01/05/2010 (Free Malaysia Today), Kuala Lumpur - Palm oil producers and government officials from Malaysia and Indonesia will meet on May 3 to discuss the latest round of attacks by Greenpeace and other environmental organisations that have blamed producers for destroying rainforests and biodiversity, an industry executive said on Wednesday.

The meeting, to be held in Kuching, Sarawak, will discuss issues affecting the palm oil industry, including greenhouse gas (GHG) emissions and the use of peatlands for plantations -- a practice that environmental groups say will increase GHG emissions as peat lands hold significant amounts of carbon.

Indonesia's Sinar Mas came under fire recently after Greenpeace charged the company with failing to follow sustainable plantation practices required by the Roundtable on Sustainable Palm Oil (RSPO), a multi-stakeholder group formed to promote ethical plantation practices, including the preservation of rainforests and biodiversity.

The report said Sinar Mas, the parent company of the Jakarta-listed PT Sinar Mas Agro Resources and Technology Tbk and the Singapore-listed Golden Agri-Resources, was widely involved in clearing rainforests and draining peatlands for developing oil palm plantations.

The campaign forced global giants such as Nestle N.V and Unilever Plc to stop sourcing palm oil from Sinar Mas, despite the company being a member of RSPO, an industry-sponsored certification body.

Questionable practices
Sinar Mas has reiterated its commitment to sustainable practices and appointed Control Union Certification and the BSI Group to carry out independent audits. It has also suspended a plantation manager whom the company said was responsible for questionable practices.

But Greenpeace is demanding that even trading companies such as Cargill Inc boycott Sinar Mas' palm oil, amid concerns that its produce is indirectly reaching end consumers through third parties, making the boycott by Unilever and Nestle meaningless. Cargill has said it would wait for the results of the external audit before taking action.

"What is important is for us... to be well-positioned when the industry meets to address this issue at the RSPO level," said Mamat Salleh, chief executive of the Malaysian Palm Oil Association (MPOA).

He said the upcoming meeting will be a follow-up from a collaboration agreement signed between MPOA, the Indonesian Palm Oil Association and other plantation organisations in early March.

The meeting has generated speculation that some palm oil producers, particularly those in Indonesia, may be planning to set up an alternative certification body, as they felt the RSPO hasn't been able to serve their cause.

Some industry executives have even said the meeting will be the precursor to setting up the alternative certification body.

Most major plantation companies in Malaysia are members of RSPO, while only some Indonesian companies have joined the body. Indonesia and Malaysia account for about 85% of the global palm oil supply.

"The key point in the upcoming conference is to discuss ways to address environmental issues. Producers are keen on a win-win solution at the RSPO level before opting to set up a separate certification body,” Mamat said.

Growers had threatened to walk out of the RSPO annual meeting last November and quit the organisation if it agreed to demands by the EU and Greenpeace to include additional conditions such as GHG emissions to the already stringent certification process.

Many growers say they are burdened with too many RSPO requirements while those with certified oils feel the demand for "green" palm oil was sluggish as buyers were not willing to pay a premium for RSPO-certified sustainable palm oil.

It is also hardly good news for traders in the palm oil sector as shares continue to plunge amidst environmental problems and currency concerns. Palm oil declined for a second day as shares plunged and crude oil fell amid concerns that Europe’s debt-laden countries may move closer to default and hurt the world’s economic recovery.

Palm oil for July delivery dropped as much as 0.8% to RM2,529 a metric ton, before closing 0.1% lower at RM2,547 on the Malaysia Derivatives Exchange.

“I don’t see any catalyst for crude palm oil prices to strengthen since oil prices are down too,” a senior analyst said in Kuala Lumpur.

Palm oil has tracked crude’s weekly movements for the past 11 weeks as confidence over an economic recovery fuelled optimism that energy demand will increase, brightening the outlook for biofuels.

The MSCI World Index dropped 2.1% on Thursday for the worst loss since Feb 4, and was down 1.1% at 6.01pm. The MSCI Asia Pacific Index lost as much as 2%, the most in seven days.

Concerns over Europe and the stock market slump helped drive crude oil in New York for June delivery down 2.1% to US$82.44 a barrel for the biggest drop in seven days yesterday. The contract traded at US$81.83 a barrel yesterday.