Palm oil or palm kernel oil are estimated to be in half of all packaged products in supermarkets. Like corn and soybeans, oil from palm products is processed into a surprisingly high number of foods and consumer products. In addition to rapidly growing consumer use, recently-enacted biodiesel mandates from around the world have driven demand for the oil to higher levels. Malaysia and Indonesia, which account for over 80 percent of the world’s palm oil production, have been the primary beneficiaries.
But all of that growth is coming at a steep price. Expanding plantations has most often meant clearing vast swaths of rainforest, and that has come with long-term environmental damage. What’s more, there is a growing number of market participants who are concerned that the industry may not be able to keep with up with global demand, especially as land expansion is key to production growth. Yet, reducing the world’s dependence on palm oil is a hard task since palm oil has historically been one of the most economical sources of cooking oils, and also because it has the highest oil yield of any oil crop. In fact, it’s five times more productive in oil yield than rapeseed, the next most productive oil crop.
Given these conditions, the palm oil industry can be best described as facing a “tug of war” of global proportions. On the one hand, the practical benefits offered by palm oil have become a ubiquitous part of the lives of consumers; and the industry has helped pull many out of poverty. On the other hand, palm oil producers, in many cases, are leaving environmental devastation in their wake. In response, a greater number of global stakeholders are searching for a sustainable way forward—namely less environmentally-invasive husbandry techniques, a reduction in crop-to-fuel mandates, and the use of alternative vegetable oils. One thing is certain, though: a recognizable future may not be in store if sustainability doesn’t become a more pressing goal for consumers and producers alike.
Background
The oil palm, Elaeis guineensis, is a tropical plant said to have originated in the ancient rainforests of West Africa. Alvise Cadamosto, a Portuguese explorer, discovered the plants in the 15th century, and described them as having “the scent of violets, the taste of olive oil and a color which tinges food like saffron but is more attractive.” Today, Cadamosto’s description is probably the last one to come to mind if one is asked to size up the palm oil industry. Instead, if anyone thinks of it at all, palm oil is more likely to be associated with the mundane—hand soap, ice cream, and margarines—or the tragic—deforestation and labor abuses.
Palm oil as a vegetable oil is extracted from the mesocarp of the fruit of the oil palms, while palm kernel oil is derived from the kernel of the same fruit. One of the key differences between the two oils is related to their levels of saturated fat, with palm oil and palm kernel oil being 52 percent and 86 percent saturated, respectively. Palm oil is also used more widely in food products, such as cooking oil, shortenings, margarine, and as a feedstock for biofuel, whereas palm kernel oil is primarily used as a raw ingredient within a wide range of consumer products, including soaps, cosmetics, candles, and detergents.
An oil palm tree has an average productive lifespan of about 25 to 30 years, with fruit production starting in the third year of development. Oil palm yields reach peak levels between the eighth and tenth year, before starting a gradual decline in the 20th or 21st year. In addition to needing a steady amount of rain and sunshine, oil palms grow best in semi-tropical and tropical environments, particularly in a rainforest climate, where temperatures hover between 24 and 28 degrees Celsius.