Small farmers in big industry earn consistent income

Smallholders, with less than 50 ha in Malaysia, are earning a steady income from the production of palm oil, which is linked to the large-scale corporate industry manufacturing oils, cosmetics components, biofuels, natural fertilisers and soaps, says Malaysian Minister of plantation industries and commodities Bernard Dompok.

About 40% of the country’s 18.2-million tons of palm oil production comes from small- holders, who consistently earn between R600/acre and R1 000/acre of mature palms each month.

“It is a good crop to elevate people out of rural poverty and lots of Malaysians who have land or have developed their properties are much better off than before. If a farmer has 5 ha of mature palm oil, he can get R6 000 to R10 000 a month.

“It [resolves] some of the problems in the rural areas, where people have land but no other income,” he stated at the Malaysian Palm Oil Trade Fair and Seminar, in Sandton, in December.

The certainty of the farmer’s income is linked to the large-scale demand created by the greater industry, the scale of which also helps to reduce supply risks and, thus, price volatility. The country’s production from January to September was around 18.2-million tons of palm oil and related products, earning it around R123.5-billion, or 9.8% of its total exports each year, with 150 000 t of palm oil being exported to South Africa in 2010.

The oil is used in the manufacture of food oils, soaps, biofuels, phytonutrients and cosmetics, with proponents noting that the oils are derived from natural sources, not petroleum, making them renewable.

For the cosmetics industry, demand for palm oil products is expected to increase as people seek out products made from the high-quality natural oil. Further, the oil also contains tocotrienols, a type of vitamin E, and there is growing interest in the oleochemicals owing to the oil’s price and fatty acid composition. Malaysia has produced 2.15-million tons of oleochemicals from palm oil for the year up to September 2011, he said.

The Minister noted that, prior to attending the seventeenth Congress of the Parties conference in Durban, he had visited a business in Pietermaritzburg that manufactured soaps using imported Malaysian palm oil.

However, Malaysia practises a market economy and Dompok noted that, although there was no explicit limit on land ownership, the country had achieved 40% of palm oil production from smallholders.

“[Palm oil] planting companies can become very big. There is trading of land, buying and selling, but most of the time people develop the land and do not sell it, preferring to target incomes coming out of good oil,” he explained.

Further, Dompok noted that a number of Malaysian companies and plant companies were establishing joint ventures with South African firms and that the government, in partnership with industry body the Malaysian Palm Oil Council, were encouraging more.

“We are also happy to see some companies owned by South Africans who want to venture into this industry, and we can work out what encouragement and assistance we can give to them,” he noted.

The Palm Oil Trade Fair and Seminar was aimed at attracting new entrepreneurs to invigorate trade in the commodity and Malaysia aims to play a significant role in developing downstream activities in importing countries, such as South Africa, Morocco and Nigeria, besides others.

The industry employs in excess of 570 000 people in Malaysia.

“All these developments would not have materialised without the government taking a proactive approach to complement the private sector initiatives by improving the national infrastructure and supporting facilities such as ports, bulking installations and transportation,” said Dompok.

Malaysia offers the right policies to help the growth of the palm oil downstream sector. In the upstream sector of the industry, such as the palm oil plantations, Malaysia is ready to help relevant multinational parties and contributes to technology, labour, expertise, raw materials and other inputs for the industry, he said.

Significant research is being done in the industry, including mapping the genome of the plant species that will help to improve production yield, concluded Dompok.