KUALA LUMPUR: Despite the recent surge in crude palm oil (CPO) prices past RM4,700 per tonne, oil palm planters, particularly smallholders, are not reaping the financial windfall.
Malaysian Palm Oil Association (MPOA) chief executive Roslin Azmy Hassan said the reality on the ground is that smallholders are feeling the squeeze due to higher operating costs.
Although fresh fruit bunch (FFB) prices are currently averaging between RM800 and RM1,000 per tonne, smallholders are seeing their overall operating costs rising between 20% and 30%.
“It is not a boom at the ground level but rather a situation where higher prices are helping to cushion rising expenses,” Roslin Azmy told The Star recently.
Fertiliser continues to account for 25% to 30% of an estate’s total costs, with the RM1,700 minimum wage revision and mandatory contributions for foreign workers adding to overall cost pressures.
Recent increases in fuel prices have also driven up transportation costs for smallholders, while at the estate level, service contractors are looking at fee hikes of between 7% and 15% due to higher diesel costs, he said.
Roslin Azmy added that large oil palm plantations have yet to be impacted by the global fertiliser disruption as they had already secured pricing for the second half of this year.
He cautioned that smallholders remain highly vulnerable as they rely heavily on spot market pricing for fertilisers rather than forward contracts.
“Any prolonged disruption could tighten supply, increase costs and directly impact fertiliser application and yields.”
To cope with the rising prices, many smallholders are considering strict cost-management strategies such as selective fertiliser application, he added.
Beyond global logistics, he said that local planters are also battling the lingering effects of extreme weather and persistent labour shortages, Roslin Azmy said.
National Association of Smallholders Malaysia (NASH) president Adzmi Hassan said the rise in overall operating costs is the reason for lower profit margins for smallholders.
“I was told that transportation used to be around RM45-RM50 per tonne and now it is between RM60 and RM70 per tonne.
“For overtime costs, I used to pay my staff RM75, but now I have to pay RM90,” he said when contacted.
While such cost increases may be short-term due to the Middle East conflict, he said the concern is more about rising fertiliser costs in the long term.
Adzmi noted that the recent surge in CPO prices is due to the low production season between January and May, as well as the recent Middle East conflict.
