Drawn to the social, economic, and environmental impacts of oil crops in the tropics, Derek Byerlee, Walter Falcon, and Roz Naylor provide context and understanding of the booming vegetable oil sector in their new book, The Tropical Oil Crops Revolution: Managing Tradeoffs Among Food, Farmers, Fuels, and Forests.
According to the authors, palm oil and soybeans account for two of the principal commodities of the oil crop industry. Their production, along with that of other vegetable oil crops, has significantly increased in the tropics over the past two decades and as a result have become a central part of the region’s economic development.
With backgrounds in land use and tropical agriculture, rural development, soybean farming, and Indonesian food and agriculture policy, Byerlee, Falcon, and Naylor combine their expertise to offer environmental and economic perspectives on oil crops, their past development, and forecasts for the industry’s future growth.
Food Tank had the opportunity to connect with Byerlee, Falcon, and Naylor about their recent publication and their thoughts on the future of the oil crop sector.
Food Tank (FT): What drew you to tropical oil crops as a subject of study?
Byerlee, Falcon, and Naylor (B,F,N): We found several aspects of our work on tropical oil crops intriguing, especially the major countries that were involved (Indonesia and Brazil), and the tensions that existed between economic development and environmental objectives within those countries. The two key commodities (palm oil and soybeans) also had some very special characteristics. The fact that one of these commodities was a 30-year tree crop and the other a 100-day annual crop helped to peak our analytical interests.
Among us, Byerlee is a long-time student of agriculture and land use. Growing up on a farm in Australia, he has dedicated much of his career to agriculture in developing countries as a teacher, researcher, and policy advisor. Falcon, is an Iowa soybean farmer, himself, and has worked in Indonesia for almost 50 years. He specializes in agricultural policy, technology, and how agricultural activities impact resource use and environmental degredation. Naylor has worked in and on Indonesian food and agricultural policy for more than 25 years and had seen the oil palm development first hand. All of us are agricultural economists who felt that there was a large gap in the vegetable oil literature between what most environmentalists were saying and what economists were arguing. One of our primary goals was to help fill this void.
FT: How did oil crops get introduced into the tropics and what are the main factors driving their growth and expansion into the agriculture, food, and energy chains of many countries worldwide?
B,F,N: In our book we deal with all vegetable oils, but primarily with palm oil and soy oil. Soybean, grown both for its oil and meal, is a relative newcomer to the array of annual crops. Since the 1940s*, the U.S. has been a dominant supplier of this crop that now ranks fourth globally among crops in value. Beginning around 1970, there was rapid growth as well in Latin America, notably in Brazil and Argentina. In Brazil, for example, the change in economic policy, and major investments in research by Brazil’s impressive agricultural research system, led to widespread cultivation by large commercial farms in Brazil’s savannah region (cerrado). Oil palm, by contrast, originated as a (semi-wild) tree crop “grown” by smallholders in West Africa. In the 19th century that region was both the major producer and exporter. By the 1930s, however, Belgian scientists had begun working in the Congo DR on developing high-yielding trees. In the 1960s, Malaysia’s oil palm boom occurred as part of its diversification away from rubber. Indonesia followed some 25 years later, with both public investments and large-scale private plantations. Since 2000, smallholder production has grown rapidly and now constitutes about 40% of Indonesia’s total oil palm area. Together, Indonesia and Malaysia currently produce 85% of the world’s output of palm oil. Interestingly, West Africa has not modernized its oil palm production and has become a significant importer. Several countries in West and Central Africa are now exploring the possibility of expanding their commercial oil palm sectors.
FT: What surprised you most in your research?
B,F,N: We knew at the beginning—but we were still surprised to learn in depth—just how complicated the vegetable oil system really is. It involves a half-dozen oils, all of which have their different geographies and policies, but which are still highly substitutable with one another in consumption. The system also involves both annual and tree crops, which have very different production characteristics. Because most of the oil crops also produce meal for feed, the links to the livestock sector had to be sorted out. And then there is the use of vegetable oil for biofuels, which inevitably takes the analysis into energy markets. Overall, vegetable oil is a messy topic! We think a second big surprise was the rapidity with which smallholders are supplementing plantations in Indonesia, and what that means for the sustainable production of palm oil. Most of the growth in oil palm production has been through expansion into new land areas, including peatlands and tropical forests.
