Palm oil offers new lifeline for Mindanao

BY MADELAINE FAYE D. CABRERA

Malaya Business Insight

THE Philippines is on the way to becoming a major player in the global palm oil industry, which is dominated by neighbors Malaysia and Indonesia.

In Mindanao, the Department of Environment and Natural Resources has identified at least 304,350 hectares as potential areas for oil palm tree plantations.

Local companies are slowly taking on the challenge after initial forays proved the profitability of the business.

Nakeen Corp., for example, a wholly owned subsidiary of A. Brown Energy and Resources Development Inc., is seeking to expand its plantation to 1,000 hectares by 2012.

Fernando S. Mercurio, operations manager of A. Brown Energy, said palm oil is emerging as a new lifeline for the island of Mindanao.

"And because of that, we plan to expand by 400 hectares more," he said.

The current 600-hectare plantation, which needed P174 million in investments, involves the cultivation of oil palm trees in Sitio Tingalan, Salawaga, Opol, Misamis Oriental.

"A total of 300 hectares has already been planted and our target is 50 hectares per month in planting," Mercurio said.

The area was formerly a ranch.

Nakeen’s application for an additional 400 hectares to be covered by a 25-year lease under the DENR’s Upland Agro-Forestry Program, is awaiting government approval.

"Those lands are found to be timberlands, so we are entering into an agreement with people’s organizations. The deal is called Community-based Forest Management Agreement involving three participants, namely, DENR, A. Brown and people’s agreement," Mercurio said.

Mercurio said A. Brown Energy aims to plant around 10,000 hectares to oil palm trees by 2015.

Manny Boniao and Dr. Rolly Dy of the University of Asia and the Pacific gave the encouragement to Walter Bwron, chairman of the Brown Group, to go into the business of palm oil production.

Dy, who has been studying the production of palm oil in Malaysia and Indonesia, said Mindanao has better climatic conditions, making it an ideal place for the crop.

"Mr. Brown saw it as a sunshine industry," Mercurio said.

Among the provinces in Mindanao, Surigao del Sur has the biggest potential for palm oil plantation with 93,790 hectares.

Bukidnon has 65,090 hectares; Zamboanga del Sur, 31.430 hectares; Surigao del Norte, 31,360 hectares; South Cotabato, 17,000 hectares; Misamis Oriental, 11,440 hectares; Agusan del Norte and Misamis Occidental, 10,370 hectares each; Maguindanao, 9,270 hectares; Zamboanga del Norte, 7,530 hectares; Agusan del Sur, 7,490 hectares; Davao Oriental, 6,220 hectares; Sultan Kudarat, 5,630 hectares; Lanao del Sur, 3,280 hectares; Davao del Norte, 2,070 hectares; Cotabato, 1,180 hectares; and Lanao del Norte, 830 hectares.

Palm oil is a basic ingredient in making soap, cosmetics, ointments, vitamins, and candles, and has plastic and oleo-chemical applications.

Its is used for cooking and baking.

Oil palm trees, which grow up to 30 feet tall and live for 25 years, bear small reddish fruits in large bunches called fresh fruit bunches (FFB).

"Fruiting starts three years from planting. The average weight of FFB is around 25 kilos," said Mercurio.

For A. Brown Energy’s projects, oil palm seedlings will be imported from Thailand and Papua New Guinea while farm inputs such as fertilizer and other inputs will be sourced from local suppliers, Mercurio said.

"We already made our order last August and we order every year. These by the way are germinated seeds. We ordered around 200,000 seeds in 2010. About 100,000 seeds arrived last September 15," he said.

A one-year-old seedling costs around P220.

At present, Philippine demand for palm oil is more than 67,000 metric tons a year and rising sharply, Mercurio said.

"The price of palm oil is getting better. I have noticed that the demand is high but unfortunately the supply is still low," he added.

The major player in the local palm oil industry are Filipinas Palm Plantations Industries Inc., Agusan Plantations Inc. and Kenram Philippines Inc.

The three processors are all located in Mindanao, with an aggregate production capacity of 78 metric tons per hour.