Characterizing commercial oil palm expansion in Latin America: land use change and trade

For algorithm training (i.e. model building) and image classification we used a Random Forest (RF) tree-based classifier [33] implemented in R [v. 2.12.2; 34] with the RandomForest package [v. 4.6–2; 35]. The Random Forest classifier constructs a multitude of uncorrelated decision trees based on a random set of predictor variables (the annual MODIS time series variables), preventing overfitting of the training set. We assigned land cover classes to each pixel based on the RF per pixel probability, requiring that a pixel contain at least 60% probability of that class.

Due to such an expansive and heterogeneous study region encompassing two continents and varied biomes, we developed 16 region-specific land classification models (table S1). Most models were at the country scale, but larger countries (i.e. Colombia, Peru) required multiple models to capture variability between different production zones. Models were parameterized with 2000 trees, a minimum of 5 terminal nodes per tree, and an unlimited maximum number of terminal nodes per tree. The overall global accuracy of the models was 96%, with an oil palm producer's accuracy of 98%, and oil palm user's accuracy of 93%.

We constructed annual LULC maps for 2014 using the 16 land use classification models. After a post-processing step that eliminated detections smaller than 50 hectares (see SI Materials), we manually assessed the accuracy of our oil palm classification. We created shapefiles of oil palm polygons (n = 2063) in ArcGIS 10.2 and overlaid them with high resolution GE imagery to visually inspect each polygon. Our classification of oil palm in 2014 had a total accuracy of 93% for the study region. Of the 7% error, most (48%) was associated with Mixed Woody land cover—heterogeneous mosaics of woody vegetation with other land covers, but no single class exceeding 40% coverage of a pixel [28]. We then removed the false positives and excluded polygons that could not be determined as oil palm before proceeding with the land use change analysis.

Oil palm expansion in Latin America is following a different land use change trajectory than the widespread deforestation associated with this industry in Southeast Asia. Each LAC nation in our analysis (except Mexico) is considered forested, or has half of its territory covered with forest [39]. Despite the fact that most of this forested area is suitable for cultivating oil palm [17], cattle pastures remain the most significant source of new oil palm plantings across LAC. This trajectory can be partially explained by Von Thünen principles of land rent and also reflects the land use legacy of the LAC region.

Latin America has a longer history of urbanization and lower rural population density compared to Asia, resulting in low-productivity cattle pastures as the defining feature of rural landscapes [40]. The predominance of the pasture—oil palm transition throughout the study area suggests the important role that the cattle industry may provide in clearing land for the eventual expansion of commodity crops, especially in Latin America [41, 42]. Cattle ranching can increase land rent, especially on the frontier, by clearing land for agriculture and increasing accessibility. Bid-rent theory predicts the pasture—oil palm transition as property values increase with proximity and connectivity to centers of commerce, favoring expansion into previously cleared lands with high accessibility over more remote areas [22, 43].

Our maps support the importance of infrastructure and connectivity to the oil palm industry, revealing the tendency for plantations to cluster into distinct production zones. These occur at different spatial scales, from an individual mill with nearby suppliers, to country-level production zones operating under completely different climatic and socio-economic conditions [44]. The clustering of production is also due to the fact that fresh fruit bunches (FFB) must be processed within 48 hours of harvesting to ensure oil quality, keeping plantings and mills in close proximity. Agglomeration of commodity plantations is further reinforced by economic factors such as competition, labor pool, and knowledge transfer [45]. The accumulation of these factors benefits the industry and when combined with the development of downstream processing activities (i.e. construction of mills, refineries) can lead to reinforcing loops characterized by economies of scale that increase agricultural rent and stimulate further expansion [46].

Infrastructure extension and cattle ranching can be thought of as proximate causes of oil palm expansion in Latin America. In tandem, these are two powerful land transforming agents that have been prominent in most cases of deforestation documented in Latin America [42], and may be similarly useful in considering the expansion of commodity crops in the region [41]. Oil palm may have largely avoided deforestation in Latin America simply because it is more feasible and profitable in the wake of cattle ranching, or because extensive pasturelands have long since deforested the productive landscapes of Latin America, isolating forested frontiers to margins where oil palm has yet to penetrate.

