Singapore-based Indonesia palm oil exporter grapples with EU law
Musim Mas reviews supply chain to comply with deforestation reporting requirement
18/10/2023 (Nikkei Asia), Jakarta - Musim Mas, a Singapore-based exporter of Indonesian palm oil, faces "a big challenge" over the European Union's new deforestation regulation, which will particularly impact the country's small individual farmers, a company executive told Nikkei Asia.
The landmark law requires importers of commodities such as palm oil, coffee and cocoa to generate a due diligence statement proving their products do not come from deforested land or have led to forest degradation. Under the regulation, traders and other organizations selling products in the EU will have until late 2024 to comply. Micro and small enterprises, however, are exempt from the due diligence rules until mid-2025.
Carolyn Lim, a senior Musim Mas manager, calls the law "a trade barrier."
Musim Mas, a Singapore-based exporter of Indonesian palm oil, faces "a big challenge" over the European Union's new deforestation regulation, which will particularly impact the country's small individual farmers, a company executive told Nikkei Asia.
The landmark law requires importers of commodities such as palm oil, coffee and cocoa to generate a due diligence statement proving their products do not come from deforested land or have led to forest degradation. Under the regulation, traders and other organizations selling products in the EU will have until late 2024 to comply. Micro and small enterprises, however, are exempt from the due diligence rules until mid-2025.
Carolyn Lim, a senior Musim Mas manager, calls the law "a trade barrier."
Musim Mas, which controls 18% of the global refined and processed palm oil market, is reviewing its supply chain. Currently, it sources 40% of its fresh fruit bunches from Indonesia's independent smallholders, with the rest produced at its own 130,000-hectare plantation in Indonesia and by corporate suppliers.
Other foreign palm oil companies active in Indonesia include Singapore's Wilmar International with a total planted area of 231,697 hectares, of which about 65% is in Indonesia. U.S. agriculture giant Cargill has about 80,000 hectares of company-owned planted land in Indonesia. Major Indonesian players include Asian Agri and Sinar Mas Agro Resources & Technology.
To meet the EU regulation, Musim Mas recently halted the export of palm oil from small farmers to the region, Lim said.
She added that Musim Mas has adjusted how it sources supplies so that they come "from our own operations as well as our suppliers, who can provide us with ... corporate traceability statistics, then ship to [EU markets]."
The palm oil produced by independent small farmers is now used to meet demand from the Asia-Pacific market because the region "cares about quality but probably not traceability," Lim said.
The Asia-Pacific region in 2022 contributed more than 60% of the company's total revenue of $10.8 billion.
In addition to the review of supply chains, Musim Mas is also holding workshops and otherwise helping small farmers gain a better understanding of sustainability. While acknowledging that improving sustainability knowledge among farmers could take time, Lim said.
Musim Mas also works with brands to find ways to exchange data with EU regulators that is palatable to the producing countries and the EU. "Smallholders' deforestation is going to be a challenge for the industry," Lim said, "even [for] the brands who work with us."