RURAL farmers, especially those with plots of native customary rights (NCR) land planted with oil palm, have every reason to smile these days.
The prices of fresh fruit bunches (FFB) have risen steadily over the last two to three months.
The prices of FFB, depending on localities in Sarawak, range between RM930 and over RM1,000 per metric tonne, compared to as low as between RM350 and RM450 per metric tonne late last year and at the beginning of this year.
“I will not be surprised if the prices of FFB continue to rise by the end of this year or beginning next year,” said an oil palm smallholder from Kampung Isu Semabang, Ulu Gedong, who has been studying the price trends of the commodity since the beginning of this year.
Like him, many oil palm smallholders are surfing the internet to search for any news on the palm oil market trends.
They take delight if there are indications that the prices will remain high or will rise.
Many, not only from Kampung Isu Semabang, but also from the nearby villages, such as Kampung Semalatong, Kampung Isu Lama, Kampung Isu Baru, Kampung Sibau Rumbau and Kampung Spaoh, are reaping the fruits of their labour brought about by the high prices for FFB.
They own oil palm smallholdings, with sizes ranging from two hectares to five hectares.
At the current price of RM950 per metric tonne of FFB, those owning bigger planted areas can easily earn a few thousand ringgit a month.
According to the Malaysian Palm Oil Council (MPOC) on its website, the factors that contribute to the high prices of FFB and palm oil in Malaysia include a global shortage of edible oils caused by labour shortages and the Russia-Ukraine conflict.
Indonesia’s export ban on palm oil and its derivatives have also caused crude palm oil (CPO) prices to rise, but the ban was later lifted to address high inventory levels.
The lower palm oil stocks, which remained below two million tonnes, is also contributing to higher prices in Malaysia.
MPOC said a weaker ringgit against the US dollar has made palm oil more affordable for international buyers.
Indonesia plans to gradually increase the proportion of palm oil in the biodiesel blend from 35 per cent to 40 per cent over the next few years, and as an alternative source of renewable energy, this has also pushed up the prices of FFB and CPO in the global market.
This means the global supply of palm oil would be impacted, considering that Indonesia is the world’s largest producer of palm oil, according to industry sources, and this could see a further jump in the prices of palm oil and palm oil products.
According to Indonesia Palm Oil Association (GAPKI), Indonesia produced 46 million tonnes of palm oil, representing 59 per cent of the global market.
Out of the 23.2 million tonnes of domestic consumption last year, 45.9 per cent was used for biodiesel, followed by 44.4 per cent for food, and 9.7 per cent for oleochemicals, such as cosmetics, household, and industrial products.
The current wet season has resulted in many areas in Peninsular Malaysia being affected by floods, impacting the supply of FFB, especially in the east coast states, thus pushing up its prices further.
Palm oil dealer David Ng, quoted by Bernama, had said the flood may impact the overall oil palm production in the country.
“We see price supported at RM4,850 and resistance at RM5,000,” he said, referring to the crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives that continued its rally last week to end higher due to concerns about the recent east coast flood.
According to the Malaysian Palm Oil Board (MPOB) data, India remains Malaysia’s largest export market for palm oil, with 2.84 million tonnes exported in 2023, accounting for 18.8 per cent of total exports.
This is followed by China at 1.47 million tonnes (9.70 per cent), the European Union at 1.07 million tonnes (7.10 per cent), and Kenya at 0.92 million tonnes (6.10 per cent), the data showed.
Malaysia expects demand for palm oil from India to remain steady despite the recent hike in import taxes by the largest buyer of vegetable oils, according to Minister of Plantation and Commodities Datuk Seri Johari Abdul Ghani.
On the subject of palm oil production, Johari said Malaysia is on track to exceed 19 million tonnes in production this year, marking the highest output since 2020.
Between January and August, Malaysia produced 12.6 million tonnes of palm oil, up 10.20 per cent from the same period in 2023, mainly due to consistent government policies and the resolution of key challenges, such as labour shortages.
According to the MPOB, Sarawak remained as the largest oil palm planted state with 1.62 million hectares or 28.60 per cent of the total Malaysian oil palm planted area, followed by Sabah with 1.51 million hectares or 26.60 per cent.
Oil palm planted area in Peninsular Malaysia amounted to 2.54 million hectares or 44.80 per cent.
The smallholders’ production makes up 40 per cent of the total output of the country’s palm oil production.
There are more than 300,000 smallholders comprising farmers who own 100 acres of land or less (40.46ha) all over the country.
There are more than 30,000 smallholders in Sabah and 40,000 in Sarawak respectively.
At a recent Sarawak Legislative Assembly sitting, Food Industry, Commodity and Regional Development Minister Datuk Sri Dr Stephen Rundi Utom said Sarawak’s palm oil sector continues its upward trajectory, with a total export value of RM14.6 billion for palm oil and palm-based products (or 4.14 million tonnes) from January until October 2024.
The total production of FFB in Sarawak has increased by 1.7 per cent from 17.66 million tonnes to 17.95 million tonnes compared to the same period last year.
The CPO production has shown an increase by 0.05 per cent to 3.47 million tonnes in the same period.
However, the production of Crude Palm Kernel Oil (CPKO) has shown a decrease of 1.0 per cent from 321,398 metric tonnes to 318,224 metric tonnes in the same period.
In terms of yield, the average yield of FFB by estates from January to October 2024 in Sarawak experienced a rise of 1.7 per cent increase to 12.35 metric tonnes per hectare from 12.14 metric tonnes per hectare in the same period last year.
Dr Rundi explained that the disparity in prices of FFB in different parts of Sarawak are determined by market dynamics, specifically supply and demand.
He said the pricing factors encompass market prices for CPO and Palm Kernel (PK), distance and transportation costs and FFB quality (ripeness, cleanliness, moisture content freshness).
