GOOD palm oil prices of late may hamper the Government's plan to replantthe country's oil palm plantations.

Traders say plantation owners will be reluctant to clear the plantationsconsidering that the old oil palm trees can still yield fresh fruitbunches (FFBs) and bring in good revenue.

"It looks easy on paper.

But in practice it is a different story.

Farmers are thinking twice before clearing the holdings.

They realise their FFBs can fetch a good price in the market," a tradertold Business Times in Kuala Lumpur.

He said the need was not there anymore.

Furthermore, he added, the plantations are the farmers' only means ofincome.

The Government had in March introduced a replanting scheme to both rubberand palm oil smallholders as part of its efforts to assist smallholders ofboth sectors.

Under the scheme, the Government has allocated a fund of RM200 million tofarmers in which they will be given RM1,000 per ha for replanting palm oiland RM1,100 per ha for replanting rubber.

Mooted by Primary Industries Minister Datuk Seri Dr Lim Keng Yaik, thescheme was aimed at reducing an estimated 600,000 tonnes of palm oil inthe market (which equals to about 200,000ha of oil palm plantation) byyear-end.

The 200,000ha would then be earmarked for replanting.

The scheme was supposed to be completed by June 30 but has been extendedto year-end.

To date, 4,000 farmers, involving a combined land area of about 180,000ha,have registered under the scheme.

The scheme will be handled by the Malaysian Palm Oil Board (MPOB).

Under the agreement, smallholders will only receive their payments afterthey have cut down their trees.

Dr Lim had said last week that the Government was concerned thatsmallholders would only want to register in the scheme but would refrainfrom cutting down their trees to enjoy the good prices.

"I am worried that smallholders will change their minds in replantingbecause of the good prices.

They must do it now because the scheme is only valid until year-end andthey will not receive the grant after that," Dr Lim had said.

Prices have previously touched the all-time high of RM2,697 per tonne in1998 and sold at its lowest price at RM697 per tonne in February earlythis year before making a sharp turnaround last month.

Palm oil prices had shot limit-up across the board at Malaysia DerivativesExchange (MDEX) on July 12 to breach the RM1,000 per tonne mark for thefirst time in 13 months.

Meanwhile, at MDEX futures market, palm oil prices last Friday forOctober, November, December and January deliveries each closed at RM1,115per tonne, RM1,119 per tonne, RM1,122 per tonne and RM1,125 per tonnerespectively.

At the physical market August South and September South deliveries eachclosed at RM1,115 a tonne and RM1,120 a tonne.

A total of 1,273 lots were traded and open interests closed at 11,372contracts.

27 August 2001Business Times