Small oil palm farmers face survival crisis

KUALA LUMPUR: When Shell engineer Incham Serdin quit his job four years ago to start a small oil palm plantation in his native Malaysia, prices of the fleshy fruit bunches used to make the world’s most consumed vegetable oil were bubbling near their peak.

But prices have since halved for smallholders like Incham, falling 30% this year alone as the Covid-19 pandemic slashes demand and wipes out profits for many farmers with 100 acres (40 ha) of land or less.

To survive, smallholders in Malaysia and neighbouring Indonesia - which together account for 85% of global palm oil production - are cutting back on spending, particularly on expensive fertilisers and replanting old trees.

With small farmers making up a third of output, the cuts are set to hit production, not just in 2020 but also next year when demand for the oil used in everything from noodles to lipstick is expected to rebound as the health crisis eases, farmers and analysts said.

“What you get currently is just enough to pay the workers,” Incham, 59, said by phone from Sarawak, Malaysia’s biggest palm producing state by cultivation area where he has a 100-acre plantation.

“For those people with landholdings of 10 acres or so, there’s barely enough to put food on the table.”

Fertiliser makes up 30%-50% of the cost of production for smallholders and any lower application of the nutrients typically shows in output six months to a year later.

Incham said his yields could fall by 20%40% as he halves fertiliser usage to 1.5 kg per tree per quarter. — Reuters