PETALING JAYA: Oil palm planters are all set for the Malaysian Sustainable Palm Oil (MSPO) certification by the end of the year, but concerns lie with the independent smallholders, who make up about 12% of estate owners in the country.
There are a lot of processes for the independent smallholders to go through and many criteria to fulfil, and while cost is not an issue, the problems are resources, input and outreach programmes for them.
Malaysian Palm Oil Association chief executive Datuk Mohamad Nageeb Ahmad Abdul Wahab said while it is a tall order to get 100% MSPO certification by December, it may be achieved with full support from the government.
Primary Industries Minister Teresa Kok is pushing for Malaysian planters to fully achieve the MSPO certification by December this year.
The certification rate for total oil palm planted areas was only 21.7% as at October last year.
“If the government is really serious about trying to get that done, it needs to put in more effort and more personnel have to be mobilised for this.
“This is a very serious matter. If it is not achieved, there might be repercussions such as mills not buying from independent smallholders if they are not certified. The other is the effect on national reputation,” he said, adding that at the rate now, he foresees a certification of around 90% by year-end.
Mohamad Nageeb, who is also Felcra Bhd chairman, said he has discussed the concerns with the Malaysian Palm Oil Certification Council and that it is coming up with plans.
He said organised smallholders such as Felda and Felcra have no problems with certification because it is within control.
Felcra has over 200,000ha of oil palm plantation and he is confident Felcra will be fully certified by September.
Malayan Agricultural Producers Association executive director Mohamad Audong voiced the same sentiments, saying that the big players had the capacity for the certification but not independent smallholders.
Meanwhile, a Reuters report indicated that palm oil may fall into a range of RM2,121 to RM2,150 per tonne as it has failed to break the RM2,198 resistance level since Dec 19.
Crude palm oil (CPO) futures yesterday closed 0.18% higher at RM2.182 per tonne with 16,593 contracts traded. It hit a high of RM2,200 at 3.57pm before dropping to RM2,182.
CIMB Investment Bank in a report said it has retained its neutral rating on the agribusiness sector due to the lack of catalysts, as it expects planters to report still-weak earnings for the fourth quarter of 2018 due to the low CPO price.
It, however, remains positive on measures by the government to help boost demand for palm oil and CPO prices, which is reflected in its average CPO price assumption of RM2,400 a tonne for 2019, a 7.5% improvement from the RM2,233 recorded in 2018.
CIMB Research, which attended the Reach and Remind, Friends of the Industry Seminar 2019 and Dialogue on Tuesday, said questions raised during the dialogue session included how the government planned to counter the negative perceptions on palm oil, especially allegations of its role in deforestation and negative health impacts.
Other questions included how the government planned to address the issue of no palm oil labelling and how to improve CPO prices.
It noted in its report that during the session, Kok revealed that the Sabah and Sarawak chief ministers had no objections to the government’s plans to stop the expansion of oil palm plantations to maintain a forest cover of at least 50%.
As for measures to help boost CPO prices, Kok said the government plans to implement the B10 biodiesel programme for the transportation sector on Feb 1 and B7 for the industrial sector on July 1.
“This should lift the domestic palm oil uptake for biodiesel to 761,000 tonnes per annum from the current consumption of 350,000 tonnes.
“We gather that the minister has urged Malaysian palm oil firms to stop importing CPO from abroad and consume domestic CPO, to help lower the palm oil stockpile in the country.
“Lastly, the government is reviewing its export tax to see if it can improve the competitiveness of Malaysian palm oil,” said the research house.
A study by the World Health Organisation that was published on Tuesday likened the lobbying of the palm oil industry to similar tactics used by the alcohol and tobacco industries to influence research into the health effects of its product.
The report entitled “The palm oil industry and non-communicable diseases” said evidence of the health impact of palm oil is mixed, with some studies linking consumption to several ailments including increased risk of death from heart disease caused by narrowing arteries.
It also called for more research and tighter regulation of the industry, adding that researchers should be wary of being influenced by lobbyists.
CIMB Research’s top pick for the plantation sector in Malaysia is still Genting Plantations Bhd, with an add call and a target price of RM10.50.
It said Genting Plantations is the preferred choice due to its rich land bank and young estates. It also has the youngest estate age profile among its big-cap peers in the country.
The research house’s call on IOI Corp Bhd is to reduce with a target price of RM4.02 due to concerns that weak CPO prices might dampen its plantation earnings.
There are also concerns that the weak ringgit would contribute to a foreign-exchange translation loss on its US-dollar debt.
It has a hold call on Kuala Lumpur Kepong Bhd, meanwhile, with a target price of RM24.54. It expects the company’s share price to be supported by the group’s strategic estate land bank in Malaysia.