Palm oil leads agricultural expansion

With about 85% of the population living at subsistence level in rural and regional Papua New Guinea, agriculture is a mainstay of the economy.

Agricultural products account for about 18% of Papua New Guinea’s exports and 25% of its GDP, approximately US$3.80 billion. The main export crops are palm oil, coffee, cocoa, copra, rubber and tea. PNG also has a livestock sector, mainly focused on poultry products.

Major palm oil investment

In early 2015, the world’s biggest palm oil producer, Malaysia’s Sime Darby, bought a majority stake in PNG’S major palm oil operation and second-largest employer, New Britain Palm Oil Limited, from Kulim Malaysia in a deal worth K5.09 billion (US$ 1.74 billion)

Sime Darby has offered a shareholding of up to 30% for the PNG government to buy into NBPOL, whose palm oil products are certified against the Roundtable on Sustainable Palm Oil standard.

Sime Darby is expected to expand the company’s operations, and has proposed a public–private partnership with the provincial government to provide electricity from its waste materials.

NBPOL’S General Manager in West New Britain, Harry Brock, says that by using methane and palm kernel, the company could provide the province with renewable energy. Talks are underway with the provincial government and state utility PNG Power to invest in this energy source.

New plantations

Another big palm oil plantation investor is R H Group, whose Chief Executive, James Lau says the company’s Sigite Mukus project in East New Britain province will be fully developed by 2017 with 31,000 hectares under plantation.

‘Construction of the first crude palm oil mill has commenced and is expected to be completed in first half of 2016,’ he tells Business Advantage PNG.

‘This mill will process 60 tonnes of palm oil per hour. A second mill, capable of processing 120 tonnes per hour, will be constructed during phase 2 of the project. Investment for both mills totals K240 million [US$92 million].

‘Once fully operational, the project will employ 3,500 people on an ongoing basis, and inject K33 million [US$12.6 million] per year into the economy of East New Britain.’

Rising to the challenges

Coffee prices jumped by 57% from December 2013 to June 2014, while copra rose by 10% in the first half of 2014 and cocoa by 12%.

On the surface, this sounds like good news for PNG’S farmers. However, the Asian Development Bank reports production response to these higher prices has been constrained by the unexpectedly sharp appreciation of the PNG kina in July 2014, as well as by structural constraints like weak transport and logistics networks, a cocoa pod borer infestation, and ageing coffee and tea plantations.

Cocoa producers are bouncing back from the devastating effects of the cocoa pod borer, which hit production in the mid-2000s.

Trader and exporter, Agmark, supported by World Bank expertise and funding, set up the Cocoa Board’s Productive Partners in Agriculture Projects (PPAP). Using new and hardier seedlings, which have the potential to more than double the cocoa yield for farmers and to withstand the borer and other diseases, PPAP is showing positive results.

A new training facility has also been built at Tokiala, outside Kokopo in East New Britain, where farmers are taught management of cocoa plantations.

Agmark Managing Director John Nightingale says more than 234,000 cocoa seedlings have now been planted on 1,172 smallholder farms, and the plan is to plant another 234,000 cocoa seedlings, and develop the concept of rotational replanting of the cocoa crop throughout its farmer networks.

He says an intensive management strategy called ‘Every Pod, Every Tree, Every Week’, could see yields rise from 0.4 tonnes per hectare to 2.5 tonnes.

Rice industry for PNG?

A super-hybrid rice pilot project funded by National Development Bank in Central Province is progressing well, according to the bank’s Managing Director, Moses Liu.

The bank has invested K2.6 million (US$1 million) in Gabadi Agriculture Ltd, which has teamed up with Philippines-based SL Agritech Corporation, to develop 10 hectares of rice-growing land without using chemicals or fertilisers. Yields are expected to reach at least seven metric tons per hectare.

PNG Coffee Ltd also wants to pioneer commercial production of hybrid rice from the Philippines.

Spices, including vanilla, cardamom and ginger, are also grown on a small scale in PNG and around 8,000 households are also involved in growing rubber trees.