IFC / World Bank Group support of RSPO

IFC (part of the World Bank Group) supports the development of the RSPO, primarily through its Biodiversity and Agricultural Commodities program (BACP). Read about it via its flyer here, http://www.ifc.org/ifcext/sustainability.nsf/AttachmentsByTitle/fly_Biodiversity_BACP/$FILE/BACP+Flyer.pdf.

Reported in the BACP newsletter, Issue 10, June 2011:

Through its grant-making facility, BACP supports the RSPO both directly and indirectly.

BACP provided a grant directly to the RSPO to support a Biodiversity Coordinator and activities of the Biodiversity Technical Committee (BTC).

BACP has given grants to various NGOs and other organisations, in support of their efforts at RSPO, these include:
• PanEco Foundation is working to demonstrate the potential for palm oil production on Indonesia's 4.7 million hectares of degraded land in an effort to preserve the country’s biodiversity-rich areas of High Conservation Value (HCV) from being converted to palm oil plantations......
• The Zoological Society of London (ZSL) is working to 1. improve the effectiveness of the biodiversity-related RSPO Principles and Criteria......
• Fauna and Flora International (FFI) has been piloting an innovative partnership model that helps producer companies comply with the biodiversity-related criterion of the Roundtable for Sustainable Palm Oil (RSPO)’s Principles and Criteria. The partnership engages large-scale producers to take an active role in protecting and managing HCV areas on or adjacent to their concessions......
• The World Resources Institute (WRI) is working to make compliance with RSPO biodiversity related principles and criteria easier for producers by providing necessary information and toolkits for successful and sustainable production on degraded land......

IFC’s BACP also has various efforts Supporting the Round Table for Responsible Soy (RTRS).

BACP states: Agricultural expansion is the leading cause of habitat loss around the world and poses one of the gravest threats to global biodiversity. Tropical export commodities have dramatically increased production in the last fifty years, resulting in the destruction of much tropical habitat. The Biodiversity and Agricultural Commodities Program (BACP) seeks to reduce the threats posed by agriculture to biodiversity of global significance by transforming markets for target agricultural commodities. To transform the commodity markets, BACP supports projects that generate greater supply, demand and financing of biodiversity-friendly products. Projects must meet specific criteria and address one of the four following components:
1. Removing policy barriers
2. Supporting better production
3. Increasing demand for biodiversity-friendly products
4. Encouraging financial services to support biodiversity-friendly practices

Source: http://www.ifc.org/ifcext/sustainability.nsf/AttachmentsByTitle/newsletter_biodiversity_BACP_issue10/$FILE/BACP_Newsletter_Issue+10.pdf.

Khor Reports comment: NGOs and other organisations have been quick to avail themselves of BACP funding for their projects. It is surprising to us that growers (especially the smaller estates, smallholders and/or those operating near high conservation / sensitive areas), who may have quite a lot work to do too, do not seem to have done so yet (not listed among 'grantee highlights' in the BACP newsletter). Perhaps BACP could assist them too?

Greenpalm CSPO premium dives to 30 cents

Greenpalm reports on its website: "GreenPalm passes key milestone as 2 millionth certificate traded... GreenPalm, the certificate trading programme that enables businesses to support sustainable palm oil production, is celebrating the trade of its 2 millionth certificate. This milestone has been achieved in just over two and a half years, enabling palm oil producers to earn over $15m of additional income for operating sustainably."

Greenpalm's market data shows that palm oil certificates last traded at 30 cents and PKO certificates trade at $3.90.

Source: http://www.greenpalm.org/en/home, accessed 6 September 2011.

Khor Reports comment: The 30 cents premium is a big come down from the near USD40 price premium that certified sustainable palm oil (CSPO) first traded at. Arguably, Greenpalm's price is the most important single market indicator for the demand for sustainable palm oil, which is so far only available under the Roundtable for Sustainable Palm Oil (RSPO) initiative. The price collapse, of about 99%, indicates an excess of supply over demand for the RSPO's CSPO. At 30 cents per metric tonne of CSPO, there is scant hope for additional income for those operating sustainably. Most of the largest palm oil growers are heavily committed to RSPO certification and they will be hoping that this lead price indicator picks up. Palm oil sustainability experts often estimate the cost of RSPO certification at USD6-12 per metric tonne for corporate growers. Smallholders have been slower to get onto the programme; growers often say that a fair premium is needed to help this group. Sustainability practitioners point out that it may not be so difficult for this group to participate; but they need a change of mind-set and a dash of pride and hope. Although the market for sustainability seems to deliver a "no" - let's hope that is a temporary message.

Sarawak NCR land - a new development model

News article, 29 Aug 2011: "Felcra-like model to develop native land in S'wak"
Sarawak has introduced a new land management system modelled after Federal Land Consolidation and Rehabilitation Authority (Felcra) Bhd to develop Native Customary Rights (NCR) land in the state..... According to state land development minister Tan Sri Dr James Masing, the pilot project involving the new land management model was carried out in Pasai Siong, near Sibu......"The agreement with Felcra was reached in June this year. This is the first time we used this model on the NCR land management. This model has been used by Felcra in other land areas under the Ladang Rakyat scheme, but this is the first time it was applied to NCR land.... "This is because, to develop NCR land, you need the consent of landowners. Felcra will manage this pilot project with a fee for 15 years," he said.... under the new land management model, NCR landowners would hold 90% shares, with the remainder to be held by Sarawak Land Custody Development Authority (LCDA). Felcra will source all the funding required and will only charge management and marketing fees.... (source: http://thestar.com.my/news/story.asp?file=/2011/8/29/nation/20110829111929&s)

Khor Reports comments:
a) This is a promising new proposal for NCR land development in Sarawak. This is an advancement from the Sime Darby land deal proposals in FY2009, where the plantation sought a 60% stake, while offering the native landowners 30% and LCDA/Pelita 10%.
b) Previously, oil palm land deals have been in the eastern state of Malaysia have been problematic in their general poor inclusion of native landowners. Such issues are exemplified in the IOI Pelita case where a secondary land purchase has been bogged down by controversy from the initial land deal.
c) This suggests that any plantation should be concerned about the level of inclusion of local and native peoples in their current and existing projects. This "social agenda" is likely to become a significant issue for plantations.
d) Investors in plantations might become more keen to ask plantation companies to better disclose such risks, as well as the conservation / environmental usability and risks of their land banks.

