The Malaysian Insight

OIL palm smallholders are urging Putrajaya not to aggravate their already difficult situation by restricting the intake of foreign workers.  

They told The Malaysian Insight they rely on Indonesian workers to tend to their plantations as locals spurn such jobs.  

Smallholders, who produce about one third of all palm oil grown in Malaysia, are already burdened by low prices and a boycott by buyers in India further worries them.  

The proposal for them to plant alternative crops to supplement their falling income from palm oil is also “easier said than done” because it required a lot of investment and research, they said.

For some, they also feel trapped in the industry as they can’t sell off their estates and migrate into other enterprises.  

Yeo Soon Huat is already dipping into his savings to sustain his estates because of the drop in worldwide prices for crude palm oil (CPO) and the boycott talk worries him.

“Malaysia’s biggest palm oil importer is India. If they stopped buying, who are we going to sell our harvests to?” the Yong Peng grower told The Malaysian Insight.

“We have not seen any impact yet, but give it two or three months, when there’s a glut, the prices will fall.

“I’m relying on savings to continue my plantation, while others are taking loans from the bank. They have to service their loans while paying workers’ salaries,” he said.

Data from the Malaysian Palm Oil Council shows that India was the biggest export destination for Malaysian palm oil products in 2018.

India imported 2.5 million tonnes compared with second biggest importer, China’s 1.86 million tonnes.

Between January and September this year, Malaysia exported 3.9 million tonnes of CPO to India, more than double what it sold to China, its next biggest buyer, at 1.6 million tonnes.

Recent comments by Prime Minister Dr Mahathir Mohamad on India’s policies towards Kashmir have angered the South Asian nation and an influential vegetable oil trade group has asked its members to stop buying Malaysian palm oil.

Government not helping

The negative news caused global CPO prices to fall for two days this week, going down 0.7% to RM2,269 per metric tonne from an eight-month high of RM2,301 per metric tonne on October 22.

At the estate-level, prices for fresh fruit bunches (FFB) have fluctuated for the past year, hovering between RM300 and RM500 per tonne.

This is a far cry from the RM700 to RM800 per tonne for FFB in the late 1990s, said another smallholder named Looi.

“Last year, FFB prices were at RM400 per tonne at the start of the year, by year-end, it was RM270 to RM280,” said the 60-year-old whose estate is in Yong Peng, Johor.

The future for the commodity looks bleak because of a prospective ban on palm oil in biofuels by the European Union and increasing competition of cheaper CPO from Indonesia.

In light of this, Primary Industries Minister Teresa Kok suggested they plant alternative crops, such as bamboo, coconuts and pineapples, to supplement their incomes.  

A palm oil trader, Tulimin, criticised the government for being out of touch with smallholders.

“What else can smallholders plant? Bananas, durians? The government doesn’t have the people’s support now because it is not helping the people.

“The economy is in tatters and commodity prices are low now,” he said.

“Other upkeep costs, fertiliser and pesticide, keep going up too. You also have to pay at least RM2,000 for labourers, what about the salary for the assistants?” Tulimin said.

If the PH government can’t help smallholders, they should at least keep the situation from getting worse, he said.

Palm oil trader and small holder, Lee Ser Huat said the policy on freezing new foreign worker applications is not helping the situation.

“Locals are not willing to harvest oil palm. Only Indonesians are willing to work because Indonesia is also a huge palm oil exporter,” said the 44-year-old.

“It is regrettable that the government’s foreign labour policy is creating more issues,” he said.

Lee said his returns now are only enough to cover family expenses and the costs of running a plantation.

“I can only hope that the government can market palm oil well and not just talk all the time.”

Yeo, the smallholder, said he was not thinking of switching to other crops yet as there was not enough data on yield per acre, market prices and conversion costs.

“We need to calculate production numbers, returns and prices, we can’t simply plant things because we want to.”

He also can’t get out of the business as he won’t be able to sell his plantation for capital.

“It used to be that palm oil plantations near major roads can fetch a price of more than RM10,000 per acre. Now, there’d be no buyers even if I sell it for RM7,000 per acre,” he said.

Yeo said he was taking it one day at a time, cutting costs, saving money wherever he can and surviving the slump. – October 30, 2019.