Smaller premiums to slow "green" palm certification

Aloysius Bhui, Reuters 11 Aug 09;

JAKARTA (Reuters) - An 80 percent dive in the premium paid for certified "green" palm oil could discourage producers from applying for certification, an industry official said on Tuesday, marking a setback in efforts to control deforestation.

Vengeta Rao, secretary general of the Roundtable on Sustainable Palm Oil (RSPO), said in an interview that the slide in the premium would slow down interest but was unlikely to stop certification given continued interest from some buyers.

Under fire from green groups and some Western consumers, the palm oil industry established the RSPO in 2004 to develop an ethical certification system that includes commitment to preserve rainforest and wildlife.

But while more certified output is ready for sale, demand is lagging behind. The RSPO has so far sold about 100,000 tons, or about 6.2 percent, of certified green palm oil since the first shipment last November.

As a result, the premium to conventional palm oil had slumped to $10-15 a metric ton now from $50 in November, Rao told Reuters on the sidelines of an industry meeting.

He said the global economic crisis was partly to blame for the slump but he also urged buyers to show more commitment to sustainability.

"I think the RSPO certainly believes there should be a fair premium to cover all the direct costs to get certification," he said, adding the support from the supply chain should be reflected in a certain amount of premium.

Rao said there was no fixed level for a fair premium as costs for certification varied from company to company.

"In some cases we have plantations which have been around for three generation, while others just started," he said.

Rao said the commitment to sustainability was now becoming a global issue, not just an interest for Western world, so the palm industry could not afford to pull back from the certification process.

"As we go forward the whole world will be concerned about sustainability no matter where the consumer is. A significant amount of buyers in China and India will also be global multinationals," he said.

"These companies will require uniform buying policies. They cannot buy certified palm for Europe but non-certified for China," he said.

After initial skepticism more environmental groups appear to be backing the RSPO initiative.

The World Wildlife Fund (WWF) plans to publish a "buyer's scorecard" that would show companies that support sustainable palm oil and those which have not fulfilled commitments to buy.

Buyers include Unilever, Colgate-Palmolive, L'Oreal and Cadbury.

Indonesia and Malaysia, the top palm oil suppliers, ship 34 million tons of the vegetable oil globally, with the European Union taking up roughly 15 percent for food and fuel requirements, industry data showed.

China and India, the world's top buyers of vegetable oils, absorb around 40 percent of global palm oil output.

(Editing by Ed Davies)