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Jessica Moss

10/4/18

GEOG 276, Zhou

Commodification of Nature: Palm Oil

Palm oil is omnipresent. It touches almost all parts of the globe, and its uses range from industrial lubrication, to replacing trans fats in food products, to being an ingredient in soaps. In observing palm oil's pervasiveness in global trade and packaged food companies, one might wonder how such an obscure oil became so prevalent. Like many commodities, palm oil follows a model of discovered usefulness, assigned value, private ownership, and, eventually, mass trade and purchase (Coe et al 131-140). For palm oil, this extensive demand is a relatively new phenomenon dating back to the 1960s, and the resulting rapid expansion of its industry has greatly altered the agricultural, environmental and social landscapes of its greatest producing countries: Indonesia and Malaysia.

While it is difficult to trace when palm oil was first discovered, it was widely used as a major component of the native food supply in Western Africa long before recorded history (Kiple, Kenneth F., and Kriemhild Conee Ornelas). The oil palm tree that grows the fruits from which palm oil is produced is indigenous to the tropical forests of Western Africa, where small farmers are believed to have cultivated palm oil by mashing the fruit of wild palms for use in soups and other hot dishes (Kiple, Kenneth F., and Kriemhild Conee Ornelas). Although palm oil was not yet a globally traded commodity, its dietary usefulness was discovered early on in history.

Palm oil was also assigned a value in trade early in history, and its value has augmented with the creation of new production processes and industries interested in using palm oil as a component of their products. Fossil records suggest that Egyptians used palm oil as early as 3000 B, likely receiving it from Arab traders (Obahiagon 2). In the 15th century, the Portuguese “discovered” the crop in expeditions to Western Africa, after which it became an important provision on caravans in the Atlantic Slave trade (Kiple, Kenneth F., and Kriemhild Conee Ornelas) and was introduced as a tree crop to Brazil (Obahiagon 2). However, palm oil plantations as we understand them today were only introduced when the British Industrial Revolution created a demand for palm oil in candle making and as lubricant for machinery (Kiple, Kenneth F., and Kriemhild Conee Ornelas). Following this, “European-run plantations were established in Central Africa and Southeast Asia, and the world trade in palm oil continued to grow slowly, reaching a level of 250,000 tonnes (metric tons) per annum by 1930”(Kiple, Kenneth F., and Kriemhild Conee Ornelas). This reflects palm oil's progression into the second nature, as Europeans introduced a plant species, altering ecological landscapes, to meet market needs.  The technological improvements following WWII such as the hydrogenation process for oils and fats increased the demand for palm oil in Western food products, such as margarine (Kiple, Kenneth F., and Kriemhild Conee Ornelas).

These technological innovations increased the productivity of palm oil collection and processing, resulting in a greater supply of processed palm oil available to meet the growing demand for it coming from the budding packaged food industry. Traditionally, African farmers harvest palm oil through cutting bunches of fruit from the oil palm tree using a curved knife, boiling the fruit in water to soften the flesh, mashing it to a pulp underfoot or with pestles, and skimming the oil off the top of the remaining liquid (Kiple, Kenneth F., and Kriemhild Conee Ornelas). Small-scale farmers adopted the modified wine and cider press known as the Duchscher press in the 1920s, which accelerated the mashing process and collected the exuding liquid in a trough surrounding the device (Kiple, Kenneth F., and Kriemhild Conee Ornelas). The next development in pressing was the introduction in 1959 of the hand-operated hydraulic press, which was capable of processing 600 to 1,000 pounds of fruit per hour and could recover 80 percent of the oil present. Today, smallholders of crude palm oil use similar presses (though most are now motorized) and now include “bunch strippers” to ease fruit collection; fruit bunch cookers to soften many fruits at once; and a digester to break up the solid fruit and release the oil, all of which accelerate crude palm oil collection for traditional food use and increase the oil output per fruit (Kiple, Kenneth F., and Kriemhild Conee Ornelas).

However, the type of palm oil Western packaged food companies seek is “neutral, bland, and nearly white in color” (Kiple, Kenneth F., and Kriemhild Conee Ornelas). Plantations or large smallholder cooperatives that export this type of palm oil use fully-mechanized power operated oil mills which collect crude palm oil by sterilizing the fruit in sterilizing cages; steaming them under pressure to loosen the fibrous skin; transferring the cooked fruit to a bunch stripper, then a fruit digester; pressing out the oil through a single or double-screw press; passing the resulting oil through screens and settling tanks to remove any water or remaining fruit debris; and recovering the oil using a clarifying centrifuge (Kiple, Kenneth F., and Kriemhild Conee Ornelas). The crude oil cultivated through this mechanized process, which is lighter and plainer than that of its traditional counterpart, is typically transported to hydrogenation factories or other processing plants (many of which are stationed within the EU and USA, but some of which are included on the plantation) to be bleached, fractionated (separated into stearin and olein) or further refined before becoming an ingredient in (primarily Western) packaged snack foods.

