Malaysia’s palm oil market is mature but Indonesia holds growth potential: Rabobank

24-May-2012 - Last updated on 25-May-2012 at 08:18 GMT

Palm oil plantation space is scarce in Malaysia but Indonesia has potential still, says Rabobank

A mature palm oil market and scarce land for expansion in Malaysia means Indonesia is set to underpin increased production due to its considerably younger profile, a Rabobank report suggests.

Malaysia and Indonesia – the two palm oil producer giants – harvest 85% of the global supply, according to Rabobank data.

The report - ‘Palm Oil Outlook: Palm, the leader of the pack’ – showed that global consumption of palm oil will soar to 68 million tonnes by 2020, but Rabobank said challenges in production have risen.

The Malaysian plantation sector is relatively mature, Rabobank said, and there is very little land left for expansion.

“Given the current land situation and the increasing regulatory, environmental, and sustainability protocols, Malaysia could run out of suitable land for cultivation in three to four years,” it said.

However, acreage expansion and the relative younger profile of plantations in Indonesia will boost production in the coming years, it added.

Indonesia may have another 16 million to 17 million hectares of suitable land available for future palm plantation, an Indonesian government land survey detailed, giving the country 10 to 12 years before land runs out.

A sustainable choice?

Palm oil has drawn criticism for many years from western markets due to sustainability concerns regarding deforestation, cultivation on peatland and conflict between land stakeholders, the paper said.

But sustainability concerns are only being driven by EU markets, the report said, despite the developing markets, in particular China and India, representing the highest consumption levels.

“These markets do not value sustainability as much as the consumers in the western world, but are focused on meeting more basic requirements,” the paper said.

As such, if sustainability across the globe’s palm oil market is to be achieved, it is crucial to generate awareness in these countries and reconcile interests among consumers.

The Roundtable on Sustainable Palm Oil (RSPO) – an association promoting sustainable palm products - has already targeted China and India and is working with these countries to encourage the consumption of certified sustainable palm oil (CSPO).