Help oil palm smallholders with replanting, Johari tells major players

KUALA LUMPUR: The government has called on major palm oil players to support close to 500,000 smallholders with replanting efforts, which will lead to higher domestic production and benefit stakeholders.

Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani noted that to date, the palm oil industry occupies over 5.7 million hectares (ha) of land. Out of the total, he said, about 1.5 million hectares is occupied by around 447,000 smallholders and a significant number of trees on their plantations are due for replanting.

However the budget allocated for such efforts is not able to help all the smallholders.

Under Budget 2024, Johari said, the government has set aside RM100 million as replanting incentives, which is only able to assist a “footprint size” estimated at 5,900ha.

On average, an individual smallholder manages about 4ha of land, he noted.

Johari urged big players to consider consolidating multiple smallholders’ land into clusters of 8,000ha to 10,000ha to support their replanting efforts.

“Indeed, many smallholders are facing difficulties in increasing their yield. I envision a feasible business model that can consolidate the 214,680 independent smallholders (822,073ha) into clusters of around 8,000 to 10,000 hectares,” he told reporters at the 35th Annual Palm and Lauric Oils Price Outlook Conference and Exhibition 2024 today.

Johari said if 30% of the 1.5 million hectares was replanted, it would be able to increase about 250,000ha and increase the production which will benefit the whole esosystem.

“These clusters would then be managed just like a medium or large estate by a dedicated team. I know this is not going to be easy, but let’s dream big. If we are able to consolidate even 30% of independent smallholders, we would have an additional 250,000ha of land to be managed efficiently,” he added.

Johari pointed out that if the big players do not step in to help, the old trees with lower yield could result in lower production for the whole local industry.

“The replanting rate between 2014 and 2023 remained low at 1.8% annually. According to industry best practices, 4% to 5% of oil palm trees should be replanted every year. Otherwise, by 2027, over 560,000ha of oil palm trees will be over 25 years old. This would lead to lower production in the future.

“A more pragmatic way to ensure that our smallholders will replant on time to ensure consistent maximum yields is to leverage on the technical expertise of the large industry players and Malaysian Palm Oil Board, covering seeds, clones, fertiliser, as well as pest and disease management. Surely, achieving a larger scale is crucial to reduce costs per unit and increase productivity.

“If all smallholders can adopt the mentioned good management practices of large scale plantations, FFB (fresh fruit bunch) yield can easily increase by two tonnes per hectare.

“This will in turn increase our crude palm oil production by an additional 600,000 tonnes a year, which is valued at around RM2.4 billion at the current market price, without any additional land use change. I know that this is easier said than done, but we need to work on it,” he said.