Also view: http://khorreports-palmoil.blogspot.com/2011/04/native-customary-rights-ncr-issues-at.html

Behemoths' land banking efforts stutter?

"Sime Darby’s expansion into Liberia may have hit some road blocks. It was reported that citizens from more than 15 towns and villages near Sime Darby Plantation in Grand Cape Mount County have threatened that the company would face stiff resistance if it intends any further extension of its concession. Not yet known at this point is the size of the area affected as portion to Sime’s 200,000ha concession land." (ECMLibra research report, 18 July 2011)

Khor Reports comments:

a) SE Asian plantations have taken a great interest in West Africa, Papua and other 'tougher' regions, to extend their land banks. Various problems have been reported with these major expansion efforts.

b) Sime Darby is reported facing some resistance from locals in Liberia (article above). The plantation behemoth had also sought to extend its interests in Sarawak, Malaysia, by offering larger stakes to local landholders - but we hear that some of these efforts may have gone 'on hold' for various reasons.

c) Golden Agri is also looking to develop 220,000 ha in Liberia via the USD1.6 billion deal with Golden Veroleum (the land area was initially reported as a 500,000‐acre palm oil plantation in the southeast of the country).3 September 2010: Golden Agri said its “subsidiary Golden VerOleum would form a partnership with the Government of Liberia in a palm oil project… for the cultivation of sustainable palm oil by the company and by Liberian smallholders and farmers, mill processing and value‐added manufacturing…The investment is expected to total USD1.6 billion” (source: http://www.reuters.com/article/2010/09/03/goldenagri‐liberia‐idUSSGC00373720100903). In October 2010. Golden Agri reported it disposed of its entire shareholding comprising one share of HK$1 in Golden Veroleum Limited. A clear status update is needed.

d) Sometime in 2009‐2010, Golden Agri’s “in progress” acquisition of 1 million ha in Papua falls through. Now, players like Wilmar are looking to Papua for major cane sugar projects. Will they have a happier outcome in the low-lying and seawater-flood prone region?

Cargill goes RSPO but keeps smallholders in

Cargill has announced that the palm oil products it supplies to its customers in
Europe, United States, Canada, Australia and New Zealand will be certified by the
RSPO and/or originated from smallholder growers by 2015. This commitment will
be extended across all Cargill's oil and trading businesses to cover 100% of its palm
oil products and all customers worldwide – including China and India – by 2020.

Khor Reports comment:

Cargill includes the smallholder element with the “and/or” flexibility for its sourcing. This seems a tacit acknowledgment that RSPO may have problems including smallholders in its efforts to a significant degree. With Greenpalm certs just bouncing off a meager $1 per unit, it seems hard for smallholders to see monetary compensation for their RSPO certification efforts, unless an attractive program for them is launched soon. The biggest concern we have had with regard to RSPO is its de facto limited inclusion of independent smallholders thus far. We think Cargill’s move is pragmatic and heartening in terms of keeping market access open for these smallholders.

Malaysia criticizes "sinister" campaign against palm oil

The Malaysian Insider reports: “It is utter cruelty to the orang utans. The zoo must understand these are animals from the tropics and adequate protection should be given to them during winter. Their enclosures must be warm and made comfortable,” (Tan Sri Yusof Barison, head of the Malaysia Palm Oil Council) was quoted as saying..... Yusof was reported as saying that he suspects having the orang utans in such degrading captivity was to win public support in Australia in the campaign against the use of palm oil products.... He said having anti-palm oil signs at the zoo was to win public sympathy and to misrepresent the orang utan issue.... “Australians must visit our orang utan sanctuaries in Malaysia and see how well the animals are taken care of. There is something sinister behind the campaign by western NGOs to ruin the palm oil industry,” he said. (Source: http://www.themalaysianinsider.com/malaysia/article/palm-oil-council-chief-upset-over-orang-utan-treatment-in-aussie-zoo/)

Khor Reports comment: The orang utan is a key symbol of the campaigns by NGOs for the sustainable growing of palm oil i.e. without deforestation, peat land development and loss of biodiversity.

Trends in planted area for the Top 10

Khor Reports comment: The recent 3-year expansion by the ten largest plantations has averaged some 18,000 ha each year. The annual net increase in their planted area has decelerated from an average of 33,000 to11,300 and 9,300 ha per year. The recent Indonesian moratorium on deforestation has been successfully diluted by corporate and development lobbies. Indonesian planters note that uncertainty surrounding the moratorium had the impact of tamping back their country's 2010 expansion to some 300,000 ha instead of a minimum 500,000 ha per year in prior years (refer to http://khorreports-palmoil.blogspot.com/2011/05/indonesia-moratorium-eases-business-and.html ). Indonesia is widely reported as deforesting at the rate of 1 million ha per year. This implies that oil palm new plantings accounts for half of Indonesia's recent annual deforestation.