Agriculture sector set to rebound with 1.5pc growth
THE agriculture sector is expected to turn around with 1.5 per cent growth next year, from this year’s fall by 3.3 per cent as it banks on higher harvest of oil palm fruits and more frequent tapping for latex.
Oil palm planters are expected to produce 19 million tonnes of palm oil next year, six per cent more than the estimated 18 million tonnes this year.
Rubber output is also expected to expand five per cent to 680,000 tonnes from this year’s estimated 650,000 tonnes.
The agriculture sector shrank six per cent in the first half of this year due to lower palm oil and rubber output, said the Economic Report 2016/2017 .
Production of livestock, fruits and vegetables, however, grew supported by government initiatives to achieve self-sufficiency.
For the full year, the agriculture sector is expected to shrink at 3.3 per cent, mainly weighed down by lower palm oil and rubber output.
Palm oil is integral to Malaysia's economy as it accounts for 40 per cent of the agriculture sector and six per cent of the country’s exports.
In the first nine months of this year, palm oil production fell sharply at 15.3 per cent to 12.6 million tonnes from 14.9 million tonnes a year ago. This was due to pro-longed drought phenomenon El Nino that causes trees to bear less fruits.
For the same period, palm oil prices averaged at RM2,556 per tonne, higher than last year’s RM2,151. On the whole, exports are crimped by the sharp drop in output despite the higher average selling price.
From January to August of this year, rubber output only amounted to 457,954 tonnes. For the full year, the government estimates that rubber production will shrink further by 10 per cent to 650,000 tonnes from last year’s 722,122 tonnes.
So far, SMR 20 prices averaged at RM5.17 per kg with the lowest at RM4.27 per kg on February 11. This is due to weak demand from China, following anti-dumping and countervailing duties by the United States on select tyres.
Since the start of this year, the government has been incentivising smallholders to go on tapping rubber by increasing the floor prices to RM5.50 per kg (free on board) and RM2.20 per kg (farm-gate price).
The government estimates this year’s rubber prices to continue to settle at RM5 per kg from last year’s RM5.22 per kg.