05/11/2008 (The Star Online), Petaling Jaya - The push for oil palm replanting, abolishment of 5% import duty on fertilisers and a 15% cut in fertiliser prices under the economic stabilisation plan are seen as additional measures to help planters cope with rising costs of production.

The Government understands the immediate need to cut local palm oil production via the replanting programme given record palm oil stocks of almost two million tonnes in October and the current low crude palm oil (CPO) price at below RM1,600 per tonne.

Malaysian Estate Owners’ Association president Boon Weng Siew said the incentive of RM1,000 per hectare for replanting could help planters nationwide speed up such activities.

“The figure (RM1,000), however, is small compared with RM10,000 to RM12,000 per hectare that most planters had to fork out for replanting,” he told StarBiz.

Last Thursday, Prime Minister Datuk Seri Abdullah Ahmad Badawi announced an allocation of RM200mil for replanting 200,000ha of oil palm nationwide.

Many believed the allocation came from the Malaysian Palm Oil Board cess under the palm oil price stabilisation fund, contributed by local planters since 2000.

Jupiter Securities head of research Pong Teng Siew said the replanting programme represented about 4.65% of Malaysia’s total oil palm planted hectarage.

He said most plantation companies had an average replanting target of 4% a year of their total planted hectarage.

“However, many have delayed their replanting due to the strong CPO prices back in 2007 and early 2008,” he said.

Pong said the goal would be to reduce CPO production by 700,000 tonnes via the replanting programme.

Boon said the industry was happy with the abolishment of 5% import duty on seven types of fertilisers and the consensus among local producers to reduce by at least 15% the fertiliser price with immediate effect.

“The 15% reduction in the price of fertilisers by local producers is still considered small,” he said. “Oil palm planters especially are hoping for prices to be cut by at least 50% to cover their high fertiliser costs.”

Over the past three years, fertiliser prices have shot up three-fold to about RM3,000 a tonne.

Meanwhile, the Government is also implementing the use of biofuel comprising 5% methyl ester (palm oil) and diesel for government vehicles from February 2009. This will be followed by the industrial and transportation sectors.

It is estimated that the production of biofuel with 5% palm oil would require 500,000 tonnes of palm oil annually when fully implemented in early 2010, he said.

Aseambankers in its latest note said: “If executed well, this is likely to be positive in ensuring CPO prices stay at decent levels in the coming years.”