Indonesia, Malaysia and EU form task force to negotiate palm oil trade under EUDR

Indonesia and Malaysia and the European Union have agreed to form an ad hoc task force to hash out issues related to the implementation of the EU Deforestation Regulation, or EUDR, Indonesia's Coordinating Ministry for Economic Affairs said Aug. 7.

Indonesia and Malaysia account for about 85% of palm oil's global trade while the EU is typically the third largest importer the tropical oil -- a big chunk of which it uses to produce biodiesel.

A kick-off meeting of the task force was held in Jakarta Aug. 4 and was chaired by Indonesia's Coordinating Ministry for Economic Affairs deputy for Food and Agribusiness Coordination, Musdhalifah Machmud, secretary general of the Malaysian Ministry of Plantations and Commodities YBhg. Dato' Mad Zaidi bin Mohd Karli, and European Commission director of Green Diplomacy and Multilateralism Astrid Schomaker, the Indonesian ministry said.

At the meeting, all parties agreed on terms of reference on issues such as smallholders in the supply chain, national certification schemes, and scientific data on deforestation and forest degradation, Jakarta's trade ministry said.

The three parties set a deadline of 2024-end for the task force to complete its work and said that the next meeting will be held in November 2023.

The EU is expected to import about 8.9 million mt of vegetable oils in the marketing year 2023-24 (July-June) of which palm oil imports were seen at 4.8 million mt, according to the US Foreign Agricultural Service data released July 12 in its monthly oilseeds report.

In MY 2022-23, the EU imported 4.05 million mt of palm oil, down 18% from the year before, according to customs data from the EU.

Arguments over EUDR

The EUDR legislation entered into force on June 29 this year and increases traceability and due diligence requirements on EU's imports of palm oil, cattle, wood, coffee, cocoa, rubber and soybean and products derived from them.

Imports of these products could be restricted if they are produced on land that has been subject to deforestation since Dec. 31, 2020, EUDR states, with extended timelines for small holder farmers.

Combined with EU's renewable energy directive, or RED, which limits the use of palm oil for biofuel in EU markets starting in 2030, the EUDR has been seen as another layer of restrictions by palm oil producing countries.

Both legislations have attracted criticism from palm oil growers who contend that it could impose a heavy burden on farmers and disregards anti-deforestation measures and sustainability certifications enforced by Indonesia and Malaysia.

In June Indonesia's President Joko Widodo and Malaysia's Prime Minister Anwar Ibrahim released a joint statement vowing to cooperate and fight against EU's "highly discriminatory measures against palm oil."

The two countries had also sent a joint mission to Brussels in May to discuss the deforestation law.

Platts, part of S&P Global Commodity Insights, assessed the price of crude palm oil CIF Rotterdam at $952.5/mt Aug. 7, down 4.2% from the start of the month.