Palm-oil price plummets

Malaysian palm-oil futures fell for a fourth straight day this week, hitting a two-year low, as weak sentiment persisted due to concerns about a potential trade war started by Donald Trump.

Prices of commodities in China tumbled as confidence was shaken by fears of Trump’s trade war.

Palm-oil prices track the performance of other cooking oils, as they compete for a share in the global market.

European Union

Palm oil has been under scrutiny because of European Union legislation targeting the controversial crop that is blamed for large-scale deforestation and pushing numerous species to the brink of extinction.

Last week, the EU agreed legislation to increase the use of renewable energy in Europe, including the gradual elimination of palm oil in transport fuel by 2030.

The decision presents a delicate balance between the EU’s environmental goals, enshrined in the 2015 Paris climate agreement, and relations with Malaysia and Indonesia.

In January, the European Parliament voted to ban the use of palm oil in biofuel by 2020, sparking an outcry in Jakarta and Kuala Lumpur.

Malaysia is the world’s second-largest palm oil producers with US$19.4 billion worth of palm oil exported in 2017. About 85 per cent of palm oil, which is used in chocolate, shampoo and cosmetics, is produced in Indonesia and Malaysia.

Last week’s collective decision by the European “trialogue” of the parliament, commission and council allows significantly more time for the use of palm oil to be phased out.

The percentage of palm oil in EU biofuel is to be kept at 2019 levels and gradually reduced from 2023. Under current regulations, palm oil used in the EU must come from certified sustainable plantations, although many environmentalists have questioned the value of the certification.

Myanmar market

The increasing popularity of fast-food in Myanmar has seen palm-oil imports rise by 60 per cent in the past six years to 750,000 tonnes, the US Department of Agriculture estimated.

Before Myanmar’s piecemeal democratic reforms started in 2011, the military-controlled state imported about 200,000 to 300,000 tonnes per year, said Toe Aung Myint, permanent secretary at the Ministry of Commerce.

KFC became the country’s first western fast-food chain in 2015 with 23 franchises around the country, said Singapore-listed Yoma Strategic Holdings, the franchise partner in the semi-democratic state. Pizza Hut and Burger King have now opened.
The Burmese food and beverage sector prefers palm oil due to its cost-effectiveness and frying properties, according to Zakaria Arshad of Felda Global Ventures, which sells the Saji palm-oil brand.

Myanmar’s rough roads, limited port cargo storage and unreliable power supplies drive up logistic costs and needed to be addressed, said palm-oil suppliers.

Indonesia’s orangutan population is being devastated by palm-oil production. Picture credit: Pexels