At the same time that palm oil collection and processing became more efficient, the growing packaged food industry created a demand for it “because of its good resistance to oxidative deterioration and its better ability to withstand the high temperatures used in frying than most alternative oils” (Kheiri; Berger). The recent rise in using palm oil within the convenience foods industry is largely a result of changed labelling requirements that have caused a switch away from using trans fats: “palm oil's highly saturated nature renders it solid at room temperature, making it a cheap substitute for trans fats or butter in uses where solid fat is desirable, such as in pastries” (Lian 993-4). This increased demand for palm oil is reflected in the remarkable increase in world export from approximately 500,000 tons per annum in 1962, to a whopping 8,500,000 tonnes exported in 11,000,000 tonnes produced in 1990 (Mielke 110).  Indeed, palm oil has become a global commodity: “Of all palm oil produced in Malaysia, roughly 60% of it is exported to China, European countries, Pakistan and so forth”(Indonesian migrant workers: with particular reference in the oil palm plantation industries in Sabah, Malaysia). This new use, demand, and ownership of palm oil reflect the progression of palm oil's commodification, as it was assigned new value outside of its original use in the African diet, owners of factories and land that cultivate and produce it, and became a globally-traded resource.

Given this global interest in palm oil, one might wonder how Malaysia and Indonesia became responsible for exporting 85% of all palm oil (Avramenko), and what companies control the cultivation or production of it. Indonesia's involvement in palm oil production dates back to 1911, when Belgian agronomist Adrien Hallet, who was involved in rubber manufacturing in the Congo, set up the first commercial palm oil plantation in Sumatra (TIMELINE: Slaves, colonials, weevils: palm oil's historic rise). After WWII, Indonesian plantation production stagnated , as Dutch plantation owners no longer had the backing of a colonial government. In 1967, second President Suharto made direct government investments with assistance from the World Bank through state-owned companies to grow the now-independent Indonesian palm oil sector (TIMELINE: Slaves, colonials, weevils: palm oil's historic rise). These efforts were largely successful, as the land area dedicated to producing palm oil and total production increased from approximately .25 to 7.6 million hectares and .1 to 22.6 million tons from 1970 to 2010 respectively according to the image below. Today, Indonesia is the leading palm oil exporter, producing 53% of all crude palm oil (Avramenko).

Malaysia's first palm oil plantation was also a result of Western colonial interests, specifically by Frenchman Henri Fauconnier who purchased seedlings from Hallet to begin a plantation at Selangor to replace an unsuccessful coffee estate (TIMELINE: Slaves, colonials, weevils: palm oil's historic rise). When Malaysia gained independence from England in 1949, it launched systematic breeding programs and “emerged as the world's largest producer, accounting for 56 percent of world production and 85 percent of world exports of palm oil in 1982”(Kiple, Kenneth F., and Kriemhild Conee Ornelas). Expanded production in Malaysia was mainly achieved by the privately-owned estate sector, which increased its oil palm holdings more than tenfold in the 1960s and 1970s; and by the Federal Land Development Authority, whose large-scale schemes organized oil production along plantation lines, although ownership was vested in the workforce of smallholders (Kiple, Kenneth F., and Kriemhild Conee Ornelas). The Malaysian government also encouraged, licensed, and offered tax concessions to private enterprises to set up refineries producing both the traditional pam oil used in local foods and fractionated palm oil for markets in India, Pakistan, Egypt, and Middle Eastern countries, which tended to import fully refined, ready-to-eat palm oil due to a lack of their own refineries (Kiple, Kenneth F., and Kriemhild Conee Ornelas). This created new Asian markets for Malaysia's processed palm oil, and increased the number of processing enterprises within Malaysia, meaning plantations less frequently had to export crude palm oil to Western countries for refinement.

Today, there are a diverse array of palm oil production owners, including independent smallholders, medium-scale landholders, managed smallholder schemes (wherein an agency manages smallholder production and acts as an intermediary between it and production mills), nucleus estate and smallholder schemes (where a private or state-owned plantation company acts as a nucleus with settlers on the land growing for it), estates (large-scale plantations), and joint-venture (between the state and a company) schemes. Smallholders typically produce palm oil for local use in cooking, since they would have to depend on intermediaries to sell their produce elsewhere (Pacheco 20). Major palm oil producing companies tend to use plantation systems, as they concentrate palm oil collection (and early stages of refinement) into one vertically-integrated area, promoting a uniform product. Wilmar, the world's largest processor and merchandiser of palm oil, operates vertically-integrated plantations in Indonesia and Malaysia, but exports to processing plants stationed in the Netherlands, Germany, Vietnam, and the Philippines before selling the refined oil to companies such as Nestle and Unilever (“Background Document: An Overview of the Palm Oil Sector: Countries and Companies” 13-14). Sime Darby, one of Malaysia's largest multinational corporations, operates 524,543 h of palm oil plantations. Its Downstream Operations division accepts the oil from these plantations, manufacturing and distributing it in 14 different countries (“Background Document: An Overview of the Palm Oil Sector: Countries and Companies” 14-15). IOI Corp, which is stationed in Malaysia, has 229,000 h of plantations in Malaysia and Indonesia and 12 mills. Like Sime Darby and Wilmar, it primarily exports crude palm oil for refinement overseas, but also has refineries stationed in Malaysia (“Background Document: An Overview of the Palm Oil Sector: Countries and Companies” 15). To contrast, Kuala Lampur Kepong and Golden Agri Resources, owning 250,000h and 464,000 h of palm oil plantations respectively, use vertically-integrated operations that process and refine palm oil within their own mills (“Background Document: An Overview of the Palm Oil Sector: Countries and Companies” 15-16). KL Kepong even manufactures final products such as soaps and pharmaceuticals; it is involved in storage and distribution, in and property and investment holdings  (“Background Document: An Overview of the Palm Oil Sector: Countries and Companies” 16). In summary, while multinational corporations involved in palm oil production are typically vertically integrated, owning the land, individual palm trees, oil-cultivating mills, and refinery plants, these companies typically station their refineries outside of the country the plantation is stationed in, and typically aren't involved in manufacturing the final product.

