Low CPO Price

Many clients of mine have called to request that their fertiliser requirement for next year be reduced by 30 to 40%. Understandable, the CPO price has dropped drastically from a record high of RM4700 a tonne to the recent low of RM1565 a tonne. With the steep increase in fertiliser prices, the plantation companies are affected by higher cost of production thus, cutting down their profit significantly.

In my 14 years working as an oil palm agronomist, such cyclical changes in palm oil prices have occurred a few times. When the CPO is high, the estates are pushing for higher crop thus request the agronomist to recommend higher rates of fertilisers, some even topping up the fertiliser rates on their own. When the CPO price is low like now, they will start to cut this and that in order to save cost. In my view, the application of fertilisers should not be driven by the price of CPO but rather the yield potential and also the nutritional status of the palms. Palm oil price goes up and down. If the estates cut down on their fertiliser input this year, that will adversely affect the yield production the following year. Now, who know what's going to be the CPO price the following year. What happen if the price is skyrocketing again but the estates which cut down on the fertilisers suffer low yield.

Plantation investment is for long term. Similarly, application of fertilisers is also for long term. Hence, it requires a long term strategy in order to ensure success and sustainable profitability. Short term adjustment on the capital expenditure in the light of low CPO price is unavoidable but should be done discreetly under the advise of qualified professional. Knee-jerk reaction or fire-fighting approach would not do any good for long term profitability and sustainability.