Malaysia's Oil Palm Growers Should Invest in Africa

By Manirajan Ramasamy and Angus Whitley

Aug. 25 (Bloomberg) -- Malaysian palm oil producers, which include Sime Darby Bhd. and IOI Corp., should invest in Africa and South America as land for producing the edible oil becomes scarcer at home, a minister said.

Growers in the Southeast Asian nation have used up about 4.4 million hectares (11 million acres) of the 6.6 million available for oil palm, Malaysian Plantation Industries and Commodities Minister Peter Chin Fah Kui said today.

``There's a need to look beyond Malaysian shores,'' Chin told reporters in Kuala Lumpur. ``It's difficult to say how much land Malaysia needs, but we are encouraging our local companies to invest to other countries.''

Malaysia, together with Indonesia, accounts for almost all global output of palm oil. Wilmar International Ltd., the world's biggest trader of the edible oil, last year targeted Africa for production as increasing demand from China and India stretched the limits of plantations in Southeast Asia.

The price of palm oil, used in cooking and as an alternative fuel, reached a record 4,486 ringgit ($1,330) a metric ton in Kuala Lumpur in March. The commodity traded at 2,628 ringgit at 12:30 p.m. local time, 4.4 percent higher than a year earlier.

No Room

The land available for planting oil palm in Malaysia can make 25 million tons of the commodity a year at current productivity rates, Chin said. Most of the nation's unused space is on the island of Borneo in the states of Sarawak and Sabah, he said.

There's almost no space left for planting on Peninsular Malaysia, home to most of the population and the capital city of Kuala Lumpur, he said.

The area covered by oil palm in Malaysia increased 3.4 percent to 4.3 million hectares in 2007, according to the Malaysian Palm Oil Board. Total output dropped 0.4 percent to 15.8 million tons from 2006. Exports of the commodity brought in a record 45.1 billion ringgit last year.

Africa is ``the next frontier'' for agricultural production, Singapore-based companies Wilmar and partner Olam International Ltd. said last November when paying S$190 million ($134 million) for a 25 percent stake in Sifca Group, an Ivorian commodity producer. They pledged to invest a further $110 million.

To contact the reporters on this story: Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net; Angus Whitley in Kuala Lumpur at awhitley1@bloomberg.net