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Supply overwhelms oil palm mill capacity

by Philip Kiew. Posted on September 29, 2011, Thursday

MIRI: There is a dire need for more oil palm mills in the state as the present ones seem to be incapable of handling the overwhelming supply of fresh fruit bunches (FFBs) from the plantations and smallholdings.

CONCERNED: Lau supports the call for the setting up of more mills to meet the growing needs of the industry.

Industry players have noted that most mills are overflowing with unprocessed FFBs due to their inadequate capacity to process the FFBs, the supply of which has grown by about 30 per cent annually.

If the situation is not addressed, they said, millions of ringgit will be lost and smallholders will be at a loss as to where to sell their FFBs.

The state currently has about 52 mills in operation, and needs at least another 30 mills to cope with the increasing volume due to the aggressive planting of the golden crop.

They said the state government should step in by encouraging more mills to be set up by the private sector or through joint-ventures.

The worst affected are planters in the Miri-Bintulu belt where the fruits are sent to the mills by hundreds of lorries a day.

As a matter of fact, neighbouring Sabah, with 1.5 million ha planted with oil palm, has between 180 and 190 mills, and Peninsula Malaysia has 500 to 600 mills compared to Sarawak’s 52 mills.

It costs between RM50 million and RM60 million to build a new mill which may take up to two years to complete and be commissioned.

It is also noted that several existing mills can be expanded to include a second processing line which can be done within six months at a cost of between RM10 million and RM15 million.

Transporters and smallholders in Niah region recently bemoaned the long queue to unload their fruits at the mills, with some having to wait for a whole day while mill owners rue their losses due to the unprocessed stock and lower oil extraction rate (OER) resulting from the delay in processing the FFBs.

An industry player Dato Sri Lau Heing Su, in relating his own experience, admitted that the situation was frustrating as losses could reach millions of ringgit a month if mills are unable to process collected FFBs as OER can drop by one per cent a day.

“Our mill buys FFBs at about RM600 per tonne and you can imagine how much loss we incur if the volume hits 30 to 40 tonnes as we have about 200 lorries coming in daily.

“This problem of accepting less FFBs for higher profit, and incurring losses with higher FFB volume at mills could only be understood by industry insiders, and this problem should be resolved urgently as it is only going to get worse if not tackled,” he said.

Another problem faced, he said, is the lower quality of oil extracted from these mills that risk rejection at the processing hub in Bintulu despite the round-the-clock mill operation to cope with the overflowing supply of FFBs.

Other industry players concurred, saying they look forward to the state government, Malaysian Palm Oil Board (MPOB) and relevant authorities to take concrete and immediate actions to resolve the predicament.

They feel that Sarawak has far exceeded the official record of 900,000 hectares of land cultivated with oil palm as production from big smallholdings and smaller plantations were not taken into account by the authorities.

Some believe that current planted areas could be between one million and 1.2 million hectares, with the bulk in Miri-Bintulu belt judging by the many smallholdings, including those planted on NCR lands, located in Miri-Niah-Long Lama triangle.

MPOB restricts the milling capacity of each plant under its licensing requirement, and limits a mill to cater up to 6,000 hectares of plantation only.

The peak production period of September to November has resulted in a 30 per cent spike in production volume, further accentuating the woes at mills, making lorry drivers with 15 tonnes load wait up to a day due to traffic congestion at the mills.

The relative high CPO prices this year has also contributed to higher production as planters plough back revenue to fertilizer to maximise output from their farms and plantations.

Meanwhile, another industry player, when contacted, said he did not share the view that the problem was caused by the shortage of mills although some smallholders experienced difficulty in getting their fruits accepted by the mills.

“The main reason is not entirely because of mills shortage.

“The current situation arises because, firstly there is sudden increase in fruit production probably because of the erratic weather which coincided with some mills breaking down and needing repair.

“Secondly, the pick or spike in FFB production is due to unforeseen circumstances.”

He also said it is wrong to put the blame on the government as authorities like MPOB rarely turn down any application to set up mills.

He believes that the situation will soon return to normal, saying it will be wrong for everyone to rush to build new mills.

“In any case, there are mills under construction,” he added.

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