Replanting to boost yields

THE government's new replanting scheme will target 365,000ha of oil palms older than 25 years as the world's No. 2 palm oil producer tries to lift flagging output, a top Malaysian industry official said.

Industry regulator Malaysian Palm Oil Board's (MPOB) new chairman, Datuk Seri Shahrir Samad, said the scheme would take two to three years to complete and that the government had allocated RM297 million under the 2011 Budget.

The scheme is the latest initiative to boost yields in the country, which has fallen behind top producer Indonesia in terms of output. An earlier industry-funded scheme to replant 200,000ha in 2008 in a bid to boost slumping prices was almost completed this year.

"I think we can easily achieve 17.5 million tonnes (in 2011) even with this new replanting scheme as there will be more young oil palms coming into maturity," Shahrir said in his first interview with the foreign media as MPOB chairman.

Shahrir's forecast was 4.9 per cent lower than the government's production target of 18.4 million tonnes for next year, and roughly the same as his projection of 17.5 million tonnes for this year. "I don't think there will be a drop in production even after the erratic weather this year. The younger trees are quite resilient," he said.

Early this year, El Nino-driven hotter weather dried up yields and lifted the Malaysian benchmark palm oil prices, which have gained almost 15 per cent so far this year. The weather condition was quickly followed by La Nina, which brings more rains and floods to southeast Asia that can complicate harvesting and transport of the palm fruits.

Malaysia exports almost 90 per cent of its output. Last year, Malaysia derived RM37 billion from crude palm oil exports and RM13 billion for refined products and oleochemicals.

Shahrir said the government would allocate up to RM127 million to further develop the refining and oleochemical industries, with aid mostly targeted at Sime Darby Bhd , IOI Corp Bhd and Kuala Lumpur Kepong Bhd (KLK) - the top three palm oil companies in the country.

The MPOB is proposing mandatory green standards to ensure palm oil does not come from estates that expand by felling forests and marginalising local communities, Shahrir said. The MPOB has had a code of practice for palm oil firms to halt environment pollution since 2007, which firms such as IJM Plantations Bhd, Genting Plantations Bhd and KLK have adopted.

"The code is similar to the RSPO's principles and criteria," Shahrir said, referring to the industry-driven Roundtable on Sustainable Palm Oil that has produced a certification system whose participants have to commit to to preserve the environment.

"The industry has asked that we keep this code voluntary like the RSPO, but we are also in discussions with the government on starting an audit body to look at the industry, to ensure that the standards are met," Shahrir said ahead of the RSPO conference in Jakarta, next week. --- Reuters

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