Oil palm seeds to cost 30pc more

The increase is due to the recent hike in labour wages and foreign worker levy, fertiliser cost, electricity tariff and packaging material cost, says a director of Applied Agricultural Resources

Sungai Buloh: The price of oil palm seeds, now at RM1.85 each, will be raised by 30 per cent to RM2.35 starting January next year.

Business Times also understands that the higher grade semi-clonal seeds will be priced 45 per cent more at RM2.70.

"Over the years, we have invested heavily in oil palm breeding. This has enabled us to improve the seeds for higher yields. Most of the major seed producers in the country have also made similar price increases for 2012. It has been RM1.85 per seed since 2007," said Applied Agricultural Resources Sdn Bhd's (AAR) director of research Dr Kee Khan Kiang.

AAR, which advises more than 350,000ha of oil palm and rubber estates in Malaysia and Indonesia, is an associate company of Boustead Holdings Bhd and Kuala Lumpur Kepong Bhd, two highly successful public-listed companies.

Kee, in an interview at his office, said the decision to raise the price of oil palm seeds was due to cost rises.

"With the recent hike in labour wages and foreign worker levy, fertiliser cost, electricity tariff and packaging material cost, we have no choice, but to raise seed pricings," he said.

This is because starting this month, plantation firms will pay a minimum wage of RM650 per month to plantation workers, with an additional productivity-linked RM200 incentive.

It is estimated that this 10 per cent wage hike for employees would cost the industry an additional RM300 million per year. The arrears of wages and ex-gratia payment would further incur an additional RM364 million.

On the whole, the implementation of this new wage and extra remuneration will double Malayan Agricultural Producers Association (Mapa) members' oil palm production costs to RM2.2 billion from RM1.1 billion. AAR's parent companies are Mapa members.

"We've tried to absorb these costs, but at the same time, we need to take care of our shareholders' interest," he added.

To add salt to the wound, the Home Ministry has increased overall foreign worker levy by RM50, meaning employers in the plantation industry need to pay a higher levy of RM590 per worker.

"Whatever that is impacting plantation companies has a chain reaction on seed producers like us. We're equally hurt by these inflated costs," said Kee.

Major seed producers like Felda Agricultural Services Sdn Bhd, Sime Darby Seeds & Agricultural Services Sdn Bhd and AAR will, therefore, be facing burgeoning labour cost.

Since 1986, AAR has been one of the 10 licensed seed producers in the country, contributing to the replanting of unproductive trees so as to raise the national oil palm yield.

According to Malaysian Palm Oil Board, some 40 million germinated seeds have already been planted by farmers in the first seven months of this year.

Most of the replanting of old trees have been carried out in Sabah and Peninsular Malaysia while new plantings are undertaken in Sarawak.

For this year, Kee said, AAR is hoping to sell 8.5 million oil palm seeds this year, having sold 7.2 million last year.

"We already have confirmed bookings for 8.6 million seeds in hand with deposits paid. Orders are still pouring in, but unfortunately, we cannot meet the demand for this year," he said.