Certified sustainable palm oil derivatives ‘prohibitively expensive’ in US

Speaking to FoodNavigator-USA.com at the IFT show, representatives from AAK, Loders Croklaan and Cargill said CSPO derivatives such as palm stearin, fractions of stearin and palm kernel oil fractions, were still “ prohibitively expensive ” in the US, even though all three firms can now offer straight (refined) certified sustainable palm oil. The reason was simple, said Bob Norman from certificate trading scheme GreenPalm: “Palm oil is intermingled at every stage of the supply chain, and traceability requires physical segregation, so it's not cost-effective to buy in 100t of [premium-priced] sustainable palm to fractionate into 80t of olein and 20t of stearin if you only have customers willing to pay for sustainable stearin.” China and India are not demanding sustainable palm – yet This was a major challenge, admitted Cargill Oils & Shortenings national sales manager Kris Knudson. “Palm olein is the global vegetable frying oil of choice, and China and India are not demanding sustainable product, so it’s hard to justify producing certified sustainable oil to fractionate it just for sustainable stearin.” Indeed, the big elephant in the room was the lack of interest – or at least firm action – from India and China, which together accounted for more than half of global consumption, said Norman. “Even if 100 percent of Europe, the US and Australia switched to certified sustainable palm, it would not give us critical mass because these markets account for just 18% of global palm oil consumption.” If the game was really going to change, said Norman, “ China and India must buy into sustainable palm.” Meanwhile, although the amount of global palm oil production certified sustainable more than doubled in 2011, only 60 percent of supplies were sold last year, said Knudson. Certified/fully segregated palm oil Right now, food manufacturers have three choices. The first is to buy certified sustainable refined palm oil (trading at a premium of around $50-70/t). This is made by plantations adhering to criteria laid down by the Round Table for Sustainable Palm Oil (RSPO), segregated throughout the supply chain and fully traceable. This can be used in cookie dough and some other foods, but is not the kind of palm used in most bakery shortenings, for example. Book and claim/GreenPalm The second option, ‘book and claim’ – is to buy GreenPalm certificates (trading at www.greenpalm.org at $2.74/t for palm oil and $3.50/t for palm kernel oil) guaranteeing that a tonnage of oil or derivatives equivalent to the tonnage you use has been produced from sustainable sources. While buyers can't guarantee the actual oil they are buying is from an RSPO-approved plantation, they at least know the amount they use has been produced sustainably. Mass balance. The third way? The third option – mass balance – at a premium of around $10-20/t, combines some segregated certified/traceable sustainable oil and some standard oil. While some firms have questioned the value of mass balance given that the claims they can make are the same as for the cheaper GreenPalm option ('Supports the production of RSPO-certified sustainable palm oil'), it had recently been changed, said Loders Croklaan R&D boss Gerald McNeill. “Companies are now able to purchase a certain volume of segregated sustainable palm and use it to match the sales of an equal volume of a palm product fraction under a mass balance claim. “Since the new option only applies to companies that source segregated sustainable palm products, it will also increase fully segregated flows of sustainable palm products to user markets.” Prices will come down The new option did not require a physical or chemical link between the segregated oil and the derivative that was sold under mass balance, said McNeill. So a purchase of 20t of segregated palm olein can be used to match the sales of 20t of mass balance stearin. " This should bring prices down."

Certified sustainable palm oil derivatives ‘prohibitively expensive’ in US

It could be years before certified sustainable palm oil (CSPO) derivatives are affordable for most US food manufacturers, although changes to the ‘mass balance’ option for sustainable palm could bring prices down, suppliers have admitted.

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