It has not been a particularly good year for Malaysia’s palm oil industry, hammered first by dwindling demand from its traditional markets, and then in March, the European Commission (EC) concluded that palm oil would be phased out from use in transport fuels by 2030 due to environmental concerns.
As the world’s second largest producer of palm oil, Malaysia has hit back, with politicians calling the EC’s decision protectionist and threatening retaliation.
On the ground, low palm prices and sustainability are only part of the problems faced by smallholders. They also have to deal with pests and low yield; some are considering whether to repurpose their plantations.
Mr Ibrahim Manap, 58, a smallholder in Hulu Selangor, said the declaration by the EC that palm oil is “unsustainable” is only a political excuse.
“They can chop their forests down, but we are (supposed to be) oxygen suppliers. This is not fair,” Mr Ibrahim said.
Mr Ibrahim made the switch from bananas to oil palm seven years ago, after disease wiped out his crops, as well as other banana plantations in the area.
“That time, a tonne of oil palm fruits sold for about RM450 (US$108) to RM540, now it’s just above RM320. I still have to deduct labour costs and transport costs, which can come up to RM75 a tonne,” he said.
He harvests about 2.5 to 3.5 tonnes of palm fruits every 20 days from his 1.8ha land.
To manage costs, chemical fertiliser – which helps boost the ripening time for oil palm fruits – is made to last three months instead of the usual two. He also uses chicken manure, a cheaper option, to keep the trees healthy.
As of December 2018, the total oil palm cultivation area in Malaysia stood at 5.849 million hectares. About half – 2.7 million hectares – are in peninsula Malaysia, while the Bornean states of Sabah and Sarawak has 3.12 million hectares of oil palm plantations.
Primary Industries Minister Teresa Kok said the government has capped the total oil palm plantation area at 6.5 million hectares, adding that no new permanent forest areas or peatland would be allowed to convert to oil palm cultivation.
Oil palm production in Malaysia involves several players: private and public-listed companies, government agencies and private smallholders.
Independent smallholders manage 16.8 per cent of total oil palm area cultivation (979,892ha), while smallholders organised under the federal government’s Federal Land Development Authority (FELDA) take up another 12.3 per cent of oil palm land measuring at 717,512ha.
It is important for the government to revive the fortunes of the palm oil industry, as it impacts on the livelihoods of many rural voters.
Heydays Are Gone
In towns such as Yong Peng in central Johor – the state with the largest area of palm plantation in the peninsula – much of the economy revolves around agriculture.
This is evidenced by the number of seedling dealers, repair shops catering for harvesting, and middlemen who collect the harvested fruit and then transport them in multi-tonne lorries to oil processing factories.
Local village chief and smallholder Chung Kee Wa said he feels helpless.
“It’s not that we don’t keep an eye on on the international market, we do, but we know that we can’t do much, Malaysia is not the only player on the market,” he said.
The heady days when smallholders could get RM800 a tonne for their harvest are gone, but Mr Chung and other smallholders feel they could still carry on for as long as prices stay above RM300 a tonne.
Mr Kong Hwee Chin, 51, said: “We’ve also lived through times when the price went below RM70 a tonne. At that point, my father told me to leave the ripe fruits on the trees. We’d lose more money harvesting them.”
A more pressing issue is pests and diseases, which can affect acres of trees and a plantation’s productivity for years to come.
Mr Chung showed CNA part of his 16ha holding that had been affected by ganoderma fungi. Commonly called “lingzhi disease”, the fungi is the cause of basal stem rot for palm trees, which will eventually topple the plant.
Other pests include bagworms, where one such infestation back in 2012 defoliated some 3,100ha of oil palm plantation in the area.
“Low prices, we can recover from, but if we lose a tree, or a whole acre of trees, it takes a few years again before that piece of land gives any income again, as oil palm seedlings take about three years to mature,” Mr Chung said.
On the other side of the smallholder equation are 112,635 FELDA settlers who come under the Ministry of Economic Affairs.
FELDA settlers, many of whom were allotted 4ha of land to carry out cash crop planting in the 1980s, face separate long-standing issues.
Settler organisations such as Suara Generasi Kedua FELDA (Voice of the Second Generation of FELDA, SGK2F) and Kami Anak FELDA (We are FELDA Children) have long highlighted how some settlers had gone into debt over late payments and poor land management.
