13/2/07 (NSTP)  -  MALAYSIA'S palm oil production may drop by 2015 if planters continue to delay replacing old trees with new ones.

However, the Government is having a tough time convincing them because crude palm oil (CPO) prices are currently quite high.

In the last three months, CPO was sold at between RM1,800 and RM2,000 per tonne.

Planters must wait at least seven years before new trees bear fruit and there is no guarantee that the price will be the same then.

"It is very hard to convince smallholders to replant their unproductive trees while the going is good. Big players are better at planning for future supplies," Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui told Business Times recently.

The Government is committed to increase CPO supply by replanting high-yielding clones, instead of expanding plantation area.

This means more CPO could be squeezed out from the same amount of trees.

"The replanting rate of the oil palm trees is very slow ... less than 2 per cent of 4.17 million ha of the planted area. Our target is 5 per cent per year," the minister said.

In order for Malaysia to produce enough palm oil for downstream businesses that churns out cooking oil, soap and biodiesel, among others, planters must chop down about 200,000ha of old palm trees and replant with high-yielding clones every year.

Malaysian Palm Oil Board's statistics showed that last year, Malaysia only replanted 55,049ha with new trees, a slight increase from 2005's 48,917ha.

By 2010, Malaysia is aiming for a yearly CPO output of 18 million tonnes, harvested from five million ha of planted area. At a 25 per cent oil extraction rate, the industry has to squeeze out six tonnes of CPO per ha per year from its plantations.

Currently, the national average yield is less than four tonnes of CPO per ha per year.

"We need to replant with good clones so that the national average yield can improve from the current 3.9 tonnes of CPO per ha per year," Chin said.

Chin said Malaysia seriously needs to step up efforts to increase CPO output to make sure there is enough for value-added downstream exports.

In 2006, Malaysia was still the world's largest producer and exporter of palm oil, churning out 15.9 million tonnes and reaping RM31.81 billion in export revenue.

Palm oil is the most versatile compared with other edible oils in the global market such as soya bean, canola, sunflower, corn, coconut oil and butter. About 80 per cent of Malaysian palm oil goes into food manufacturing.

From 2001 to 2005, the Government spent some RM880 million to encourage the replanting of about 220,000ha with high-yielding oil palm trees.

Under the Ninth Malaysia Plan, RM337.5 million was allocated to replant oil palm trees.