13 July 2011 16:05 [Source: ICIS news]
“Is the entire picture rosy? Well, maybe not,” said one Indonesian producer, who also has operations in
The new processes are a result of significant legal changes in the region. Government laws have been set to help minimise environmental damage, like deforestation and greenhouse gas emissions, from the palm oil sector, and maximise sustainability. Additionally, the lack of highly-skilled legal professionals to navigate the new processes will have a short-term impact on palm oil growth in the region, thereby stagnating fertilizer consumption locally – but only for a few years.
“As the big boys [get used to the new government standards], the small guys will follow,” said the producer.
These developments are just a few of the challenges listed in a US Department of Agriculture (USDA) June 2011 report, which indicates that Malaysia’s three-decade long palm oil growth trend is set to decline, soon after it reaches its peak production in 2020.
Since the financial recession of 2008, crop yields have dropped dramatically. The USDA says this is due to decreased fertilizer use, adverse weather and high crop prices, which have led to sub-optimal crop cultivation.
Instead of replanting new trees which would – in time – produce higher crop yields, plantations have opted to continue harvesting from trees that have matured past their optimal crop production.
But fertilizer imports are on the rise for the southeast Asia region as a whole, according to producers. Several confirmed that their fertilizer application and purchasing habits have not changed, and in fact have grown since 2008.
“There’s not much [plantation land] in
Beyond this, the high price for palm oil crops and a strong demand for edible oils and biodiesel feedstock are driving company expansions elsewhere, shifting and increasing fertilizer demand in new places.
Other palm oil giants, such as Sinar Mar and Olam International, have set their sights on
But the unique aspect of palm oil plantations is that they provide a long-term producing, high-yield crop that does not have a particular off-season – which would also require consistent, year-round applications of fertilizer imports.
“It’s a 15-plus year investment, and a long term commitment,” a Malaysian producer said.
Similarly, there is also concern over the long-term impact of taking land away from local community farmers. However, advocates of African expansion argue that plantations will increase job opportunities for low-skilled labourers and improve exports, while contributing positively to the country’s balance of trade.
Also, producers say palm oil production for these African regions would not be mechanized – as southeast Asia’s processes are generally not mechanized. That means the type of agricultural development envisioned would not result in rapid urban migration – as was the case during
“We definitely see Africa as a region for potential growth,” said a representative of Arab Potash Company, a fertilizer producer in
Statistics show there is room for such growth. In 2008, fertilizer consumption for the entire African continent, of roughly 1bn people, was reported at 2.9bn nutrient tonnes, according to International Fertilizer Association data. That same year
But the growth presents a massive challenge as well.
Another possible consequence of agricultural expansion in
“The only problem [about African demand increases] is that SOP is sold at a premium,” said a European SOP producer. “Someone has to pay for it, and places like
Despite this, Indonesian producers say current events are promising. The fact that the agricultural industry in
All these positive aspects could set
“Let’s keep our fingers crossed that
($1 = €0.71)
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