Friday, 5 December 2008

Indonesia to Help Farmers Replant 125,000 Hectares of Oil Palms

Indonesia to Help Farmers Replant 125,000 Hectares of Oil Palms

By Yoga Rusmana

Dec. 3 (Bloomberg) -- Indonesia, the world's largest palm oil producer, will help small farmers replant 125,000 hectares of palms in the next two years to rejuvenate plantations and control supply, a government official said.

``Our program is to replant old trees in west and north Sumatra and West Kalimantan,'' Achmad Manggabarani, director general of plantations at the Ministry of Agriculture, said in an interview from Bali today. ``We will replant 125,000 hectares in the next 2 years.''

Crude palm oil futures in Malaysia, the global benchmark, have plunged 65 percent since their March peak as record production from Indonesia and Malaysia outpaced demand, hurt by the global economic slowdown. The two countries supply 90 percent of the world's palm oil, which is used for cooking and fuel.

The commodity is Indonesia's largest agricultural export.
About 50,000 hectares will be replanted next year, as announced on Nov. 6, and the rest in 2010, he said. This will be the first replanting in almost three decades for small-holders, he added. Oil palms are productive for between 25 and 30 years.

The area targeted for replanting represents a fraction of oil palms that need to be replanted, Manggabarani said.

``If we include the trees managed by big companies, there are around 1 million hectares of oil palm plantations in total that need to be replanted,'' he said. ``This program hopefully and ideally should take place within 5 years, mostly privately by each company'' on a voluntary basis, he added.
Companies tend to replant 5 percent of their plantations yearly, he said. They usually own some of their own palms and buy fruit from small farmers in the area.

Controlling Stock
Indonesia and Malaysia announced on Nov. 6 plans to jointly reduce annual output by as much as 800,000 metric tons and coordinate stockpile management to reverse a price plunge.

Inventory in Malaysia reached a record 2.09 million tons in October, the Malaysian Palm Oil Board said Nov. 10. Indonesia has said it has a similar-sized stockpile.

Malaysia plans to replant 200,000 hectares next year, reducing production by 700,000 tons. Replanting cuts output as it takes years for new trees to bear fruit. Indonesia can expand if needed to meet future demand, another official said.

``We have 11 million hectares of abandoned land, of which 5 million can be used for oil palm plantations,'' Muhammad Lutfi, chairman of Indonesia's investment coordinating board, told an industry conference in Bali today. That compares with a cultivated area of 6.5 million hectares for oil palms currently, he added. ``This could create 5 million jobs.''

To contact the reporters on this story: Yoga Rusmana in Bali at