KUALA LUMPUR: Sarawak expects 15 per cent output growth to 3.1 million tonnes of crude palm oil this year, as more oil palms mature and bear more fruits.
In an interview, Sarawak Oil Palm Plantation Owners' Association (Soppoa) vice-president Paul Wong said the association members should be able to harvest and squeeze out between 10 to 20 per cent more than last year's 2.7 million tonnes.
"About 80,000ha of additional area will come to maturity this year. Many of our members' tree profile is pointing towards favourable output these few years. Malaysia's final expansion frontier is in Sarawak," he told Business Times on the sidelines of the Palm and Lauric Oils Outlook Conference (POC) 2012 held here yesterday.
Indeed, with some three million hectares of agriculture land yet to be cultivated, the growth story lies squarely on Sarawak. As at December 2011, the country's oil palm planted area totalled five million hectares.
Last year, the Malaysian Palm Oil Board's data show that both Peninsular Malaysia and Sabah's crude palm oil output only grew by 9 per cent and 10 per cent to 10.4 million tonnes and 5.8 million tonnes, respectively. Sarawak's production, however, jumped 24 per cent to 2.7 million tonnes.
Soppoa's 3.1 million tonnes of crude palm oil forecast is in line with that of the Malaysian Palm Oil Board (MPOB)'s national estimate of 19.3 million tonnes.
"While there's good prospects of crude palm oil output, we face shortage in refining capacity in Sarawak. The restructuring of the Indonesia palm oil export taxes have caused an uncompetitive environment here. The uptake by refiners in Sarawak is very slow because they face negative margin when they process the crude palm oil," Wong said.
Since last year, the Indonesian government has widened the export tax gap between crude palm oil and refined products drastically to boost refining capacity and downstream activities. As a result, crude palm oil and crude palm kernel oil became cheaper for downstream producers there.
"We have a lot of crude palm oil to process but the refiners in Sarawak lose money when they refine in this kind of uncompetitive environment. Although the market is slowly adjusting, we hope the federal government will do something to help the refiners here," he said.
Wong then said the backflow effect of refiners slowing their uptake of crude palm oil from millers have cause a build-up in stocks.
"Millers in Sarawak only have that much tank storage. What happens when it is peak season in the third quarter? By then, millers would not be able to take in that many fruit bunches from smallholders when their tanks are filled to the brim," he said.
"The government needs to urgently address this issue faced by refiners because it is also affecting the planters," he added.