Replanting incentive for big palm oil players effective for output cut

WITH a RM432mil budget allocation for an aggressive oil palm planting and replanting drive this year, efforts to replant the country’s ageing oil palm estates are certainly a top priority to address the current high palm oil stock situation.

To put things in perspective, Malaysia has about five million hectares of total planted oil palm area, of which about 30% to 40% represents oil palm trees of over 20 years, mostly belonging to smallholders.

So, there is no doubt that the bulk of the Government’s budget will go to the smallholders to replace their unproductive oil palm trees with higher-yielding clones.

For replanting alone, it has been estimated thatanRM180milreplanting grant would be allocated to smallholders, including those who own 40ha or less, eligible for the replanting grant.

Therefore, at an estimated cost of RM8,000 per ha, industry experts envisage that slightly over 22,000ha will be replanted this year.

The average yield of smallholders is 15 tonnes fresh fruit bunches (FFB) per ha, or equivalent to three tonnes of crude palm oil (CPO).

Hence, the replanting move for smallholders would likely see a cut in CPO production by only 60,000 tonnes per year, with an average of 5,000 tonnes per month, said an experienced planter.

As compared to the total supply for 2013, which can be calculated at three million tonnes per month, the supply cut was only about 0.016%, noted the planter.

Furthermore, the replanting takeup by the smallholders has always been very sluggish and may achieve only 50% of the Government’s targeted replanting hectarage and CPO output cut.

So, will the accelerated replanting move via smallholder holdings help reduce the country’s CPO supply to the market? Apparently, the answer is no, according to some quarters.

On the other hand, many believe that if the replanting incentive was extended to the big plantation sector, it would be able to help slash the country’s CPO output to a higher level and at a speedier pace at that.

Firstly, many big plantations in Malaysia adhere to the replanting policy of between 3% and 5% per year of their total hectarage, that will result in a good balance of both young and mature palm tree age profiles.

Private plantations also contribute the bulk or about 60% of the country’s CPO production, representing three million ha of the total planted area.

So, with an incentive and subsidy of about RM2,000 per ha under a proposed allocation of RM200mil, a total of 100,000ha of replanting per year can be accelerated among big planters vis-a-vis a mere 20,000ha on the smallholders front.

In fact, this had been proven during the two previous Oil Palm Replanting Incentive Schemes. Among planters producing four tonnes of CPO per ha, the replanting measure would cut production by 400,000 tonnes, a substantial amount.

In fact, many are of the view that a proposed allocation of RM200mil to big plantations can be considered a small return to the industry for longterm reinvestment in replanting.

After all, the big plantation players have been contributing billions to the Government in the form of corporate taxes, sales taxes and the windfall profit levy annually.

lDeputy news editor Hanim Adnan is also on “replanting” mode, albeit on a more miniscule scale. She is now repotting her lemongrass and pandan plants on the home front.