Friday 02 Jun 2023
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KUALA LUMPUR (March 12): The Malaysian Palm Oil Association (MPOA) has pleaded with stakeholders of the palm oil industry to lend their support as multiple global challenges confront the industry.

At its Sabah branch’s annual general meeting on Saturday, MPOA chief executive Joseph Tek Choon Yee said the sector is operating on a “non-level playing field” in the world’s agricultural market today, as trade barriers, protectionism, and social and environmental regulations are all intertwined.

“The association’s earnest plea is not lo kill the goose that lays the golden eggs. MPOA and its members will continue to manage plantations in a sustainable manner and strive to attain higher productivity while remaining competitive and sustainable,” said MPOA in a statement on the meeting.

According to the statement, Tek said the sector was a price taker, not a price maker, as it is in the commodity business.

“When there is any cost increase, the sector cannot pass down the cost to its consumers. While facing many challenges such as shortages of skilled workers, higher unabated production costs and unpredictable weather patterns, the ante has been raised today as growers must comply with numerous regulations and certifications,” it said.

However, Tek said global crude palm oil (CPO) supplies are expected to be further constrained this year, due to a marginal increase in output by Malaysia and Indonesia, as well as heavier rainfall and floods affecting Malaysian palm oil estates.

“The last three years of La Nina have caused significant damage to oil palm root systems, which may take time to recover even as the application of rooting fertilisers are ongoing. As a result, atypical FFB [fresh fruit bunch] can be expected, which may be smaller in size, have lesser oil content and uneven fruit set arisen from parthenocarpy and leading to ‘porcupine’ looking bunches. The rising number of over-aged and very tall oil palm trees in Malaysia will also continue to constrain supply as replanting has been slow due to high costs”.

Tek believed that CPO prices should be sustained at around RM4,000 per metric tonne in the near term, and urged industry players to keep a close eye on issues such as the potential weather shift from La Nina to El Nino, an uptick in hina consumer spending with its borders reopening, the Russia-Ukraine war, Indonesia’s export restrictions and its B35 diesel mandate, as well as fluctuations in the US dollar’s strength.

“... plan accordingly to mitigate potential risks and take advantage of any opportunities that may arise. However, strategising and pursuing pragmatic replanting plans for long term business sustainability along with investment and training in right-fitting mechanisation especially for in-field collection is the industry’s ‘battle-call’ to mechanise or perish.”

Sabah production rates decline in 2022

Sabah, which produce 23.3% of Malaysia’s CPO output in 2022, saw its FFB output decline by 2.4% to 15.4 million tonnes per hectare per year, while it oil and kernel extraction rates (OER and KER) fell by 1.5% to 20.3% and 0.9% to 4.5%.

MPOA listed labour shortages, the age proile of oil palm trees, and the Property Assessment Tax (PAT) as some of the issues plaguing Sabah palm oil players.

The association’s Saabah branch chairman Prakash Arumugam said plantations in the state are now relying on Filipino migrants as approvals to recruit from other countries besides Indonesia remain limited.

He said MPOA in Sabah fully supports the Philippine Special Consular Mission initiated by the Philippines Embassy to document migrants from its country, and is willing to facilitate its ground team by providing amenities and assistance durignt the recruitment process into the plantations.

“The industry looks forward to discussing measures with the state government and its agencies to minimise opportunity losses in crop and revenue to the growers and the state due to the labour shortage estimated to be more than RM5 billion losses for Sabah in 2022,” said Prakash.

Meanwhile, Sabah has 184,746 hectares or 12.3% planted with trees aged above 25 years old, the highest in Malaysia.

On the other hand, 352,689 hectares of trees are between 19 to 25 years old. In total, over 36% of the palm oil trees in Sabah are over 19 years old, which may not be economically productive due to their height or if compared against their leftover density.

“If not addressed, this will lead to changing supply equations in Sabah's palm oil supply chain. Thus, pragmatic replanting programme with best practices is crucial for long-term sustainability of the oil palm sector in Sabah notwithstanding the prices of CPO”, Tek said.

Last but not least is the PAT, which is imposed on palm oil mills and estate housing.

“Despite the appeals, some district councils in Sabah refused to renew trading licenses for palm oil mills and estates with outstanding PAT, which could put the palm oil’s mandatory MSPO and business-to-business (B2B)’s RSPO sustainability certification at risk.

“However, the meeting concluded with an agreement to allow affected palm oil mills and estates in Sabah to renew their trading licenses while the government resolves the PAT matter soon.

“This decision would prevent non-compliance with the certification. MPOA wishes to reiterate the importance for follow-through and inclusive engagements with the state government to resolve the PAT issue in Sabah soon,” said the association.

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