospects of the sector are bad, experts suggest it is still too early to say whether the viral epidemic will hurt efforts to expand the sustainable palm oil market in the medium-to-long term.

Indonesia, the world’s largest producer of palm oil, is seeing drastic falls in exports to its main markets…

The decline is attributed to the ongoing outbreak of Covid-19…  

Malaysian palm oil exports to China declined by nearly 17% … Exports to India, until recently its main market, plummeted by as much as 91% in these two months, mainly due to a trade spat with the South Asian nation…

Work at plantations has also been affected due to lockdowns in producer countries…  

“In the short term, we expect some demand reduction of palm oil in India,” said Bhavna Prasad, director of sustainable business at WWF India…

It is still unclear whether the trade and consumption shocks will hamper efforts to make the palm oil sector more sustainable. Clearing land for plantations in Southeast Asia has led to widespread destruction of tropical rainforests and peatlands, resulting in loss of species and habitat and increasing greenhouse gas emissions. Palm oil plantations have also worsened the spread of forest fires, a significant contributor to global warming and a public health hazard.

“The efforts to expand the sustainable palm oil space, in India and globally, will not stop because of the outbreak,” said Kamal Prakash Seth, India representative of Roundtable of Sustainable Palm Oil (RSPO), which develops and implements global standards for sustainable palm oil…

Seth’s expectations are mirrored by Anjana Shanmugavel, senior manager, sustainable business at WWF. “There has been a lot of multi-stakeholder effort when it comes to promoting sustainable palm oil across the value chain,” said Shanmugavel, who focuses specifically on palm oil. “As things go back to normal, we will go back to the baselines we have already established.”

Not everyone is so optimistic. “Covid-19 could severely impact smallholders’ income if they or their families contract the virus, and not all smallholders have access to medical facilities,” said Katie Major, a UK-based conservation psychologist who leads the Global Alliance for Sustainable Palm Oil.

Smallholder farmers across Asia are ill-equipped to deal with medical shocks, which often lead them to slide back into poverty and destitution. In such a scenario, it is unlikely that they would in the near future be able to join the sustainable palm oil movement…

Industry insiders say that the coronavirus epidemic could potentially be a setback to ethical palm oil expansion. “All stakeholders in the sector work on very thin margins. With demand and production disruptions, profits will be further squeezed,” an industry executive said on condition of anonymity. “Adding costs to participate in the sustainable palm oil value chain will be low in their priorities right now.”…

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