As a result of new planting, Sarawak palm oil players have the youngest age profile and stronger output growth prospects among the Malaysian-listed plantation players. — Bloomberg photo
KUCHING: Plantation players in Sarawak are offering the best production output growth prospects for the plantation sector throughout the country.
The research arm of CIMB Investment Bank Bhd (CIMB Research) in a report yesterday said the better-than-expected production results was driven by aggressive new planting of oil palm by timber and plantation players in Sarawak after they successfully acquired the required land and executing the skills in developing and managing the plantation estates.
CIMB Research observed that as a result of new planting, Sarawak palm oil players have the youngest age profile and stronger output growth prospects among the Malaysian-listed plantation players.
The research firm noted that approximately 53 per cent of the total planted oil palm areas in Sarawak were developed over the past eight years.
CIMB Research pointed out that Sarawak has started to scale up the development of oil palm estates from 2006 onwards.
Therefore, given their young age profile, the research firm noted that Sarawak estates’ average fresh fruit bunches (FFB) yield achievement of 16.2 tonnes per hectare in 2013 was lower than the country’s average FFB yields of 19 tonnes per hectare.
Nonetheless, CIMB Research believed that the FFB yields from the estates of Sarawak planters will rise over the next few years as they reached matured production age.
The research firm is confident that Sarawak planters will be able to achieve double digit FFB output growth of between 12 per cent to 30 per cent this year driven by higher new matured areas and improving FFB yields.
Following a trip to some of the plantation estates in Sarawak, CIMB Research noted that oil palm trees that are planted on peat soils tend to lean over time due to the softer soil conditions and some of the trees which will be culled over time.
As a result, the research firm noted that the planting density for oil palm on peat soils are higher at 160 trees per hectare compared to mineral soils of 136 trees per hectare.
On another note, CIMB Research observed that the cost of developing peat oil palm estates are higher at RM20,000 to RM25,000 per hectare compared to RM15,000 to RM20,000 per hectare for mineral soil due to higher costs incurred at the land preparation stage as well as infrastructure costs in some plantation areas across Sarawak.
The research firm also noted that the historical average cost of production for Sarawak planters achieved ranges from RM1,500 to RM2,200 per tonne of crude palm oil (CPO) price which is higher than their peers in West Malaysia and Sabah due to lower FFB yields.