The future of palm oil could be in Latin America

The world is facing a growing shortage of its most versatile edible oil. The solution may lie with emerging producers, half a world away from the vast palm oil plantations of Southeast Asia.

In Malaysia and Indonesia—which now account for most of the production—the old trees that cover much of the region are becoming less productive. In addition, labor is increasingly scarce and controls on soil work have become stricter, making replanting difficult.

Thousands of kilometers away, the panorama is totally different for the new planters from Colombia and Guatemala. There, some farmers produce almost twice as much oil per hectare as their Southeast Asian counterparts. Additionally, to comply with impending European regulations that will ban imports of crops from newly deforested land, growers are already focusing heavily on satellite and geolocation technology to ensure full traceability of supply chains.

Free from deforestation concerns, with high yields and the ability to attract a broad customer base, Latin America is emerging as a new frontier for palm oil, which has increased competition, especially in Europe.

“Latin American farmers”have learned from the mistakes made by Indonesia and Malaysia regarding deforestation”said Khor Yu Leng, an economist at consultancy Segi Enam Advisors in Singapore. “Short, simple, visible and low-emission supply chains should win in the long term”.

Palm oil exports from Central and South America are increasing. According to data from the United States Department of Agriculture, in the last decade they have skyrocketed by 70%, compared to a growth of only 14% in global shipments, although exports from these regions continue to represent only 5% of the world total. , compared to almost 90% in Indonesia and Malaysia.

Supplying Europe

Colombia is already the fourth largest producer in the world and has “a lot of margin” to develop its 600,000 hectares of plantations, according to Nicolás Pérez Marulanda, executive president of the National Federation of Oil Palm Growers, Fedepalma.

The Government has identified around five million hectares that are very suitable for palm trees without the need to deforest, Pérez stated. An expansion of that size would put the country on par with Malaysia in terms of land area.

Producers in Colombia are preparing to meet the new requirements of European deforestation standards and both the country and Latin America have the opportunity to become reliable sources of sustainable palm oil for high-standard markets like Europe, he said. Perez.

Meanwhile, farmers in Guatemala—Latin America’s largest palm oil exporter—are also seeing an increase in European demand, because the country can demonstrate that its production is free of deforestation through third-party satellite monitoring and the sustainable certification, said Karen Rosales, former executive director of the Guatemalan Palm Growers Guild.

“The problem is not palm oil itself, but the business model“said Rosales. ““You can produce palm oil very well or you can produce palm oil with many environmental and social impacts.”

Edible oil is Guatemala’s third export, after textiles and coffee, according to Rosales. The Central American country exports 80% of the oil it produces and its largest market is Europe, where around 60% of the palm oil is destined.

Indonesia and Malaysia also use satellites and drones to demonstrate traceability and sustainability, and have certification systems. Still, the challenges are much greater due to the large size of the plantations and the difficulty in mitigating European concerns related to palm oil and deforestation.

Producer Óscar Emilio Molina Martínez in Guatemala regularly flies over his farms to evaluate the health of the trees, which are among the most productive in the world. He takes geopositioned photographs and sends them to agronomists, who check for pest damage, or lack of water or fertilizer.

Unlike the giant plantations in Indonesia and Malaysia, which stretch as far as the eye can see, most of the country’s properties are small 500-hectare clusters nestled among a patchwork of banana, sugarcane and coffee fields.

The country entered the palm industry many decades after Indonesia and Malaysia, said Molina, president of Grupo MEME, part of a family business that pioneered palm oil cultivation in the country in the 1980s.We start later. We have more tools like satellites, we have sustainability and climate change commitments“, he claimed.

The national average of palm oil productivity in Guatemala is 5.86 tons per hectare, Rosales stated. The average in Colombia is 3.66 tons and worldwide, it is 3.27 tons, according to Pérez.

Latin American countrieswill continue to improve their performance”said Julian McGill, agricultural economist and managing director of consultancy Glenauk Economics. ““They’re really focused on that.”