While the fact that palm oil production isn't monopolized by a single conglomerate allows various smallholders to operate a (largely domestic) portion of the sector, the proliferation of these large corporations' land and factory ownership within Malaysia and Indonesia somewhat undermines these smallholders' ability to take part in the process due to land dominance and environmental harm. Across Indonesia, the movement toward cash-crop production appears to be lowering the poverty gap through increasing the value of land (Pacheco 21). Palm oil dominated villages “perform positively on almost all development indicators”(Pacheco 21), meaning the wealth accumulated due to palm oil production has led to locals' increased access to schools, medecine, and electricity. Additionally, provinces producing palm oil have a more diversified economy due to increased purchasing power derived from higher incomes (Pacheco 24). However, these benefits seem to come at the detriment of native farmers: “In some cases native populations have been forced to give up land due to oil expansion by companies and those who cannot invest in oil palm are faced with rising prices”(Pacheco 22). In other words, while plantation employees might gain from palm oil expansion, traditional landowners may experience restrictions on land use, land loss, and ultimately become comparatively poorer. Much farmland previously used to grow rubber, cocoa, and coconut has been converted into oil palm plantations (Kato), meaning the local economies that once practiced subsistence agriculture were converted to monocropping, cash-crop dependent economies. The movement toward monocropping makes these palm oil dependent economies vulnerable to market and weather changes (Innis 129). Moreover, smallholder yields average 11-40% lower than those of plantations in Indonesia because companies have better access to high-quality seedling, inputs, technology and fertilizer (Pacheco 25), and permanent plantation workers earn a higher and more regular salary than smallholders (Pacheco 23). Notwithstanding the many benefits of smallholder agriculture, this security/income disparity may encourage a movement away from the form of localized farming traditional to the region toward laboring for major agricultural companies.

Corporate   involvement has also altered the social landscape in palm oil dependent communities through contracting migrant laborers to cut production costs. This creates income disparities within the region, as companies have moved away from recruiting families for permanent positions, instead hiring individual males for permanent positions and contracting casual migrant labor, often women, for low-paid, dangerous seasonal work (Pacheco 23).  This means that many regions whose economies rely on palm oil production contain gendered work and income disparity along ethnic lines.

Palm oil's expansion has also greatly impacted local ecosystems and global warming overall. Oil palm plantations often expand into land that wasn't previously a farm: “Of the 9.6 million ha that were converted to oil palm [from 1990 to 2010], only 4.1% of conversion took place in undisturbed forests, 32.4% in disturbed forests, 33.9% on other plantations and agroforestry systems, 17.8% on shrub lands and grasslands, 8.3% on bare soils and 3.4% in other land use areas” (Pacheco 25-26). In other words, oil palm plantations' expansion disturbs both locals' subsistence farmlands and natural, uninhabited ecosystems, altering both to appeal to overseas markets' needs. Palm oil mills can also have adverse health effects on local populations, as they generate 2.5 metric tons of effluent for every metric ton of palm oil produced which can cause freshwater pollution, affecting locals that drink it and downstream biodiversity. Furthermore, palm oil plantations' expansion onto peatland releases carbon dioxide emissions due to mills, peat fires and peat oxidation. Because of this, net carbon dioxide emissions from land use change increased from 92 to 184 Tg/yr^-1 in Indonesia, Malaysia, and Papua New Guinea between 1990 and 2010 (Pacheco 25). Industrial slash-and-burn practices in Indonesia have also converted primary and secondary forests into plantations, which has implications for biodiversity loss and climate change (Pacheco 26) and has given rise to the Southeast Asian “haze” caused by peat fires in 1997-1998. However, the World Bank estimates that despite these damages, every hectare burned comes with an estimated benefit of USD 8 billion if converted to palm oil (Pacheco 26). This willingness to sacrifice a local ecosystem to maximize palm oil production reflects that large plantation owning corporations place their marketable, commodified oil higher in value than the area's natural ecology.

While palm oil certainly retains its original dietary value and purpose in traditional cuisine in Africa and Central America, its more recent use in various Western goods and globally-traded convenience foods augmented its presence in the global market, its role as a major export in Southeast Asia, and the social and environmental consequences that arise from it.

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