Greens put pressure on palm as oil prices hit boiling point

Related tags Palm oil Sustainability

Greens put pressure on palm as oil prices hit boiling point
Environmental fall-out forces manufacturers to seek alternatives

Processors are being forced to look at reformulating products or paying substantially more for palm oil as pressure builds for them to switch to sustainable supplies. Meanwhile, oil traders predict a bidding war this autumn as food and energy industries compete for tightening stocks of rape, which have come under additional pressure as processors seek relief from rocketing sunflower prices.

Said to be present in one in 10 food and non-food products in Europe, palm oil hit the headlines this summer when Asda became the first UK supermarket to ban conventionally produced oil in 500 lines. The move followed a media campaign linking endangered orang-utans with alleged forest clearance for plantations.

It frustrated Asda's fellow members of the European-led Round Table on Sustainable Palm Oil (RSPO), which is looking to introduce a certification scheme for responsibly produced product later this year.

"It doesn't matter how much Tesco, Asda, Waitrose or Sainsbury bang on the drum, UK retailers saying they are going to ban palm oil probably won't save one orang-utan," said Bob Norman, shipping manager for Hull-based refiner AarhusKarlshamn, a founder member of the RSPO.

But the green lobby has become intense, said Hilary Baker, spokeswoman for own-label manufacturer Northern Foods. "Sourcing debates and green issues are hugely on the agenda," she said. "The obvious alternative choice for us is soy, but there are issues around GM and palm oil's performance in the manufacturing process is better. It's also not hydrogenated."

Sandra Flöstrom, quality manager for ethnic food and spice company Santa Maria, which sells Tex Mex meals in the UK, said: "We have been thinking of switching to other oils, but palm is good for producing deep fried products. We need an oil that's heat stable and the market demands a certain shelf-life."

A 25% rise in 12 months has taken conventional oil to $800 a barrel, while sustainably produced carries a 40% premium. A cheaper option may be to invest in the soon-to-be-launched Green Palm trading scheme, which charges an environmental levy for every tonne of oil purchased, although it is unclear whether this would be supported by the UK's major retailers.

Over the last two months, rapeseed costs have also risen by 16% to £209.50/t and prices are unlikely to fall in the short term.

Oil World, the independent forecasting agency, predicts EU rape plantings will be substantially reduced this year as farmers chase the strengthening wheat market leading to even firmer prices next season.

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