04/05/2009 (Daily Times) - Growing economic pain may increasingly force consumers to turn to palm oil, one of the cheapest cooking oils, a move that can scupper nascent plans to slow deforestation in Southeast Asia.

With rising output in Indonesia, the world’s biggest palm oil producer and home to the eighth largest expanse of forests, and tight land supplies in Malaysia, the world’s second largest supplier, conservation’s economics look even less appealing. Under a United Nations (UN) scheme to slow deforestation, countries that preserve forests could be paid up to $2,077.50 per hectare, but that compares with the $4,826.11 per hectare that could be earned at current prices on a well-managed palm estate, Reuters calculations showed.

The UN plan, called the reduced emissions from deforestation and degradation (REDD), was supposed to allow investors to buy carbon credits and bring in $10 billion to $30 billion yearly to over 60 developing nations with forests.

“REDD has no chance. Malaysian palm oil yields are high and better estate management is key,” said an official with a listed Malaysian planter with holdings in Indonesia as well as Malaysia. “Even in Indonesia, which many thought would revert back to keeping forests, yields are going up and above the usual 3 - 4 tonnes because Malaysians are buying up these estates and Indonesian companies are developing very fast,” he added.

Companies that use degraded farm land say that the economics of palm and growing demand mean that there is simply no choice but to expand.

Indonesia has defended forest clearing for palm oil, saying high conservation value forests are being left alone as it prepares to boost oil palm estates by 125 pecent to 18 million hectares by opening up more forests.

Indonesia has 88 million hectares of forests and recorded the second biggest net loss of forest cover during 2000 to 2005 at 1.5 million hectares annually, 2005 data from the Food and Agriculture Organisation showed. Palm-driven deforestation has accelerated as Indonesia’s planters and foreign firms rushed to increase estates during a two-year price rally from 2007, more than doubling the expansion rate to 1 million hectares a year from the 400,000 hectares norm. reuters