Oil Palm Industry Economic Journal Vol. 1 September 2001 p. 21-27

Improving Productivity:The Replanting Imperative

Idris Omar, Azman Ismail and Chang Lin Chong
Received:    Accepted:    Available Online:


The replanting of old and uneconomic palms is one of the more practical strategies to improve oil palm productivity. High productivity will ensure that the oil palm industry continues to remain competitive even during times of low palm oil prices. In order to maintain a good productivity level, the percentage of tall and ageing palms should be small and preferably less than 10%. Changing the age profile by reducing the tall and ageing palms from the current 21.6% should improve the national fresh fruit bunches(FFB) yield. This could be done through replanting as seen from the analysis of the age profile which showed that by end of 2000, about 264 074 ha(7.8%) were in dire need of replanting. A hypothetical cash flow exercise at different FFB prices comparing immediate replanting against delayed replanting for 25-year old palms was done. Immediate replanting is referred to as replanting palms at the age of 25 years and delayed replanting is referred to as replanting of palms at the age of 30 years. At the end of the 10th year, the price sensitivity analysis showed that immediate replanting was viable when the price of FFB was at least RM 135/t. At this price, the accumulated Incremental Net Revenue (INR) is RM 5601/ha. At a 10% discount rate, the incremental Net Present Value (NPV) and Internal Rate of Return (IRR) were RM 34 and 10.1% respectively. The break-even price would be lower if the increase in the cost of replanting in the next five years had been taken into consideration. It is concluded that immediate replanting is economically viable when the long-term FFB price is at least RM 135 t-1.

About Post Author