Adding value to palm oil production

Stagnating palm oil production, declining productivity, shortage of talents amid the mounting environmental challenges continue to affect Malaysian planters.

According to United Plantations Bhd vice-chairman and chief executive director Datuk Carl Bek-Nielsen, it is important to prevent complacency in the industry.

He said it is crucial for all players in the industry to come together and prioritise the adoption of sustainable practices to remain resilient and retain their competitive edge.

While incremental improvements were seen in other oilseeds crops such as rapeseed and sunflower with increased yields per hectare over the years, he pointed out palm oil output has remained stagnant for the past 25 years.

“This is extremely serious, and we have to focus much more on raising the floor and not just focusing on the ceiling,” said Bek-Nielsen, who was one of the key speakers at 10th International Planters Conference 2023 organised by the Incorporated Society of Planters (ISP) here yesterday.

He stressed on the need to focus on raising the baseline productivity levels rather than solely on achieving higher yields.

ISP director and chairman M.R. Chandran also raised concerns about the stagnation in the country’s palm oil production, particularly on the limited progress or improvement in terms of output.

Chandran concurred that there had been minimal changes in the domestic palm oil production, as the latest figures indicated a decrease to 18.4 million tonnes in 2022 from 18.8 million tonnes in 2012.

Comparing Malaysia’s palm oil production, he highlighted that Indonesia has shown significant improvement.

Indonesia, which is the world’s largest palm oil producer, has experienced a remarkable growth in production output, with figures rising by 72% to 46.2 million tonnes in 2022 from 26.9 million tonnes in 2012.

Furthermore, the rest of the world has followed a similar trend, with palm oil output increasing from eight million tonnes in 2012 to 13.7 million tonnes in 2022 – reflecting a notable 71.2% increase.

Chandran expressed doubt about the country’s ability to achieve production exceeding 20 million tonnes in 2023, but projected that the local palm oil production could come close to reaching 19 million tonnes.

“So, here is the situation, our production is not going to increase, so the only way to increase our income is by value addition,” Chandran said.

On the crude palm oil (CPO) price outlook, he envisaged that CPO would likely average out to between RM3,800 and RM3,900 per tonne in 2023 – a significant drop from the average price of RM5,088 per tonne in 2022.

Among the top 10 Malaysian oil palm plantation companies, Chandran noted that all of them have experienced a decrease in yield per mature hectare, when compared with from 2015 to 2022.

However, he noted that United Plantations was the only company that managed to increase its yield from 23.18 tonnes per hectare to 27.57 tonnes per hectare, while Far East Holdings Bhd was able to sustain its yield at 19 tonnes per hectare.

Another key speaker at the conference, Sime Darby Plantation Bhd group managing director Mohamad Helmy Othman Basha said: “To ensure the success of the palm oil industry, it is crucial for all plantation companies, regardless of their size, to take certain actions.”

Firstly, planters should establish platforms that encourage innovation within the industry and foster collaborations with both local and overseas startups, creating opportunities for knowledge exchange and technological advancements.

“We need to create an environment that supports growth and development by embracing experimentation and accepting failures as valuable learning experiences,” he said.

There is a need to allocate dedicated resources, including financial investments and talented individuals to support transformation initiatives, according to Helmy.

Collectively, the measures would contribute to the overall growth and sustainability of the palm oil industry, he said.

Deputy Prime Minister Datuk Seri Fadillah Yusof, who is also Plantation and Commodities minister has highlighted the need for Malaysia to develop an action plan to address the shortage of talents and qualified planters in the palm oil industry.

His opening speech at the conference was read out by the ministry’s secretary-general Datuk Mad Zaidi Mohd Karli @ Sukari.

“Some planters have retired or are about to retire and some are even seeking greener pastures in other countries. In view of this, the plantation sector will be facing a shortage of qualified planters,” he said.

Fadillah also stressed on the importance of teamwork in finding solutions and the ministry has created platforms for stakeholders to share ideas and contribute to policy formulation.

“We need agreement and consensus to move forward in reaching our goals, and the ISP could play an active role in the formulation of policies and guidelines,” he added.

Tags: Production, Malaysia, yields, rapeseed, palm oil, output, shortage, productivity, sunflower, floor, Indonesia, oilseeds