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Palm oil special

Case study: The little palm oil processor that pushed the boundaries

By RJ Whitehead , 07-Nov-2013
Last updated on 08-Nov-2013 at 07:03 GMT2013-11-08T07:03:10Z

Case study: The little palm oil processor that pushed the boundaries

In July, we reported on the first certified sustainable palm oil (CSPO) shipment from Thailand to Europe , bringing the world’s third-largest producer of the crop in line with other sustainable exporters. We thought we would follow this up as part of our week-long special on the industry.

Thailand, although it is among the palm oil big three countries, it is a long way behind Indonesia and Malaysia in terms of production. It is also very different by having established the principles and criteria for certified sustainability as a country. Thai processors point to this as a example of how overarching criticism of its crop is not necessarily correct.

Thailand's first palms were planted in 1969 by Univanich, the processor behind the first CSPO shipment. While the company is Thailand's biggest palm oil producer, it pales in size compared to some of the region's other, massive players. Over the initial 20 years, growth had been pretty slow, but it has been increasing rapidly over recent years to around 740,000 hectares. 

Smallholders owning less than 8 hectares comprise more than 80% of the planted area, and there are no large plantation companies in Thailand in the way they are commonplace in neighbouring Malaysia and Indonesia.

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This conversion is being encouraged by a widespread move from other crops, including rubber, rice and coconut, and a shortage of workforce as oil palms are much less labour intensive than rubber, for example, and much less laborious and risky than rice farming. 

I read a few years ago that the average age for a rice farmer in Thailand was 56 years old — it’s bound to be older now,” says John Clendon, Univanich’s chief executive, when FoodNavigator-Asia visited recently. 

The fact of the matter is that the younger generation does not want that life any more. They would rather go into the Toyota factory or work in palm oil than farm rice. So that’s encouraging the conversion to palm.”

Thailand came to the palm oil party late because conventional wisdom dictated that only areas within 10 degrees of the Equator could sustain profitable production. Within this latitude there is sufficient rain to give thirsty palms enough water to keep them productive.

The further away you get from the equator, the less it rains and southern Thailand, much of which is outside the 10-degree degree region, had been regarded as a marginal area. 

When I first came to Thailand, we were told we shouldn’t be growing oil palms here; that it wasn’t a good location for oil palms because of the dry season,” says Clendon. “We have since managed to change that and now our yields are as good as you would get in Malaysia.

That was conventional wisdom, but now oil palms are spreading to within 15 degrees of the equator, using more drought-tolerant hybrid seeds

So we are selling oil seeds into Myanmar,  northern and eastern Thailand and Cambodia — all regions outside the traditional oil palm belt.”

When listening to any figure in the palm industry refute claims over sustainability by opponents, you will naturally hear impassioned arguments and defences. Clendon is no different.

He is keen to differentiate Thailand from other palm oil-producing countries. He says that consumers and food companies don’t ask for Thai palm oil specifically at the moment, but he can see a time when this will happen on the back of the Thai industry’s inherent approach to sustainability.

He also backs up his statements with what we can see around us at the Univanich plant in Aoluk, in Thailand’s Krabi province.

Clendon recalls: “Before the oil palm arrived in this province, it was a dangerous place, troubled by anti-government insurgents and known as a Red Area. There was very little in the way of infrastructure, facilities and development

Look at the changes now — not only in infrastructure, but in services like hospitals and schools. And, of course, it has enabled the tourist industry to follow behind, creating very many jobs. This has all come from a strong agricultural base. It’s important for us to feel part of the local communities.”

Supplying Univanich with its crop, the 160-member Univanich PlaiPraya Community Enterprise Group of independent smallholders was recognised this year as the first in the world to be recognised by the Roundtable on Sustainable Palm Oil through group certification. Although based near to the Univanich plant, the farmers are independent to the point that they can sell to other processors if they prefer.

Years ago, many of these farmers would not have been able to afford a motorcycle, but now they have their own pick-up trucks, and deliver their fruit to the ramp at our factory. And very often the children and grandchildren of people who used to be communist terrorists are now engineers at the factory or chemists in the lab,” Clendon adds.

He is adamant that the environment is just one of three areas of of sustainability — albeit the one people talk most about. He is also keen to stress economic and social sustainability, which he says must be considered equal to the environment for production to be considered truly sustainable.

Economic sustainability, for example, goes hand in glove with the environment because it is financially better for us when we produce better yields, but it also means that we are using less land to do so.

There are definitely three legs to sustainability, and it’s not — as people would normally assume — all to do with the environment.”

Bringing greater efficiencies to oil palms is a long and challenging mission. To establish better mother palms, it takes five years of yield records to test the progenies and at least eight years before you can find out if a particular hybrid is any good. 

