Stinky fertiliser? Oil palms need nutrients, too

The fertiliser trail as published in the Business Times.

21 Jan 2009 -- Fertiliser importers set to drop prices further

FERTILISER importers are expected to drop prices by more than 15 per cent this quarter. This will benefit oil palm plantations as they use up some 3.5 million tonnes or 90 per cent of the country's chemical fertiliser imports.

Plantation Industries and Commodities Minister Datuk Peter Chin said fertiliser prices in the world market, except for potash, have fallen significantly and it is only logical to see these savings passed on to the plantations.

"In the last quarter, they've dropped prices by 15 per cent. They are now calculating the quantum of price drop for this quarter. It's likely to be more," Chin told Business Times after meeting with Agriculture and Agro-based Minister Datuk Mustapa Mohamed and Fertiliser Industry Association of Malaysia (FIAM) in Putrajaya yesterday.

FIAM chairman Zainal Matassan said: "Although barter trade is an option that would involve extra steps and procedure, we'll strive to find ways to implement fertiliser purchase via the POCPA. We'll revert to the government soon, before the end of this month."

19 Jan 2009 -- Plan to barter palm oil for fertiliser with North Korea, Russia

MALAYSIA, in efforts to reduce its fertiliser import bill, will barter US$70 million (RM250.6 million) worth of palm oil for fertiliser with North Korea and Russia.

Last year, without much leverage from barter arrangement, oil palm planters paid more than RM6 billion to fertiliser importers for an estimated 3.5 million tonnes at market pricing.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said his ministry and Bank Negara had, last month, approved US$20 million (RM71.6 million) credit with North Korea for palm oil orders until end-2010.

"In the last nine years, we've bartered US$60 million (RM215 million) worth of palm oil for fertiliser with North Korea. We've approved a further US$20 million for another two years," he told reporters after meeting with the Malaysian Estate Owners' Association (MEOA) in Putrajaya over the weekend.

"Russia is a bigger fertiliser producer. We're bartering US$50 million (RM179 million) of palm oil for potash this year," he said. Bartering of palm oil for fertiliser could facilitate more competitive pricing in fertiliser components from smaller suppliers. Giant crop nutrients suppliers of the world are in Canada, Norway and Chile, Chin said.

Apart from North Korea and Russia, Chin said, Malaysia wants to do more barter trade with other fertiliser producing countries like Morocco, Jordan, Syria and Iran. Since 1992, Malaysia has been bartering palm oil for other commodities via the Palm Oil Credit and Payment Arrangement (POCPA) with Bank Negara as credit guarantor.

30 Dec 2008 -- Govt seeks views on fertiliser bulk-buying, ceiling pricing

THE government plans to meet with the Fertiliser Industry Association of Malaysia (FIAM) to explore the option of bulk buying and selling fertiliser to oil palm and rubber planters at lower prices.

"Before we bring this up to the Cabinet, we need to meet with FIAM to gather their views on bulk-buying and ceiling pricing," said Plantation Industries and Commodities Minister Datuk Peter Chin. "We already have this kind of arrangement with sugar distributors," he told Business Times in a recent interview in Putrajaya. "If fertiliser importers are agreeable, we can work together to find ways to implement this in a practical manner like in the sugar trade," he added.

According to the Statistics Department, in the first eight months of this year, Malaysia imported 2.57 million tonnes of fertiliser worth RM4.64 billion. So far, industrial crops consume RM4.4 billion, which make up 95 per cent of the country's fertiliser import bill.

Oil palm plantations consume 90 per cent of Malaysia's fertiliser imports while rubber and cocoa estates take up another five per cent. Padi fields, vegetable farms and orchards use the remaining five per cent.

Fertiliser make up 60 per cent of oil palm planters' production cost. Many planters, especially those with young trees just starting to bear fruits, are crying foul over expensive fertiliser. "Last year, our oil palm planters spent RM2.6 billion on 3.4 million tonnes of fertiliser. This year, the import bill may swell to more than RM6 billion since fertiliser prices have more than doubled," the minister said.

Chin's plan is in line with that of Agriculture and Agro-based Minister Datuk Mustapa Mohamed who suggested subjecting fertiliser to ceiling pricing so as to ease farmers' and planters' burden.

In a separate interview, the Malaysian Estate Owners Association (MEOA) said it welcomes the ceiling price proposal if fertiliser importers continue to sell it at high prices.

"We propose that the ceiling price for fertilisers, other than urea, should be at least 50 per cent less than the current prices," said MEOA president Boon Weng Siew. "The ceiling for urea, a petroleum derivative, should be fixed at, say, 65 per cent less than the price as at 31st July 2008," he added.

Boon said the government should probe into the two-tier pricing of Muriate of Potash (MOP) in the global market if it were to facilitate fertiliser bulk buy from global suppliers.

Citing industry journal "Potash Corp", Boon said current MOP prices showed contract price for shipment to China and India was US$550 (RM1,914) whereas that for Malaysia, Indonesia and Brazil was between US$1,000 (RM3,480) and US$1,100 (RM3,828) per tonne.

26 Dec 2008 -- TH Plantations may have to use less fertiliser

TH PLANTATIONS Bhd, the plantation arm of Lembaga Tabung Haji, will reduce its fertiliser usage if palm oil prices do not improve and continues to be expensive.

"So far, we have not cut down the amount of fertiliser usage this year. Earlier, we had budgeted for 38,000 tonnes," its managing director Datuk Rashidi Che Omar told reporters after the company's extraordinary general meeting in Kuala Lumpur yesterday.

"If, however, palm oil prices do not improve, we may have to reduce by as much as 30 per cent. Fertiliser is so expensive. If this drags on, we will have no choice but to cut back," he said.

