Wednesday, August 25, 2010

Deforestation Moratorium and Future Shortages of Food Supply Will Require 10 Times More Forest Conversion

The world population of over 6 billion is increasing by 70 to 80 million people annually. Food supply needs to expand to keep up with the additional demand. Land to grow food crops is getting scarce. By 2020, arable land in the world is projected to decrease to less than 1 acre per capita which is hardly sufficient considering the same land is needed for producing enough grains, vegetables, fruits, meat, milk and oils and fats to feed a single person and his animals for a year. In terms of land utilization, priority will of course be given to the production of cereals and grains as these are staples in most countries and this will be followed closely by oils and fats production.

In the oils and fats sector, global demand is increasing at a rate of 5 to 6 million tonnes per year on average against a total consumption of 165 million tonnes annually. To produce an additional 5 million tonnes of vegetable oils and fats, 10 million hectares of land will be required to plant soyabean, as compared to 1 million hectares if oil palm is the choice. Cereals and grains such as rice, wheat and corn are also experiencing shortages due to population pressure and increasing affluence where more demand for meat will mean more intensive production of grains as feed for cattle etc. The world is facing an enormous challenge. It needs to have 10 million hectares of new land created every year to supply the additional 5 million tonnes of soyabean oil, considering additional land is also needed for grain and cereal production. The annual expansion of oilseed area if planted with soyabean is almost equivalent to the combined total oil palm area of Malaysia and Indonesia. Another 10 million hectares will be needed the following year and similarly, in subsequent years to maintain an additional 5 million tonnes of oils and fats supply annually. BUT if oil palm were to supply the annual increase, the land expansion is more modest, a mere 1 million hectares per year.

Need to Use Land Wisely

It is important to note that most countries including the EU are already net importers of oils and fats. For these countries the chronic shortages will worsen in future because of limited land availability locally for growing oil seed crops. As shown in the chart 1 below, only three countries are significant net exporters of oils and fats, i.e. Malaysia, Indonesia and Argentina. Malaysia and Indonesia which export mainly palm oil, account for 80 % of world net export availability for oils and fats. These countries have announced limitations of available land for oil palm cultivation because of the need to conserve forests. Malaysia has long pledged to keep a minimum of 50 % of its land as permanent forest and that remains till today. Indonesia has recently declared a moratorium on deforestation after a US$ 1 billion compensation agreement with Norway.

(Chart 1)
Net Importing and Exporting Countries for Oils and Fats 2009

The challenge facing the future availability of oils and fats is in the need to ensure adequate supply to meet at least the requirements of the net importing countries. As a result of their chronic non self-sufficiency, their import demand is growing. As shown in chart 2, the net import of oils and fats has doubled since 9 years ago from 25 million tonnes to an estimated 50 million tonnes in 2009.Yet, the two largest net exporting countries, accounting for 80 % of world net exports of oils and fats are imposing a limit to future production expansion because of the need to conserve forest.

( Chart 2)
World Net Importing Countries

Many potential scenarios can be postulated to prevail in the coming years regarding such future shortages as follows:-

Firstly, countries that are not bound by a moratorium on deforestation will continue to deforest to produce the additional oils and fats needed to feed the increasing world population. As these countries will produce annual oil crops such as soyabean rather than palm oil, the new land required will be 10 folds larger due to its low yield as compared to the higher yielding oil palm. If most of these are forest areas, the deforestation rate will be accelerated by a factor of ten. The deforestation moratorium in Indonesia and Malaysia will translate into an accelerated deforestation which will occur ten times faster in other countries. This will be most profound in the net importer countries as they will have no alternative but to put their own forest areas to work to produce the oil needed to feed their population. (African and Latin American tropical countries could not cultivate oil palm on a larger scale because of the threat of indigenous diseases that could devastate their oil palm plantations).

Secondly, shortages will cause prices of oils and fats to rise. While, producers will try to improve yield to produce more oils and fats from existing land area, this potential has been explored in recent years and future additional yield improvement is limited. Consumers will have to reduce consumption because of high prices in order to reduce demand to match smaller volumes of supply. More than 75% of the net export of oils and fats is destined for developing countries. Future supply shortages and high prices of essential commodities such as oils and fats will mostly impact developing countries. Low income earning population in the developing countries will face the prospects of having inadequate access to oils and fats supply leading to major segments of the population being exposed to mal-nutrition.

Future planning to address the impending shortages should be initiated in the agenda of international bodies like the FAO and not dictated by agendas of the Western Environmental NGOs (WENGOs). Their claim of success in their anti-palm oil campaigns could be premature. When the developing countries are confronted with acute shortages of oils and fats in 10 years time, it will be too late to restart the cultivation of oil palm as the trees take 3 years to mature. By curtailing the continuing expansion of the oil palm industry, through the WENGOs bogus anti-palm oil campaigns, it is the developing countries which will face shortages of edible oils and fats supply in the near future. Furthermore, instead of preventing deforestation, much more deforestation will be carried out by other countries planting inefficient annual crops such as soyabean to meet their local demand. Instead of reducing carbon emissions, the large scale planting of soyabean will cause more deforestation and more CO2 emissions as compared to the situation if oil palm cultivation is allowed its natural expansion to supply the needs of net importing countries.

Bogus studies by the WENGOs have also depicted exaggerated emissions of carbon dioxide when peat land is developed for oil palm cultivation. A recent review (See JOPE, 2010, at actually showed that degraded peat land naturally emits much more CO2 equivalent than if the peat area is planted with oil palm. In other words, oil palm planted on degraded peat land will reduce carbon emission compared with the natural emission of the degraded peat forest. Bogus WENGO campaigns based on non-scientific studies will deter expansion of legitimate and logical use of peat land for oil palm cultivation which would otherwise ease shortages of supply for net importing countries and would in future save more forests from being converted into producing oil seed crops in those countries.

Similarly, bogus calculation of default carbon emission figures on palm oil in the proposed EU Renewable Energy Directive(RED) will also force the EU to use high carbon foot print raw materials such as rape seed and soya oil for their biofuel programme therefore increasing carbon emission as compared to a situation if palm oil were allowed to be freely used for biofuel in Europe where carbon savings will occur. Already bogus arguments have been proposed that despite palm oil not meeting the 35% threshold figure of emission saving, (because of fictitious default value of carbon emission saving of 19 % assigned to the crop ), it will continue to be allowed for use in biofuel in the EU but will not be given tax exemptions. Such arguments make no business sense at all as no one would use palm oil under punitive tax discrimination.

Highly disputable land-use change calculations are already being designed to ignore the effect of deforestation avoidance whenever net importing countries import land-efficient palm oil to replace soyabean or rapeseed oil as raw material for food or fuel. The outcomes are equally predictable. Not only will carbon emissions be increased multifold, but the shortages of supply will force prices to rise which will severely hamper consumers in developing countries to have access to affordable oils and fats.

When shortages hit the market, palm oil net exporters such as Indonesia and Malaysia will be the beneficiary of high prices for their commodities. The WENGOs will probably deny any responsibility in accelerating the shortages. They would also probably deny their role in accelerating deforestation that will contribute to a faster rate of global warming. While orang utans will continue to survive in the permanent forests of Malaysia and Indonesia as they have been well looked after for decades by authorities in these countries despite claims by WENGOs that these animals will become extinct by 2012, millions of children and adults in developing countries will suffer malnutrition from low availability of oils and fats as a result of the bogus WENGOs anti-palm oil campaigns. Will the WENGOs be answerable for their suffering?

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