Planter-gov talks can cut wastage

Billions of ringgit are wasted along the whole palm oil value chain every year but oil palm planters say closer ties with the government can prevent such losses.

"So far, reports have been focusing on labour shortage. It is not just that one issue. It is more of inefficiencies along the whole value chain," said Layar Positif Sdn Bhd managing director Charles Chow, an oil palm smallholder in Sandakan, Sabah.

He urged the Malaysian Palm Oil Board (MPOB), the Immigration Department and the finance and human resources ministries to be more engaging with smallholders. "By having regular dialogues, all stakeholders in the industry stand a better chance of finding pragmatic solutions to minimise wastage throughout the supply chain," he said.

Since MPOB is on an aggressive drive to get smallholders to replant unproductive trees with high yielding hybrids, one would expect matching expansion in milling, refining and storage infrastructure. Chow related how smallholders experienced tremendous wastage from price volatility when fruit bunches were rotting in the field because the industry lacked adequate storage.

When palm oil prices go up, planters are happy. In March 2008, prices soared to its highest of RM4,486 a tonne and that prompted overseas buyers to cut back their purchases and when the global financial crisis set in, it prompted governments in China and India to tighten credit facilities. This lead to a flood of defaults and prices fell to a low of RM1,390 a tonne in October 2008.

Chow recalled how shipments were stuck in Sandakan and Lahad Datu ports when buyers delayed taking delivery in the hope that prices would fall. "At that time, refiners' storage were filled to the brim and mills turned away our produce because they are operating at full capacity," he said.

Sabah, the largest oil palm planting state in the country. Last year, it saw output shrink for the first time ever to 5.45 million tonnes because there were not enough labourers to harvest fruit bunches in the plantations.

Since there was a critical shortage of harvesters, Sabah output fell miserably. As much as 20 per cent more fruits or one million tonnes of palm oil were left unharvested in the plantations because of critical shortage of strong and experienced hands, Chow said.

He said MPOB, in giving new licences for expansion of planted area, should give accurate worker estimates to the Human Resources Ministry so that the industry is able to hire enough harvesters to collect the fruits.

"Let's say, if the government had approved recruitment ratio of one harvester to 10ha, we could have harvested an additional one million tonnes of palm oil. At a conservative pricing estimate of RM2,000 per tonne, opportunity loss in palm oil exports from Sabah works out to be RM2 billion," he said.

In a separate interview, Valentino Ting, another smallholder based in Sandakan said what he sees now is an ad hoc approach to complaints and that the same problems remain.

Last year, Sabah produced 5.45 million tonnes of palm oil and this should translate into some RM80 million of cess collected by MPOB. "We want MPOB to use a portion of the money collected to upgrade and expand bulking facilities at the ports. In case of a price plunge in the international market, smallholders like us can continue to sell fruits to the millers," he said.

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