Rashidi's comment comes on the back of major oil palm planters' recent stand to reduce fertiliser purchases in the next six months if fertiliser continue to be sold at high prices.

Fertiliser makes up 60 per cent of oil palm planters' total production cost. "Cutting back on fertiliser usage is not an easy decision because we don't want to have drastic impact on yields in the later years," Rashidi said. TH Plantation's landbank now totals 28,730ha. Its shareholders, yesterday, approved of the almost RM200 million purchase of Bukit Belian estate and one-half of Sabaco estate from parent Lembaga Tabung Haji.

19 Dec 2008 -- Ceiling price on fertiliser?

THE GOVERNMENT may make imported chemical fertiliser a controlled item, placing a ceiling on its price so as to ease oil palm planters' burden.

"The government is aware that fertiliser prices have yet to come down despite importers pledging to drop prices by 15 per cent. Fertiliser prices have risen significantly, about three times higher than in 2006.

"While crude oil prices have dropped significantly, fertiliser is still sold at high prices," Agriculture and Agro-based Industry Minister Mustapa Mohamed told reporters after officiating the launch of the Fisheries Department's business prospectus on aquaculture in Kuantan yesterday.

"The government is already subsidising fertiliser for padi and vegetable farmers, but the biggest users are oil palm planters. It would be disastrous if planters cut back on fertiliser usage as this would affect Malaysia's palm oil output next year," Mustapa said.

Asked how soon there would be a ceiling price on fertiliser, he said: "The proposal is still preliminary. We have yet to bring it up to the Cabinet."

25 Nov 2008 -- Oil palm growers to buy less fertiliser

MALAYSIA'S 200,000-odd oil palm planters, initially forecast to spend more than RM6 billion on 3.5 million tonnes of imported fertiliser this year, have collectively agreed to reduce purchases in the next six months.

Oil palm plantations consume 90 per cent of the nation's fertiliser imports. Last year, Malaysia's oil palm planters spent RM2.6 billion on 3.4 million tonnes of imported fertilisers. This year, they are expected to use 3.5 million tonnes worth more than RM6 billion.

Oil palm planters do not usually want to skim on fertiliser usage unless they have no choice. This is because the more fertiliser is applied to the oil palm tree, the more fruit it bears. Therefore, productive estates are better at curbing production cost. For example, estate churning out 25 tonnes of fresh fruit bunches (FFB) per hectare per year incur production cost of about RM1,300 per tonne while those producing 20 tonnes of FFB per hectare per year will have to cope with RM1,500.

"We're considering not applying fertiliser for the next six months to cut cost if fertiliser prices do not come down. Fertiliser is still two times more costly than at the beginning of the year," said Malaysian Palm Oil Association (MPOA) chairman Datuk Azhar Abdul Hamid, who is also Sime Darby Bhd executive vice-president of the plantation and agribusiness division.

He was speaking to reporters after a meeting with Malaysian Estate Owners Association (MEOA) president Boon Weng Siew and the Malaysian Palm Oil Board (MPOB) chairman Datuk Sabri Ahmad.

MEOA's Boon said fertiliser importers' recent pledge to cut prices by 15 per cent is not justified. "Fertiliser suppliers should drop prices by 50 per cent, considering that international crude oil have come down by more than 65 per cent from its high of US$147.47 (about RM535) per barrel in July," he said.

Also present at the press conference were Felda Holdings Bhd group managing director Datuk Mohd Bakke Salleh, IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng and Kuala Lumpur Kepong Bhd (KLK) chairman Datuk Seri Lee Oi Hian.

MPOB has so far collected RM500 million in cess from oil palm planters. Some RM200 million has been set aside to replant 200,000ha of land and stabilise biodiesel prices when the government implements the B5 mandate effective February 2009.

Oil palm planters are also proposing to the government that national power firm Tenaga Nasional Bhd uses palm oil feedstock for its diesel-fuelled power plants in Sabah.

Although yesterday's sudden gathering of the oil palm associations that included captains of the six biggest oil palm companies seemed to reflect the seriousness of low palm oil prices, KLK's Lee said oil palm planters and exporters are not in dire straits.

"Please do not misread this as a distress situation. At RM1,500 per tonne, we're still profitable," he said, adding that oil palm planters can manage production cost by lowering inputs.

He said KLK's oil palm planted area of some 170,000ha in Malaysia and Indonesia have begun to reduce fertiliser inputs by 20 per cent. "By using less fertiliser, we've cut back on our production cost by about RM100 per tonne," he said.

Yesterday, the third month benchmark crude palm oil on Bursa Malaysia Derivatives Exchange traded RM28 higher to close at RM1,488 per tonne.

5 Nov 2008 -- Palm oil sector could gain from lifting of fertiliser duty

MALAYSIA'S palm oil industry could get a respite from low margins thanks to a government move to scrap import duty on fertilisers.

Deputy Prime Minister Datuk Seri Najib Razak, who is also Finance Minister scrapped the 5 per cent duty on seven imported fertilisers yesterday.

"On fertilisers, usage cost is approximately RM1,600 per hectare," Affin Investment Bank said in a research, "hence, scrapping the import duty is estimated to boost net profits by 0.5 per cent to 2, equivalent to the impact of a RM20/tonne increase in crude palm oil price."

A level of RM1,500 a tonne — 15 per cent below current levels — represents the break-even point for plantations, which face a margin squeeze as fertiliser and other farm costs stay strong. Yesterday, the third month benchmark crude palm oil futures on the Bursa Malaysia Derivatives rose as much as RM122 to close at RM1,700 per tonne.

Malaysia’s import bill for fertiliser, used mostly by the palm oil industry, is likely to more than double to RM6 billion this year, as global prices flare on strong demand.

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