Govt may make it a must for millers to buy FFB from smallholders
by Lim Shie-Lynn
KUALA LUMPUR: The government plans to make it mandatory for palm oil millers to buy fresh fruit bunches (FFB) from smallholders, Plantation Industries and Commodities Minister Datuk Peter Chin said.
He said the move was necessary as smallholders were hard hit when the millers, running at full capacity, turned the smaller planters away.
“As smallholders are affected the most, we will introduce a regulation where millers must buy the FFB from them,” Chin said on the sidelines of a public lecture on Palm oil: Food or biofuel? Policy implications for the future here yesterday.
However, Chin did not say when the regulation would be enforced.
According to news reports, some smallholders have suffered losses when millers rejected their FFB.
The palm smallholders are also affected by plunging crude palm oil (CPO) prices, recording narrower margins as the price of FFB moves in tandem with that of CPO.
Costly fertiliser, which make up close to 60% of production cost, also affects the earnings of the smallholders.
Commenting on the government’s decision to use palm-based biodiesel in government vehicles to reduce high CPO stocks in the country, Chin said the palm biodiesel price would be kept at the same pump price of regular diesel at petrol stations beginning February next year.
“The government will bear the costs to maintain the biodiesel price,” he said, adding that the country would promote the use of CPO to produce biofuel as palm-based biodiesel reduced greenhouse gas emissions by 60%.
The government recently announced it would use biodiesel comprising a 5% blend of palm methyl ester and diesel for government vehicles beginning February, to be followed in stages by the industrial and transport sectors. The adoption of the biodiesel is expected to be fully implemented by January 2010.
In response to a research report by CLSA Asia-Pacific Markets which said CPO prices would plunge by 46% next year on oversupply and waning demand for biodiesel,
Chin said the price of CPO would trade to RM2,000 a tonne next year on improved demand for the edible oil.
CLSA cut its CPO price forecast to RM1,000 a tonne next year and RM1,250 a tonne in 2010.
“The demand for biodiesel is still there,” Chin said. CPO for February delivery closed RM25 lower to RM1,435 a tonne on Bursa Malaysia Derivatives yesterday. CPO prices had plunged more than 60% after trading to a high of RM4,486 a tonne in March.
With the implementation of biodiesel usage, the biodiesel production with 5% of palm methyl-ester would use up some 500,000 tonnes of CPO per annum.
Chin said the use of biodiesel in government vehicles was estimated to consume 70,000 tonnes of CPO a year.
He also said the 5% blend would vary according to market conditions. “We will look at the situation on how much this would cost the government. Whether the 5% blend would be kept depends on the prices of the commodities.”