Because our approach took a snapshot of the most immediate land cover transition to oil palm, we acknowledge that this temporal limitation may ignore previous LUC dynamics important to the oil palm expansion narrative. In some cases it may be possible that the herbaceous vegetation absorbing oil palm expansion may have been recently cleared from forest as a speculative pretext in attempts to establish property rights while landowners await investment opportunities [47]. However, most of the herbaceous land cover classified in our study was established pasture (i.e. cattle trails, water holes), not recent land clearings, and other research shows that cattle ranching continues to be the primary proximate driver of deforestation in the region [48].

The African oil palm was introduced to Latin America as early as the 1920s as an alternative cash crop to diversify the dominant banana industry [49]. With the spread of Fusarium wilt (Panama disease) in the first half of the 20th century, the banana sector was severely affected and other commodity crops began replacing banana plantations [50]. Commercial production of both banana and oil palm require similar infrastructure, with cultivated areas divided into smaller plots by roads or cable lines to facilitate extraction. The banana sector is also highly labor intensive, and transitioning from banana to oil palm would lead to labor pool abundance, potentially driving down wages and increasing agricultural rent (see SI Materials), contributing to further oil palm expansion in these areas [46].

Conversion from banana to oil palm was likely a more significant pathway in decades prior to our study period, and we are merely capturing the tail end of this transition. Indeed today's oil palm dominated coastline of Puntarenas, Costa Rica was once a banana hub for the United Fruit Company. In SA, the banana—oil palm transition was only found in the Zona Bananera of Magdalena, Colombia, which is now dominated by more oil palm than banana plantations. Oil palm has become valued over banana in the region for its relative price stability and resilience against stochastic events like drought, flooding, and high winds. However, with the recent strengthening of the USD against the Colombian peso making banana exports more profitable than palm oil, and the specter of spreading bud rot disease in the northern production zone of Colombia, some landholders are choosing to replant oil palm with banana (personal observation).

Peru. In the Amazon, large areas of oil palm expansion have replaced primary forest. The oil palm production zones we mapped in this region expanded into large forest blocks on the edge of the agricultural frontier. Plantation size may be an important factor in the extent to which oil palm causes deforestation in frontier areas [51]. Our findings in Peru are in line with another study that reported large-scale commercial plantations as a significant cause of land clearing compared to smallholders [21]. We mapped two large industrial-scale plantations in the Loreto and San Martín departments, which together accounted for 77% (12 097 ha) of the total oil palm driven deforestation found in the country, but only 59% of national oil palm expansion during the study period. We found evidence for two additional industrial-scale plantations being developed in the Ucayali department totaling more than 10 000 ha [52], which we classified as herbaceous vegetation (land clearings) in 2014.

Large, industrial-scale operations will undoubtedly be responsible for more deforestation in remote areas where road access will limit smallholder penetration reliant upon commercial mills to sell FFBs. Only large-scale oil palm operations with sufficient capital to construct an on-site processing mill will find it feasible to venture beyond the agricultural frontier into wilderness areas. Rivers are often the primary infrastructure that connects these remote areas of production to markets. Considering the Von Thünen model of land rent (see SI material), the increase in access costs (v) may be offset by the lower costs of defending property rights (c) as the presence of the state is diminished in these remote areas, making these isolated concessions more profitable [46].

It is apparent that local conditions, particularly weak governance and enforcement, have enabled the conversion of large forest tracts to oil palm in Peru [53]. Though Peru's forestry laws prohibit land use activities that affect vegetation cover and the conservation of forestry resources, companies have acquired oil palm concessions in primary forested areas through a loophole that allows the changing of land use designation if the lands are deemed to have agricultural potential. This is a technical definition known as 'best land use capacity' (BLUC), which ignores standing vegetation and is based only on soil and climatic characteristics, subjecting forests to development under the Ministry of Agriculture [53].

