KUALA LUMPUR: Malaysia's oil palm plantation can be managed more efficiently if the sector can consolidate at least 30 per cent of its independent smallholders, Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani said.
Such a consolidation could thus boost the country's palm oil production, Johari added.
He said out of the industry's 5.7 million hectares (ha) of oil palm planted area, 1.5 million ha or 27 per cent belong to around 450,000 smallholders in the country, many of whom are having aging trees.
"If we are able to consolidate even 30 per cent of independent smallholders, we would have an additional 250,000 ha to be managed more efficiently.
"This will help increase production and at the end of the day, it will benefit yields," Johari told reporters after launching the 35th Palm and Lauric Oils Price Outlook Conference and Exhibition (POC2024) here today.
Many of the 450,000 smallholders' plantations are aging and in need of replanting, but the government lacks funds to assist them adequately.
"With a budget of only RM100 million in the last fiscal year, covering just 5,900 ha, we are exploring alternatives.
"This strategy could also encourage more big players to invest in supporting nearby smallholders, ensuring the sustainability of the palm oil sector," added Johari.
He, however, acknowledged that the process is complicated by land ownership issues as each plot belongs to individual smallholders.
The local replanting rate remained low at 1.8 per cent annually between 2014 and 2023.
According to industry best practices, 4.0-5.0 per cent of oil palm trees should be replanted every year. Otherwise by 2027, over 560,000 hectares of oil palm trees will be over 25 years old.
"This would lead to lower production in the future," Johari remarked.
A more pragmatic way to ensure that smallholders will replant on time to ensure consistent maximum yields is to leverage on the technical expertise of the large industry players and Malaysian Palm Oil Board, covering seeds, clones, fertiliser, as well as pest and disease management.
Surely, achieving a larger scale is crucial to reduce costs per unit and increase productivity, said Johari.
"If all smallholders can adopt the mentioned good management practices of large scale plantations, fresh fruit bunches yield can easily increase by two tonnes per hectare.
"This will in turn increase our crude palm oil production by an additional 600,000 tonnes a year, which is valued at around RM2.4 billion at the current market price, without any additional land use change.
"I know that this is easier said than done, but we need to work on it," said Johari.
ohari cautioned that Malaysia's palm oil industry is at a crossroads and that the country must continue to position its palm oil industry as a global leader.
"To do so will require a concerted effort of all of us to steer this large ship in the right direction.
"We need to work hand-in-hand to fight this unjustified negative perception against palm oil," he added.
Johari expects the sector's outlook to remain positive in 2024, with strong demand from top export destinations such as India with 17.4 per cent of the share, China (9.1 per cent), and the European Union (7.4 per cent).
He said the demand for palm oil is further supported by the interest in replenishing stocks to ensure food security and the overall viability of business activities.
Malaysian Palm Oil Board estimates crude palm oil production to reach 18.75 million tonnes in 2024 against 18.55 million tonnes in 2023.
"This marginal increase of about one percentage point compared to 2023 will be driven by improved labour market conditions and a higher number of oil palm trees maturing," Johari said.