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Published in March 2002 by the Malaysian Palm Oil Board TABLE OF CONTENTS Palm Oil and Its Global
Supply and Demand Prospects
The Optimal Age of Oil
Palm Replanting
An Economic Analysis
of the Malaysian Palm Oil Market
Factors Affecting Fluctuations
in Net Returns from the Processing of Oil Palm Fruit Bunches
A Financial Study
of Cattle Intergration in Oil Palm Plantations
Counter-Trade: The
Malaysian Experience
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in September and March by the Malaysian Palm Oil Board (MPOB) http://mpob.gov.my Views of writers expressed in this publication are not necessarily those of MPOB. MPOB welcomes contributions and comments from all individuals and organizations. Its inclusion is however, the prerogative of the Director-General of MPOB. Contributions and comments should be addressed to : Director-General
Material from this publication may be freely used or reproduced, provided the source of information is accurately recorded and acknowledgements made to the Malaysian Palm Oil Board |
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fatimah@mpob.gov.my |
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| Palm
Oil and Its Global Supply and Demand Prospects
The paper outlines the global palm oil situation and highlights the developments in the Malaysian and Indonesian palm oil industry. Palm oil has played a positive role in the world oils and fats supply and demand equation largely due to its techno-economic advantages and versatility as well as some of the developments in the world in relation to security of supply, health and environment. The paper will also discuss the various challenges confronting palm oil in the world market, namely self-sufficiency policies by developing countries, crop subsidies by developed countries, stringent standards and quality for trade, non-tariff technical barriers and effects of exchange rate variations. Top |
| The
Optimal Age of Oil Palm Replanting
Malaysia is expected to only contribute 45.6% of the world palm oil output in 2005, a decrease of 4.5% compared to production in the year 2001. The declining contribution to world palm oil output is in part attributed to the lower production due to the increase in the aged oil palm trees. It is important that old palms, which are less economic to maintain be replanted, hence ensuring a continuous productive Malaysian oil palm industry. The question arises as to what age is oil palm economically suitable for replanting? The objective of this paper is to determine the optimum age for oil palm replanting. Following Faris (1960) the optimum age of replanting is when the marginal net revenue in year n of the present stand is equal to or exceeds the amortised value of net revenue in year n of the second stand. It is concluded from this analysis that the optimum replanting age depends on the price of fresh fruits bunches (FFB), cost to establish and maintain new palms, technology that changes the yield profile, and the discount rates adopted. In Malaysia, it is found that the optimal replanting age lies between 25 and 26 years if the FFB price is RM 200 per tonne. The replacement age declines to between 24 - 25 years if the FFB price rises to RM 220 per tonne. Top |
| An
Economic Analysis of the Malaysian Palm Oil Market
The objectives of the study are to describe a national model of the Malaysian palm oil market and to identify the important factors affecting the Malaysian palm oil industry. The model is estimated by taking into account total oil palm area, oil palm yield, domestic consumption, exports and imports over the period of study between 1970 and 1999. The results show the importance of the Malaysian economic activity, the exchange rate and world population in affecting the palm oil industry. Other factors are palm oil stock level, price of palm oil, technological advancement in production technique and the price of soyabean oil Top |
| Factors
Affecting Fluctuations in Net Returns from the Processing of Oil Palm Fruit
Bunches
This paper attempts to elucidate factors which affect the efficiency of oil palm fruit processing in a selected palm oil mill. Three efficiency proxies are used, i.e. revenue per tonne (RPT) of fresh fruits bunches (FFB), cost per tonne (CPT) and net revenue per tonne (NRPT), with the analysis being focused on a 30-month time series data. From the study, it was found that the RPT of the mill was positively correlated with the differentials in the oil extraction rate and kernel extraction rate (KER), differentials in crude palm oil (CPO) price as well as FFB intake. The differentials in OER and KER, in particular, were significant income generators, as they resulted in increases in RPT as high as 20% and 12% respectively. Nevertheless, both OER and KER had declined at the rate of 0.27% and 0.22% per month, respectively and the processing toll was negatively correlated with RPT by 1%, indicating the need to crosscheck the sources of RPT variability. The study also identified two causal factors, which affected CPT variability. These comprised maintenance, either major or routine, and depreciation. The study also revealed that the amount of FFB received was positively correlated with either RPT or NRPT and was found significant in reducing CPT. This implied economies of scale, as denoted by the significance of the utilization factor and workers’ overtime. Top |
| A
Financial Study of Cattle Intergration in Oil Palm Plantations
In the context of government efforts at reducing beef imports, integrated cattle rearing in oil palm plantations is a useful method for producing cattle locally. FELDA and ESPEK and some other organizations are recent participants of the cattle-under-oil-palm programme. Oil palm plantations with trees of seven years or older can produce 500 kg per hectare per year of dry matter, which is sufficient to justify grazing by cattle. One animal requires about 2.5% to 3% of its body weight in grass uptake and an animal which is one to two years old, requires about 3 ha of oil palm area for grazing. This animal is controlled from straying about by electric fencing. Each enclosure of about 4 to 6 ha requires two workers to manage. This study shows that, in the cases of three estates that were studied, cattle rearing under oil palm can be pursued successfully. The average weight gain of cattle aged between one to two years old was 250 g to 300 g per head per day. The calving percentage was more than 50%, while the mortality rate was below 5%t. The average cost of maintenance was low. An average price of RM 5.50 per kg live weight was obtained during normal times but increased to RM 6.50 per kg during festive seasons. Prices of RM 4.00/kg, RM 4.50/kg and RM 5.00/kg live weight were used to account for the final stock value, depending on the age and sex of the animal. The IRRs obtained from integrated cattle rearing in oil palm plantations, ranged from 25% to more than 50% and the reduction in the cost of weeding ranged from 17% to 38%. That was an additional benefit from the production system adopted. Top |
| Counter-Trade:
The Malaysian Experience
A detailed explanation of the various types of counter-trade is presented, ranging from barter to counter-purchase to buy-back to offset. Apart from outlining the framework agreement on counter-trade, actual case examples of counter-trade deals undertaken in Malaysia are also highlighted. In this respect, counter-trade deals involving government-to-government transactions as well as deals entirely transacted on the basis of private sector involvement are also elucidated. By doing so, further explanations are given to explain modifications that need to be done to the existing counter-trade models, taking into account the peculiarities of each varying trading environment. Top |