This stems from the fact that settlers can choose to have their land managed by FELDA subsidiary FELDA Technoplant, or manage the smallholding themselves.
In the case of Mr Rashid Ridha Muhamad, 40, a member of SGK2F, he returned to Terengganu to help manage his father’s FELDA allotment.
“Previously, the 4ha land was only able to yield something like five tonnes of harvest at best, under the old management.
“So we decided to run the plantation ourselves. With proper management, it is actually possible to hit 1 tonne per acre. Some can even get over 10 tonnes of harvest for the 4ha lot,” Mr Rashid said.
Eu Ban Dampens Sustainability Efforts
Mr Peter Chang, a director at Wild Asia, said the legislation to phase palm oil out from the EU’s pool of transport fuels does hurt efforts to have oil palm grown sustainably. Wild Asia is a sustainability social entreprise that works with plantations to provide sustainability audits and environmental consultation.
“Why bother getting sustainability certification if no one is going to recognise the efforts and what benefits would they get from being certified? But unless there are really clear indications and support from the government, and what would the potential benefits be, such extension efforts (on sustainability) at best would not be welcomed at village level,” he said.
Mr Chang pointed out that to ensure smallholders’ livelihoods and at the same time work towards sustainably grown palm oil, cultivation should not be a mono-crop system.
Farmers are encouraged to move into integrating other crops such as timber, cocoa, vanilla, coffee and similar cash crops, or even livestock, he said.
“Agroforestry practices will have to be introduced, and the move away from commercial pesticides and weed killers should be encouraged on all fronts,” said Mr Chang.
Repurposing Agricultural Land
The woes are so unsettling that some growers are contemplating giving up palm cultivation.
Former IT department head Leslie Ikon, 37, is one of those who are repurposing his agricultural land in Kampung Kiabau in Telupid, Sabah.
“Twenty years ago, setting up your own oil palm plantation was easier for kampong folk. They decide where to plant, start a fire and burn off whatever was on that land and then tanam (grow), some might be more considerate and use their hoe and parang,” Mr Leslie said.
Now, there are regulations barring open burning, while heavy equipment required to level the plot is costly, he said.
“To plant oil palm in a new plot, you need to calculate the cost of manual labour, depending on how many trees you want to cultivate. And then then you need to buy the ‘bibit sawit’ (saplings) and transport them to your plot, which costs more money,” he added.
Mr Leslie is now looking at replanting his land as a fruit orchard, and stocking a fish pond.
“To me, having a palm plantation is not viable anymore… too much work and money. Plus, there are too many rules and regulations, like the Roundtable on Sustainable Palm Oil and Malaysian Sustainable Palm Oil (MSPO) certification which also cost money,” he said.
Issues such human-wildlife conflict, sometimes with fatal results, are not uncommon in oil palm estates, where wild boars often come to feed on fallen ripe palm fruit, and elephants also pass through oil palm estates on their way between their familiar grazing grounds.
In Sabah, it was revealed last year that 115 Bornean pygmy elephants had been killed between 2010 to 2018, with most of the deaths occured on palm plantations or forest reserves close to such.
It was reported in March that the state, after discussions with government bodies, local wildlife scientific community and smallholders, agreed to set up a “green food corridor” for the megafauna to forage.
Putrajaya Seeks To Change Mindsets
Such measures are among the stories Ms Kok aimed to tell during a lobbying trip to Europe to demonstrate that Malaysian palm oil is not the environmental menace its detractors make it out to be.
It is important, she said, to see palm oil detractors’ point-of-view and also relook at the country’s communication strategies.
Her ministry planned to open up maps to properly show where Malaysia’s oil palm plantations are located so as to counter accusations of forest destruction.
On the smallholder front, separate from FELDA’s smallholders, Ms Kok said her ministry is pushing for full sustainability in their palm oil supply chain. The government will pay the full costs for auditing and certification for those owning land below 40.46ha.
The aim is to achieve 100 per cent certification for the entire value chain under the MSPO certification scheme by 2019, including all palm oil mills, she added.
“If we want to continue selling our oil to the EU market, we must understand what people are thinking.
“The main accusations are deforestation and killing off biodiversity. Now we have to show our side of story to the Western countries,” Ms Kok said.