It’s a long and a laborious thing but we’re getting there and that’s why we are reaching the same yields as Malaysia. We used to import seeds but now we export them to 15 countries around the world. Many of these countries have climates similar to our own and that’s why they are attracted to our products.

Our breeding programme is also benefitting the economic sustainability of Thailand’s growers — the small farmers. We have three nurseries that supply more than 1m seedlings a year to Thailand’s small farmers, who are expanding their oil palm plantings.”

Moreover, Univanich is among the only processors to have a tissue culture programme, which is an extremely expensive and long-term bet — and one that is unlikely to bear fruit within most of our lifetimes.

Rather than multiplying Thailand’s oil palms by seeds, Univanich is trying to do it by tissue culture. For most plants, like rubber, for example, this is very easy — you just cut off an arm and stick it in the ground so it will grow into a new plant. 

But palms are notoriously difficult in this regard as they don’t grow in easily, and developing tissue cultures is a leap of faith by Univanich, although the company believes the study is the next step forward in economic sustainability for oil palms.

We know that some of our mother palms are elite but we have a limited number of them, so we are trying to clone them,” explains Clendon. 

If we can have a number of them, it will lift the quality of our seed production. The other reason we are doing it is we know the very best palms will produce 30% more oil than the rest of the field. But it is a very complicated and hi-tech process and a high risk investment

Many other companies have abandoned this process because there were so many problems. We went against the tide and started it in 2005 — we are probably one of the only companies in the world that does it — but we believe this will take the industry forward.”

And then there’s agronomic science. Oil palms are usually replanted when they are about 25 years old because they get too tall. Univanich established its first replanting trial in 1989 to find better ways to replace the trees, other than knocking them down. 

As well as conventional environmental practices, like building terraces in hilly region, protecting soils and planting cover crop, the company has been experimenting with what it calls “avenue underplanting” and other density and thinning trials.

Over one 16-year trial, the results of which it will publish formally later this month, Univanich scientists have looked at the conventional planting density of 143 palms per hectare — or nine metres on the triangle — and tried to solve an age-old problem.

This density is a compromise, because when the palms are young, it is not dense enough; and when they are mature, it’s too dense. Univanich’s trials revealed that a higher planting density of 160 to 180 palms per hectare, followed by thinning by 25% to 120 palms per hectare after a period of time, works well. 

The crucial question is when to thin it, and we’ve now discovered this is between years eight and nine. To thin, we remove alternate palms in alternate rows, so that each remaining palm loses two of its neighbours

Under this system, you have high yields in the early years, when the palms are small, and then it gives them the opportunity to reach their full potential once they are mature

Over the 16 years of our trial, this gave an extra 36 tonnes of fruit — and a 15% higher yield — compared to normal fixed-planting density. So we’ve adopted this, once again increasing our economic sustainability.”

Processing plants aren’t especially pleasant places, and every 1,000 tonnes of fruit processed will result in 600-700 tonnes of waste water. Thought this byproduct doesn’t contain any chemical or toxic substances, it has a very high organic load. But by using bacteria to break down the organic load, a plant would become a potent source of greenhouse gases, especially methane.

Univanich claims to be a pioneer in capturing the methane and making it environmentally sustainable. 

Clendon explains: “The gas is captured and then has to go through a series of bio-scrubbers to get rid of impurities including sulphuric acid, leaving bacteria capture the sulphur, which can be used as fertiliser

The clean gas is then dehumidified and goes on to provide power. Any surplus methane is then burned off in a flare and recorded, because the destruction of methane qualifies for certified emission reduction credits.”

Each of Univanich’s three mills now has a powerhouse, and these are connected to the national grid to supply electricity to several thousand households in Krabi province — essentially from the company's dirty water.

Last year, we generated a little over 34,000 megawatt hours — sufficient for more than 3,000 households. Sales to the grid accounted to $2.6m, and sales of CERs made up another $2.6m,” says Clendon.

In terms of greenhouse gas emissions, a renewable energy source equivalent to 100,000 tonnes of carbon each year has replaced fossil fuels, not only in our factories, but also on the grid where they use less coal.”

Univanich is just on palm oil processing company out of an industry of many. It is in Thailand, which receives far less criticism for its industry practices — for right or for wrong — than its neighbours do. But it also provides a good illustration of how a company is furthering its own business by looking at social, economic and environmental sustainability. It is not alone.

Just as is the case within any other other business-facing industry, the majority of palm oil processors are striving to maximise profits while attempting to provide their customers with the most saleable product or commodity.

Palm oil is easy to pick up on through headlines and campaigns. But when you’re on the ground you will see things very differently. 

“People need to recognised that Thailand is not certified for destruction, as Greenpeace might say. We are working for the same cause at the end of the day,” Clendon signs off.

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