Wednesday, 31 July 2013

b.xox - Considering Oil Palm Farming

The last part is here:   Farming xox - The Beginning

Today, 4.49 million hectares of land in Malaysia is under oil palm cultivation; producing 17.73 million tonnes of palm oil and 2.13 million tonnes of palm kernel oil. Malaysia is one the largest producers and exporters of palm oil in the world, accounting for 11% of the world’s oils & fats production and 27% of export trade of oils & fats. The industry provides employment to more than half a million people and livelihood to an estimated one million people. (Source:  The Oil Palm Tree from

Oil Palm price per metric tonne is RM2,215. (Source: Daily Palm Oil Prices from
The density is 143 trees per hectare or 58 trees per acre. (Source:    Oil Palm General Information from

Cost per acre of land:   RM30k - 60k per acre. (Source:   Land Prices from

Based on the above fact sheet, assuming that 20m tonnes oil palm is produced in 4.5 mha in Malaysia. That gives 4.44 tonnes per ha (20m/4.5m) or 1.8 tonnes per acre (4.44/2.47). Based on the daily palm oil price of RM2,215, that gives RM3,985 per acre (1.8x2215) or USD1,226 per acre (3985/3.25).

Based on the land price of RM30k-60k in Malaysia, the yield is 13% - 6.6% (3985/30kx100% - 3985/60kx100%). Not so bad for a farm operation, if you have no family to feed and no luxury to spend.Your nose to the grindstone will need 20 years flat out.

But, if the land is purchased based on bank loan, then the farm owner will shit bricks. Based on the loan percentage of 5-7% and maybe 50% down-payment, the cost of borrowing would be 2.5% - 3.5% (5%x50%, 7%x50%), the net percentage yield is reduced to 11.5% - 3.1% (taking the maximum and minimum, 13%-2.5%, 6.6%-3.1%). This is not even considering the running need to employ workers, place fertilizers, do repairs, buy machinery, maintain gals, buy food and go on holidays. Your chance of survival is greatly reduced. You need 40 years flat out. You gamble too much.

So always buy the land free of bank loans. Otherwise, you will shit bricks. Trust me.

Based on these numbers, you would realize the negativity of straight-jacket farming. So how to dance the mating dance of business where you are always 5,000 years too late?

What a teaser ... life is ... 

Hint:   If you must be a farmer,
(1)   Don't be a commoner farmer.
(2)   Find your passion, it can't be just oil palm like every one else.
(3)   Find a farming job that is not so tough going.
(4)   Read the internet and think like hell. Going through Google, don't count.
(5)   What if your farm dies?
(6)   Build a temple where you can hide and meditate.
(7)   You must find time.

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