• Sime Darby Plantation chief strategy and innovation officer Dr Shariman Alwani presented a at Bursa Malaysia’s Investors Knowledge Sharing event yesterday, speaking on the plantation sector.

• Shariman said that to counter allegations of deforestation, it has to be stressed and highlighted that oil palm only accounts for 0.4% of total world agricultural land or 20mil hectares out of 4.9bil hectares.

• In addition, oil palm accounts for less than 7% of global oilseed harvested areas. He added that if not for oil palm, which has a higher oil yield than other vegetable oils, more than 250mil hectares of forest land would have been cleared.

• Also, new plantings of oil palm in Indonesia have been falling not only because of the RSPO’s slow approval process but also due to the country’s moratorium. It is estimated that the potential loss of CPO production due to pressure from the NGOs is 14mil tonnes in total in Malaysia and Indonesia.

• Second, FFB yields have been stagnating in Malaysia and Indonesia as there have been more incidents of drought. In addition, the technology at palm oil mills has not improved in more than 50 years. To improve FFB yields, the plantation industry has to move towards irrigation, increased R&D activities to find better planting materials and digitalisation. For instance, the usage of drones to count the number of oil palm trees or infrared pictures of oil palm trees to determine the optimum amount of fertiliser application.

• Third, Malaysian palm oil could potentially be a niche market of its own. We understand that there are customers who only want to buy sustainable palm oil from Malaysia. Efforts have to be made to attract consumer companies like Ferrero Rocher to set up operations in Malaysia as this would ensure a larger take-up of the country’s sustainable palm oil products. We gather that Kellogg’s fries some of its Pringle chips in Malaysia as it is easy to source palm oil-based cooking oil here.

• Finally, China and India might bow to pressure from global consumer companies to source only sustainable palm oil in the future. Hence going forward, it will not matter if certified palm oil commands a premium or not as sustainability would be a basic requirement of customers.

Source: AmInvest Research - 22 Feb 2019