Ecuador. The high rate of deforestation we and others [20] report in Ecuador, may be in part an artifact, given that the majority of the area sampled was heavily forested and much of the oil palm production occurs elsewhere. The availability of recent high-resolution images restricted our analysis to the eastern production zone—specifically, the provinces of Orellana and Sucumbíos in the Amazon—which represents only 7% (∽20 000 ha) of the total area planted in oil palm. The majority (84%) of oil palm production in Ecuador occurs in the western zone including plantations in southern Esmeraldas, Santo Domingo, Los Ríos, and Guayas [54]. Historical satellite images reveal that this area has had a long history of intervention with extensive areas of crops and pastures. Thus we would expect the national rate of oil palm driven deforestation in Ecuador to be less severe than our findings indicate.

Brazil. Expansion of Brazilian oil palm is concentrated in Pará, which currently represents 95% of national oil palm production [55]. Expansion typically replaced primary forest contained within larger landscape fragments; croplands were comparatively less dominant in this region. Though a national forest code has been in place since 1965, much deforestation in the region is associated with weak land tenure laws during the initial acquisition of lands by medium-large scale agricultural companies in the 1970s and 1980s, during a period of financial incentives for the economic development and integration of the Amazon frontier [56]. With the introduction of a new biodiesel law in 2005 (7% blend by 2014), another wave of investment and plantation expansion occurred, this time from large national and international investors. Today, nearly 75% of the area cultivated in oil palm is held by just three companies [56]. Deforestation concerns are being addressed with increased monitoring and adoption of the Sustainable Palm Oil Production Program (SPOPP) in 2010, which targets previously cleared lands in the Amazon for future expansion (ZAE-palma) and prohibits expansion into forests and onto lands deforested before 2008.

Guatemala. Petén is a vast frontier department that contains a large portion of the Maya Biosphere Reserve (MBR), and has undergone considerable cattle ranching expansion in the last decade [57]. We estimated that 24% of oil palm expansion in Guatemala came from woody vegetation, and 89% of that occurred in Petén. Similar to Peru, these were industrial-scale plantations located near Sayaxché, Petén that were among the largest documented in Guatemala (>3 000 ha), and have been associated with environmental degradation beyond land clearing [58]. Government regulations that have incentivized productive lands over natural areas and promoted colonization of frontier areas through subsidized development have contributed to the forest loss observed in this region of Guatemala [59]. Additionally, weak land tenure laws and rising land rent values from in-migration have created an extra-legal land market, further propping up land prices and incentivizing speculation, which has stimulated more land clearing [60]. Land in Guatemala has been historically concentrated into the hands of few, including foreign investors, and this trend has only worsened over time. In 2006, 50% of the population controlled 93% of the land [60]. Oil palm expansion is encroaching upon the buffer zone of the MBR, and researchers suggest that it may be causing indirect land use change in the reserve, as rural poor are displaced from non-protected areas into the forest [61].

Colombia. While only 9% of oil palm expansion in Colombia replaced forest at the country-scale, several departments had much higher deforestation rates, including Norte de Santander (35%), Bolívar (20%), Santander (18%), and northern Cesar (18%). The humid tropical forests of Magdalena Medio include some of the last remnants of tropical rainforest outside of the Amazon, yet remain among the least protected in the country [62]. These departments make up the central production zone of Colombia and coincide with areas where armed forces have historically been present. The involvement of para-military groups in the oil palm sector as a way to control territory has been well documented [63], and poses a proximate driver of forest loss. Sabogal [64] performed a spatial analysis of forced displacement in oil palm producing municipalities and found that over twice as many people were displaced than in non-oil palm municipalities between 2002 and 2009. While it is unclear whether these implicated plantations are most responsible for local trends in forest loss, the departments where we found most deforestation coincide with the oil palm municipalities that have the highest correlation with forced displacement [64]. Contrary to expansion in the Amazon and Petén, we found that most of the woody vegetation converted to oil palm in Colombia and the other LAC nations occurred on forest fragments and regenerating forests, instead of undisturbed blocks of primary forest [19].

