LAST year, Sahman Duriat could barely make RM1,000 a month from his 12ha plot of oil palm trees in Kuala Selangor.

But starting last month, the 52-year-old’s income from his crop doubled in tandem with the worldwide increase in crude palm oil (CPO) prices.

There are worries, however, that the rebound will be impacted by India’s decision to restrict imports of refined palm oil (RBD) from Malaysia and Indonesia.

As of Thursday, CPO was RM2,991.50 a tonne. CPO is made from crushing oil palm fresh fruit bunches (FFBs), which are grown by independent smallholders.

CPO prices plunged from an average of RM3,300 in February 2017 to between RM1,800 and RM2,100 for most of 2019.

In the same period, FFB prices slid from about RM800 per tonne for the grade A variety to RM400.

The plunge from early February 2017 to last September was due to a glut in the supply of palm oil from Indonesia and Malaysia, the world’s top two producers of the commodity.

CPO and FFB prices started to rally last November and are now about RM2,900 and RM610 per tonne, respectively.

Sahman is one of the 650,000 independent smallholders who plant some 40% of Malaysia’s oil palm.

These growers’ income feeds the rural economy in many states, especially Johor, Sabah, Perak, Selangor and Pahang, where oil palm is the primary crop.

“Some of the tea stalls around here closed down because growers no longer visited when our incomes plunged,” Sahman told The Malaysian Insight in Ijok, a town outside the Klang Valley built on the plantation industry.

Palm oil prices have influenced the outcome of by-elections, such as in Cameron Highlands and Tg Piai, with Barisan Nasional tying the low global prices to Pakatan Harapan’s performance.

“The rally in prices revived us. We could go back to our plantations,” said Rahman Sarip, another Ijok-based smallholder who owns 12ha.

“Now, we have cash to buy herbicides and fertiliser, and hire workers again.

“When prices were low, I struggled to afford all these things, and as a result, my yields suffered because I could not take care of my trees,” said the 70-year-old.

Last month’s total harvest of 24 tonnes netted Rahman an income of more than RM2,000.

Rebound retreat

And yet, the National Smallholders’ Association is worried that the rebound may be short-lived.

Selangor chapter chairman Lehan Sayahan said a combination of worker shortage and the impact of India’s import curbs could see prices go down again.

After CPO crested at RM3,100 per tonne on January 10 – the highest level since early 2017 – prices dropped to about RM2,900 just before the Chinese New Year weekend.

“The prices are high now, but there are not enough workers to work the land. I used to have six of them but now, I am left with only one,” said Sahman.

Smallholders in Malaysia depend on Indonesian migrant workers, who are accustomed to plantations’ sweltering conditions.

“Bangladeshis, Pakistanis and Indians hate working on the plantations. Only Indonesians are willing to do this type of work,” said Sahman.

Rahman, meanwhile, said despite wages that can top RM3,000 a month, it has become harder to find Indonesian workers.

“Since the palm oil industry is now very big in Indonesia, they prefer to stay and work there.

“When they were younger, they came here to gain experience. They then returned to their plantations back home.

“They might get paid a little less in Indonesia than here but to them, they get to stay home and be with their families.”

Palm oil market analyst Dr Sathia Varqa said India’s decision to restrict imports of RBD has seen CPO prices tumbling to below RM3,000 per tonne.

“We can expect lower CPO prices at mills and consequently, lower FFB prices, from March onwards. There will be a short-lived rebound in early February due to lower output,” said the Palm Oil Analytics co-founder.

“CPO prices are currently at RM2,860 per tonne and FFB is at RM630 per tonne. FFB will trade at between RM550 and RM600 in March and the second quarter of 2020, on the assumption that India will keep the ban on RBD palm olein, and the Wuhan virus in China is under control.” – January 27, 2020.