Malaysia is expected to run out of suitable land for new oil palm plantations in the next three to four years, while Indonesia will have another 10 to 12 years for the crop’s acreage expansion.
The top two world largest palm oil producers accounted for 85 per cent or 42 million tonnes of the total world production last year, said Rabobank International in its latest report on Palm Oil Outlook: Palm, the Leader of the Pack. Given such a scenario on the back of significant global demand for palm oil, the bank’s Food and Agribusiness Research and Advisory Division associate director Pawan Kumar had raised several pertinent points:
- Will the top palm oil producers be able to boost output at breakneck speed?
- Can the output level be sustained?
- Which other countries can step up to the plate in terms of new production?
Pawan in an e-mail reply to StarBiz said Malaysia’s palm oil industry had reached a more mature phase of industrial development even before Indonesia started its high-growth phase.
For Malaysia to go back to its golden years in production growth, he said it needed major replanting.
According to the US Department of Agriculture (USDA), the Government reported an average between 3 per cent and 4 per cent of the total national area is currently replanted annually. “At this rate, it can take almost a quarter of a century to replant the entire national acreage,” he added.
On shortage of fruit harvesters in local plantations, he said: “This can be overcome if the Government loosens the regulations on foreign labour. At least 80 per cent of plantation labourers in Malaysia are Indonesians, and with Indonesia’s own palm oil industry on a high growth track, there is stiff competition to retain the labour pool from returning to their homeland.”
He said a further potential to increase yield levels would be via best management practices and seed development.
The USDA also pointed out that Sarawak was perceived to have the most remaining development potential, but much of the available land was low-lying coastal peatland or degraded inland forest that is claimed by the natives.
It is envisaged that only 800,000ha of land at most could be cultivated with oil palms in Malaysia in the coming years.
Industry expert M.R. Chandran, meanwhile, believed that Malaysia could only push “the most” up to 500,000ha for new oil palm cultivation area that would mostly be located in Sarawak.
Sarawak, which has about 900,00ha of land planted with oil palm, is said to be trying to match Sabah’s oil palm hectarage at about 1.5 million ha in the near future.
“Within the next eight years, Malaysia will only manage to have 5.5 million ha planted with oil palm compared with about 5 million ha currently,” Chandran said.
On Indonesia, Pawan said in the report that the Indonesian government land survey indicated about 24.5 million ha are potentially suitable for oil palm cultivation.
Of the total, 8 million ha have been planted thus leaving about 16 to 17 million ha of suitable land for future plantations.
Assuming Malaysia would soon reach its palm oil production limit, he said Indonesia would need to expand at the rate of 640,000ha per year to meet the global demand.
Also, assuming only 50 per cent of additional land available will be planted, in another 10 to 12 years, Indonesia would also run out of suitable oil palm land.
Therefore, given limited land and regulatory restrictions on developing new plantations and increasing demand, he expects industry players would be exploring options in other geographical regions.
In Southeast Asia, Thailand is another significant oil palm producer, but the plantation size is still small with production mostly intended to supplement domestic requirement.
Rabobank expects the focus of regional expansion would still remain on Malaysia and Indonesia for the next five to 10 years.
Outside of Asia, Pawan said that industry players had started to explore possibilities of future palm oil supply from Africa and South America.