The ebb and flow of Latin American palm oil may illustrate a shift in underlying drivers of expansion. The region is a net exporter of palm oil, but only slightly, consuming over 90% of what it produces; less than 12% is exported out of the region. In contrast, only 9% of palm oil exports from Malaysia and Indonesia went to other SE Asian countries in 2013 [16]. Trade flows demonstrate a high demand for palm oil in LAC (see SI Materials), demand that is being met predominantly by the same LAC producing nations as opposed to other palm oil producing regions. This breaks from the conventional view of palm oil as a global South-North flowing commodity, and built-in assumptions about deforestation based on the unequal exchange theory [65].

A potentially important institutional factor contributing to this divergent trend is the creation of recent biofuel programs by governments in Latin America. Biofuel initiatives introduced after the 2006–07 global financial crisis and subsequent spike in petroleum prices have sustained further investment in the oil palm sector aimed to meet future energy goals [19, 66]. Though sugarcane based ethanol dominates the current biofuel agenda in the region, there are several ambitious biodiesel initiatives in Latin America that will likely be met by the growing oil palm sector. These include Colombia (B8-10), Brazil (B7), Ecuador (B5), Peru (B2), and Costa Rica (B20) [55, 67, 68]. Each nation has significant industrial palm oil production, but the extent to which this sector contributes to biodiesel targets varies. For example, Colombia's entire biodiesel mandate is fulfilled by approximately half of its national production, whereas the contribution of palm oil to Brazil's B7 mandate is currently less than 1%; soy and beef tallow are the primary feedstocks [38, 56].

Governments often require that biofuel targets be met by domestic consumption, creating the structure for financial incentives (e.g. tax breaks, credits) that help perpetuate expansion. How these financial instruments influence LUC both directly (e.g. zoning of biofuel feedstock) and indirectly (e.g. displacement of subsistence agriculture) will depend on local proximate and underlying forces. In the case of Colombia, state incentives have caused investors to acquire less productive land for oil palm expansion, mainly pastures [69]. Local institutional/policy factors can also create complex interactions between oilseeds including indirect trade signals that have consequences for land use. In Brazil, 75% of biodiesel production is being met by soybean oil. As more soybean production is dedicated to meeting national energy goals, palm oil imports are filling the vegetable oil supply vacuum for the processed foods industry, particularly for its consideration as a healthier oilseed alternative [38].

Palm oil is also becoming an important fuel source in Europe. From 2006–2012, the EU-27 increased its use of palm oil in biofuel production by 365%, equating to 1.6 MMT, or 20% of total biodiesel feedstocks [66]. Our data show that during this same time period, LAC exported 1.79 MMT of palm oil outside of the region and 1.67 MMT (93%) went to EU-27, or roughly the equivalent to EU-27 consumption of palm oil for biodiesel.

Beyond energy demands, another explanation for the retention of palm oil in the region is that LAC nations are not as competitive in global markets as their counterparts in SE Asia, where transportation and production costs (primarily labor costs) are lower [56]. For example, Brazil is considered to have the highest labor costs of any oil palm producing nation—65% higher than Indonesia—demonstrating the importance of price premiums from sustainable certification programs to access overseas markets [56, 70].

Because palm oil is a globally traded commodity rooted in diverse supply chains, efforts directed toward industry sustainability have been most effective via market based initiatives. The most notable example is the Roundtable on Sustainable Palm Oil (RSPO) which provides oil palm growers and other value chain actors a price premium for sustainably produced palm oil. These incentives are driven mainly by civil society and consumers in affluent markets, particularly USA and Europe. If palm oil is being retained in Latin America for domestic consumption, especially for use as fuel instead of food, there may be less pressure to certify local production. As it turns out, certification for sustainable production is building momentum in Latin America. The RSPO has made recent strides by doubling membership of certified growers in the last two years (11 total) and increasing the total certified area to 258 180 ha in 2016, a 65% increase from the previous year [71]. The regional supply of certified palm oil is now comparable to the global average (∽20%) [71]. It is likely that oil palm producers in Latin America will continue seeking certification to remain competitive and ensure access to international markets.