* Coordination on future replanting, biodiesel mandates expected
* Council to merge both countries sustainability schemes
* Palm industry's image tarnished by annual haze problem
Michael Taylor and Bernadette Christina Reuters 20 Nov 15;
JAKARTA, Nov 20 Malaysia and Indonesia will formally sign up to a new joint palm oil body on Saturday as the world's top two producers try to tackle an array of challenges - from bulging stockpiles to weak prices and a polluting haze caused by smouldering forest fires.
Previous attempts to develop better palm relations between the countries have had limited success, but analysts believe this time they will try harder to make it work given the plunge in benchmark prices to 6-1/2 year lows this year.
"We hope we can synchronize and optimize stock management in both countries," Indonesia's chief natural resources minister Rizal Ramli said. "If we do that, we can maintain price sustainability."
Supply sustainability will also be in focus. Industry watchers will seek clarity on how the council will accommodate Indonesia's push to drop a "no deforestation" pledge made by major companies at a climate summit last year.
"It is still early days and they have not specified the criteria for their joint sustainability certification," said Ivy Ng, an analyst at CIMB Research. "People will be watching to see how this could potentially help prevent haze in the future and whether it will improve the reputation of palm to consumers."
Green groups say smallholder farmers and palm plantations are largely responsible for Indonesia's slash-and-burn forest-clearing techniques that send vast plumes of smoke across Singapore, Malaysia and northern Indonesia every year, described by climate officials as a "crime against humanity".
Indonesian government officials have said the new body, the Council of Palm Oil Producer Countries, will educate smallholders on adopting sustainable land-clearing practices.
Indonesian President Joko Widodo and Malaysian Prime Minister Najib Razak will sign-off on the council on Saturday. This group will merge the separate sustainability certification schemes currently operating in the two countries.
It is unclear what the council's relationship will be with the Roundtable on Sustainable Palm Oil (RSPO) - an independent body of consumers, green groups and plantation firms - that many European buyers see as the global sustainability benchmark.
RSPO's co-chairman Biswaranjan Sen said it had not been approached by either government, but that the RSPO was open to working with the producer group.
The new council, which does not plan to directly support palm prices, aims to develop downstream industries, manage stocks, coordinate biodiesel mandates and re-planting schemes.
Both countries currently have huge palm oil inventories, with combined stocks set to approach 5 million tonnes this year, a record high according to the U.S. Department of Agriculture.
Indonesia and Malaysia are afraid of a major sell-off and the new council is about reassuring the market and the smallholders "that prices will not go below the cost of production", a Kuala Lumpur-based palm trader said. (Additional reporting by Emily Chow in Kuala Lumpur, reporting by Michael Taylor and Bernadette Christina; Editing by Himani Sarkar)
Malaysia, Indonesia to spend $5 mln each on joint palm council's initial ops
* Council to manage stock levels, ensure welfare of smallholders
* Also proposes global framework of sustainable palm standards (Adds quotes, details)
Reuters 21 Nov 15;
Malaysia and Indonesia will invest $5 million each in the initial operations of a new joint palm oil body, whose tasks will include stabilising prices and managing stock levels, the countries announced on Saturday.
The council secretariat will be located in Jakarta and its membership will be extended to all oil palm cultivating countries, including Brazil, Colombia, Thailand, Ghana, Liberia, Nigeria, Papua New Guinea, the Philippines and Uganda.
"We must be able to chart the direction of the palm oil industry and, with similar objectives, the industry will continue to prosper the people and especially assist the smallholders," Amar Douglas Uggah Embas, Malaysia's plantation industries and commodities minister, told a press conference after the signing of the joint council.
The formation of the new joint council, called the Council of Palm Oil Producer Countries (CPOPC), took place at the ASEAN summit in Kuala Lumpur and was witnessed by Malaysian Prime Minister Najib Razak and Indonesia's President Joko Widodo.
Indonesia's coordinating minister for maritime affairs Rizal Ramli also said both countries will coordinate their respective stock management plans in order to maintain palm's sustainable prices, and ensure the welfare of smallholders in the industry.
Creating new demand for palm through the biodiesel mandate will help maintain optimal palm stock levels, said Rizal, as the vegetable oil is used for blending into biodiesel.
Malaysia's palm oil stocks rose to a near 15-year high of 2.83 million tonnes at end-October on an unexpected rise in production, while a Reuters survey estimated Indonesian inventory falling slightly to 3.025 million tonnes from 3.050 million a month ago.
The ministers also announced a proposed framework for sustainable palm oil, taking into account laws and regulations related to the sustainable development of both countries.
The framework, called e+POP, will be benchmarked against other international standards and addresses issues such as the legal requirements for land use and management, industry best practices and protecting the use of primary forests and peatlands from planting.
Malaysia and Indonesia first announced the CPOPC in October with the aim of ensuring further industry cooperation, establishing a global framework for sustainable palm oil, stabilising prices and managing stock levels.
The world's top two producers, who supply 85 percent of global palm oil, are trying to tackle various industry challenges from high stockpiles to weak prices and a polluting haze caused by smouldering forest fires.
(Reporting by Emily Chow; Editing by Praveen Menon and David Evans)
