23.03.2020 (The Star Online) - PETALING JAYA: Local plantation companies are now placing strict measures on all their operations, particularly on harvesting and millings, where “social distancing” can be practiced to fight the Covid-19 coronavirus outbreak.
With the price of crude palm oil (CPO) down 25% so far this year, planters are eager to keep production intact to cushion the downfall.
At the close on Friday, the most active CPO futures contract on Bursa Derivatives was last traded at RM2,288 a tonne.
“Our members have prepared a comprehensive standard operation procedures (SOP) that strictly adheres to the guidelines set by the Health Ministry, ” Malaysian Palm Oil Association (MPOA) CEO Datuk Datuk Mohamad Nageeb Ahmad Abdul Wahab said.
So far, there have been no reported cases of Covid-19 at local estates.
MPOA members include some of the country’s largest planters such as IOI Corp Bhd, Kuala Lumpur Kepong Bhd, Sime Darby Plantation Bhd and FGV Holdings Bhd.
Nageeb told StarBiz that “no funds have been allocated by the Plantation Industries and Commodities Ministry (MPIC) to the industry to fight Covid-19.
“But MPOA has given assurance to the government that we will undertake all the precautionary measures to contain the spread of the virus. In fact, the plantation industry is truly grateful that the government has lifted the control order on oil palm and rubber industries to resume their operations on a restricted scale from March 19.
“Just imagine, the oil palm sector anticipates a loss of revenue to the tune of RM1.6bil to RM1.8bil if we were to stop operations for two weeks, ” said Nageeb.
The MPIC is also aware of the significant contributions by the oil palm and rubber sectors to the supply chain, especially on essential items such as cooking oil, rubber gloves and catheters.
Hence, the ministry has allowed the harvesting of fresh fruit bunches (FFB) by plantation companies and smallholders, the processing of FFB by palm oil factories and the processing of crude palm oil (CPO) in the refineries for the production of cooking oil for domestic markets.
The leeway has also enabled rubber tapping activities to supply raw materials for the manufacturing of medical equipment such as gloves and catheters and activities in the timber sector to meet contracts.
According to CGS-CIMB in its latest report, the impact on planters’ earning and industry revenue was minimal from the one day closure of estates and mill operations.
“We are not surprise by the government’s favourable decision (to lift the restriction) as palm oil which goes mostly into cooking oil should be considered as an essential food item.”
Both independent and organised smallholders owned about 28.4% of total planted oil palm estates in Malaysia around 5.9 million ha. As such the potential impact on smallholders daily income will be significant if they are not allowed to harvest FFB from their estates and sell to the mills during the movement control order (MCO) time.
However, should the MCO be imposed on the sector, the earnings of upstream planters with over 90% of their estates holdings in Malaysia such as FGV, Tan Ann Holdings Bhd, Hap Seng Plantations Bhd and IOI are likely to be the hardest hit by the directive as “the estates cost are mostly fixed and the loss in revenue will mostly flow through to the earnings.”
On the other hand, integrated planters with majority-owned refineries and Indonesian estates such as KLK, Genting Plantations Bhd and Wilmar Ltd will be partially cushioned as “they could benefit from better CPO prices from their estates in Indonesia given lower-than-expected supply from Malaysia, ” added CGS-CIMB.