Oil Palm Plantations

Oil palm plantations are good for potential small and medium size investments. Typically there are many small holdings available in the market. Compared to tea and rubber plantations which are currently operating at a loss, oil palm plantations are operating profitably. Profitability margin is also high. This plantation is relatively easier to operate than tea and rubber plantations.

Oil palm has a tremendous advantage over other vegetable oil producing crops. It has a potential oil yield of 3,000 to 4,000 litres per hectare per annum. In comparison, coconut yields just 700 litres per hectare. Alternatives such as sunflower yields, 600 litres per hectare per year, and soy has an output of only 460 litres per hectare per year.

Rubber plant will start yielding in 5 to 7 years, where as palm oil tree starts yielding in 3 years although its peak yield will be between 7 and 18 years. After 18 years the yield will gradually decrease. The planter will need to consider removing old palms and planting new palms to replace the old palms.

It is also beneficial to the workers employed in harvesting the fruits. An oil palm harvester earns from Rs. 65,000 to Rs. 105,000 a month compared to a good tea plucker earns Rs. 25,000 per month.

Oil palm is more profitable compared to other cash crops in Sri Lanka.Crude palm oil plantations generate an income of Rs.150,000 to Rs. 200,000 per hectare, while tea and rubber plantations are struggling to make profits.

Palm oil cultivation started in Sri Lanka in a 20ha land in Nakiadeniya. Galle, Matara, Kalutara, Colombo, Kegalla,Gampaha, Kurunegala, Kandy Matale and Ratnapura have suitable climatic conditions for growing oil palms.

At present 7,953ha of land is under palm cultivation.

In 2013 Sri Lanka produced 666,966mt of palm oil, compared to 61,635mt in the previous year.

The advantages of oil palm production are:

1. Saving foreign exchange that would have been needed for the import of vegetable oil for local consumption. Sri Lanka is still very dependent on imported vegetable oil. The national vegetable oil requirement is over 150,000 tons per year, the bulk of which is imported, as the local coconut oil production at best can meet only about a third of it.

2. Reducing fluctuations in coconut prices.

3. Only uncultivated bare lands are used for oil palm plantation.

4. Availability of high quality palm oil to the local market.

Future plans for oil palm cultivation

Over the next 10 years, the extent of land used for palm cultivation will be increased to 25,000ha.

Oil palm research division has bee established under Coconut Research Institute.

Steps are being taken to import high quality seedlings.

Sri Lanka needs diversify and increase its production of palm oil to develop the industry to be on a par with other countries such as Malaysia and Indonesia. There is great potential for investors in this industry.

There is a concern that oil palms may take away marginal rubber holdings and rubber acreage may decrease in the future. This may turn out to be a serious problem as blk of the rubber is consumed by value added industries locally.

Rubber small holdings complain that nearby oil palms deplete the ground water thereby depriving rubber plants of adequate supply of water. Rubber Research Institute denied that oil palms depleted the ground water resources. However many fell that the Rubber Research Institute did not carry out proper scientific evaluation before expressing its opinion.

Another concern is that the oil palm removes about ten times more soil nutrition than rubber, while fertilizer costs keep escalating. But the oil palm planters argue that cost of production of a kilogram of crude palm oil is Rs.4 against a selling price of Rs. 11 to 12. In other words, the massive productivity and price of goods can easily absorb the high fertilizer costs.

On balance it is felt that oil palm cultivation is important and beneficial to Sri Lanka and therefore expansion of oil palm plantation should be encouraged.