Palm oil problems in Indonesia and Malaysia

Indonesia: Farmers suffer from booming palm oil
The Jakarta Post 4 Jan 08;

The Indonesian Farmers' Union criticized the government Wednesday for mismanagement in the food crop sector, highlighting the massive displacement of farmers by the expansion of oil palm plantations.

Union chairman Henry Saragih said the palm oil industry had been aggressively expanding plantations to capitalize on a continuing rise in crude palm oil prices expected to result from higher world demand, especially in India and China.

He cited 2006 records of the Agriculture Ministry showing oil palm plantations had grown by more than 200 percent during the last decade -- from 2.7 million hectares in 1998 to 6.1 million hectares in 2006.

He said large-scale private companies, including PT Astra Argo Lestari and PT SMART, controlled 57 percent of plantation areas, while the government and small-scale private growers had the other 43 percent.

"As the oil palm plantations grew larger, the number of large-scale food crop farmers decreased, with many becoming small-scale growers (and even) farm laborers," he said.

Small-scale farmers are defined as having an average of 0.3 hectares under cultivation; farm laborers work for other farmers. Aggregate numbers have increased from 19.9 million families in 1993 to 25.4 million in 2003.

Henry also cited 2007 data indicating that poverty rates stood at 16.58 percent. "Some 63.52 percent of the poor people are villagers who mostly work as small-scale farmers or farm laborers."

He predicted that the conversion of food crop land areas would continue apace in the coming year, owing to the global campaign to replace non-renewable fossil fuel with sustainable bio-fuel.

Such bio-fuel may be derived from agricultural products, including the palm.

"Food crop farmers will continue to see a hard time in the coming years because of the lucrative palm oil industry and the fact the government has apparently sided with the industry by issuing policies that facilitate the expansion of oil palm plantations."

He cited a law on investment endorsed by the government in 2007 and a decree issued by the Agriculture Ministry in 2002; they grant concessions as large as 100,000 hectares for up to 95 years.

Those policies replaced previous regulations with 35 year and 20,000 hectare maximums.

Henry said takeover by big growers could hurt farmer's income and domestic food security as well.

"The government had earlier promised that the country would be able to meet its domestic rice demands in 2005, but the fact is we still have to import rice and the amount keeps rising."

In 2007, Indonesia imported 1.5 million tons of rice, an increase by 78 percent from 840,000 tons in 2006.

Henry said the rice imports had affected the price of domestic rice as foreign brands were cheaper. As a result, farmers suffered losses as they had to lower prices to compete.

"The government must stop the conversion of food crop land and revise its rice import policy to ensure that farmers stand a chance to improve their welfare."

Malaysia: Consumers panic as cooking oil shortage spreads
Straits Times 4 Jan 08;

KUALA LUMPUR - A SHORTAGE of cooking oil has spread to at least seven states in Malaysia, causing panic among consumers, local Malay-language newspapers reported yesterday.

The shortage of palm oil has been affecting residents in the northern and eastern states of peninsular Malaysia for the past week, and Malacca and Johor are the latest to join the list.

The shortage is the result of manufacturers ceasing production temporarily as they prepare for the new year's accounts.

Johor's state enforcement director of domestic trade and consumer affairs Fahmi Kassim said that, based on a report by the Malaysian Palm Oil Board, supplies will resume this month.

He also told Utusan Malaysia that excessive panic by consumers had contributed to the shortage.

Checks in other states found empty shelves in supermarkets and grocery shops in Kedah and Malacca.

A shopkeeper in Terengganu said his wholesaler had supplied less stocks than what he had ordered, and they were snapped up in a few hours.

Consumers in Perak, Pahang and Negeri Sembilan also complained of difficulty in getting cooking oil.

In Perlis, consumers were allowed to buy only one or two packets of cooking oil a person, Utusan Malaysia reported.