FOR the past several weeks, a lot of things happened at Felda.
Earlier this month, Felda said it will buy 37 percent of Eagle High Plantations in Indonesia.
Last week, Felda said it will take back its land from Felda Global Ventures.
How will it benefit the smallholders?
How will it affect the rakyat?
Let us take a look.
Malaysia’s smallholders and their family members will have a better quality of life
Malaysia is the world’s second largest palm oil producer with a total of 112,635 smallholders.
Assuming each shareholder has 4 children, the Felda population will total 4 million family members.
So how can buying Eagle High improve the lives of smallholders?
Smallholders income depend largely on crude palm oil prices.
Whenever crude palm oil prices go up, all the smallholders will have a better income.
It is very important to remember that for every RM100 increase in palm oil prices, it will add millions of ringgit to Felda or Eagle High’s income.
Felda has total area of 850,000 hectares of oil palm estates.
Eagle High meanwhile has total area of 320,000 hectares.
If crude palm oil prices increase by RM100.
The income would be in the millions of ringgit for Felda and smallholders can earn thousands of ringgit.
This is a good business deal carried out by Felda and the government.
Palm oil prices have nowhere to go but up
Although palm oil prices have been weak since 2015, industry experts say palm oil prices has nowhere to go but up in 2017 and 2018.
This is because demand is strong from China, India and Europe.
Demand is expected to be even stronger in the next month as it will be Ramadan.
During Ramadan, demand for palm oil is strong as it used as cooking oil and to make cakes and cookies.
So the Eagle High deal is timely as palm oil prices are expected to go up and the companies and the smallholders are the ones who will benefit.
Malaysia will earn more money from palm oil exports
Now that Felda own 37 percent of Eagle High, Felda will make money whenever palm oil is exported to other countries such as China, India and the European Union.
This year, Plantations Industries and Commodities Minister Datuk Seri Mah Siew Keong told the New Straits Times on April 25, that Malaysia is expected to export some RM70 billion worth of palm oil.
When palm oil companies make money, it will benefit the rakyat.
This is because the palm oil companies will pay tax to the government.
With the tax money, the government will be able to do a lot of things for the rakyat such as give BR1M, build schools and roads and so many others to benefit the rakyat.
Malaysia and Indonesia will work together and become even more closer
Indonesia is the world’s largest crude palm oil producer in the world followed by Malaysia at number two.
Both countries are members of the Council of Palm Oil Producing Countries.
With the partnership between Felda and Eagle High, the two companies can work together to promote as well as sell palm oil at at new markets.
There will be also be a lot of new businesses for Felda Group in selling seeds, fertiliser, crude palm oil trading and others.
Indonesian also has a market of 260 million people and this will be good for Felda.
The Malaysian Palm Oil Board and Indonesia’s Gabungan Pekebun Kecil Indonesia will be able to work closer to find new ways to help smallholders as well as in the area of research and development.
Malaysia and Indonesia are also brothers as we are both close neighbbours which will benefit the people in both countries.
Malaysia will be able to save money
Malaysia has been growing palm oil for a long time and it has been looking for land outside of Malaysia.
This include in Africa, Myanmar, southern Philippines and even as far as Venezuela.
This is because there is no more land in Malaysia to grow palm oil.
The Eagle High Plantation landbank is perfect for FGV as its land is suitable for FGV.
In this way, Malaysia does not have to go far to look for land to grow its palm oil.
Palm oil land in Indonesia more fertile
Indonesian plantations produce more palm oil than Malaysian plantations because the soil in Indonesia is more fertile.
This is because it has gone through less planting cycles than Malaysia.
Kalimantan and Sulewasi, have 2-3 cycles while Malaysia has 6 cycles ever since palm oil was planted 160 years ago.
This is an important reason on why Felda bought Eagle High – its fresh soil.
With better soil, the palm oil production and the income will be higher and this will help smallholders in Malaysia and Indonesia to earn a bigger income.