FT: What do you hope readers take away from reading The Tropical Oil Crop Revolution?
B,F,N: We hope that readers from different backgrounds will find varying points of interest and importance. At a more general level, we think three messages are key. First, we hope the volume conveys the idea that the vegetable oil sector is large, growing rapidly, and grossly under analyzed. It is in serious need of more research for those interested in economic development, land use, commodity analysis, food security, and nutrition. Second, we see a sharp slowing of growth in the vegetable oil sector as a consequence of smaller income effects, the topping out of its use in biodiesel, and the past consumption substitutions that have already occurred, such as the almost complete replacement of coconut oil with palm oil in Indonesia. For the future, Africa remains the major wild card with respect to both the demand and supply of vegetable oils. Third, vegetable oils (and especially palm oil) are a very important component of economic growth, poverty reduction, and the environment. Policy proposals have tended to focus on one element at a time, especially the environment. Our view is that policy approaches must embrace both development and the environment dimensions if they are to be responsible and relevant. Sustainable systems will become a reality only when both factors are considered together.
FT: So in your view, can oil crops be produced sustainably?
D,F,N: There is little doubt that topical vegetable oils could be produced sustainably, but to do so will not be easy. Few developing countries, both current and prospective producers, have land-use plans that carefully delineate land rights. In many regions there are particular problems with conflicts between the traditional rights of local people with the land concessions awarded by government entities. Let us offer further illustrations from palm oil production in Indonesia, a sector with huge emissions of greenhouse gases. First, the homogeneity of the milled oil makes it difficult to link output with individual producers. Certification schemes are especially complicated for small holders because of records that are needed and the costs that would be involved. Second, some means of land conversion must be found other than by burning. Third, there is enough land in the countryside in many regions that has been logged previously to provide for responsible expansion of oil palm without further deforestation. But moratoria against using “new” land are very blunt instruments, and without land-use plans, strong governance, and incentives not to burn, genuine sustainability will be difficult. Parts of Malaysia are leading the way on the certification of small holders by focusing on small regional districts rather than individual producers. But globally there is still a long way to go. Finally, we want also to note that sustainable production does not always mean zero deforestation. A number of potential producers, for example, Papua (Indonesia) and Cameroon, have little deforested land and any significant palm oil production would mean some deforestation. The issue is, rather, having good land-use plans to minimize environmental degradation and to preserve high carbon soils and biodiversity hotspots, and then to be able and willing to enforce these plans.
FT: How do you foresee the oil crop sector changing in the future?
B,F,N: Unlike a number of other analysts, we see a substantial slow down in growth of the global vegetable oil sector over the next 30 years. Many of these forces for change will be on the demand side. We see a topping out of vegetable oil use for biofuels, although future trends in energy markets remain uncertain, and the diesel transportation sector is growing quickly. We think the growth of vegetable oils, as food will also slacken, particularly in Asia where higher income and slower additions to population will have significant effects. Africa, with its rapid population growth and seemingly better economic prospects, will play an increased role in global vegetable oil marks. However, whether Africa is able to produce this oil domestically, or will import it, is perhaps the largest open question for the future. Finally, the overall slow down in growth of demand should also help relieve some of the pressures on sustainable sourcing. Overall, we do not see the real prices of vegetable oil rising, and if anything, we see downward pressures on its prices more likely.
FT: Did researching and writing this book present any challenges?
B,F,N: All books present challenges, and our book on the tropical vegetable oil revolution was no exception. The good news is that our collaboration worked beautifully, and we think we were able to play to each of our strengths and to achieve a common “voice” throughout the volume. Our biggest challenges were those associated with boundaries. We wanted to produce a relatively short volume that was readable, and that could inform readers with a variety of backgrounds. The “audience” question then raised issues of how much explanation to provide on certain concepts, such as elasticities, that are well known to economists, but less used by others. The other boundary issues had to do with how many vegetable oils to deal with in depth, and how much material to include about the energy/biodiesel sector, the livestock sector, and the manufactured product sector (such as cosmetics). After the fact, we are quite happy with our decisions; we hope that our readers are as well.
*1920s main exporter was Japanese occupied Manchuria