Dealers unsung heroes in palm oil supply chain

FFB dealers are vital as they address the major logistical issue of transporting a steady supply of quality FFBs from the plantations to the mills. — Reuters

WHILE planters and palm oil millers are often seen as key players in the production of crude palm oil (CPO), licensed dealers of oil palm fresh fruit bunches (FFB) are in fact the unsung heroes in the entire palm oil supply chain.

The existence of FFB dealers is vital as they address the major logistical issue of transporting a steady supply of quality FFBs from the plantations to the mills.

To ensure the oil palm sector stays well regulated, the Malaysian Palm Oil Board (MPOB) has strictly imposed the MPOB grading manual which millers need to adopt when receiving the FFB from suppliers, namely the plantations, smallholders and licensed FFB dealers.

Given such a strict grading system, recent claims by some independent millers that FFB dealers have been providing them with low quality or unripe FFB are mostly unfounded.

The quality of the FFB depends on growers, and never with FFB dealers, according to experienced planter Mahbob Abdullah.

Some growers cut unripe bunches because it makes for easier collection without many loose fruits to be picked up. He does not care about the oil extraction rate (OER) as he gets payment earlier.

Some smallholders also do not understand the amount of loss incurred by cutting unripe bunches. The oil is not yet formed fully. Where the grower leaves it to the harvester, a lack of supervision adds to the problem. However, the MPOB is doing a good job providing training to smallholders, but more training and guidance will be needed.

To lay the blame squarely on FFB dealers is also not acceptable as the failure to produce quality CPO owes to a large extent the performance of some independent millers and bad weather. Millers are prohibited from accepting unripe black bunches and are at liberty to reject any FFB which are unripe or poor in quality.

Having said that, it has been a normal and accepted practice for most millers to make a calculated tonnage deduction for less-than- good quality FFB in accordance with the grading manual.

FFB dealers also do not have the luxury of retaining the FFB for a duration of more than 24 hours as millers would and most likely refuse acceptance or make tonnage deductions. 

Suffice to say, the economic repercussions would be gross and extensive to the FFB dealers!

Some independent millers have been observed to operate inefficiently as a result of poor housekeeping, high breakdown duration and a backlog of FFB dumping.

Another point is that millers cannot complain how dealers get their fruits. The dealers will go all out to get volume, and will pay competitively, even to small estates which usually produce higher quality FFB due to better control.

Owners of small estates know dealers can provide a service, and would sell part of their crops to them as diversification helps to maintain their sales channels. In times of high crop yields, the dealers can find buyers when some mills cannot accept any more fruits.

On the whole, perhaps some independent millers have a lot to answer for. This includes the state of the equipment used, management expertise, practices such as blending inferior quality oil with fresh CPO as well as the payment system to dealers and owners.

Are millers paying as promptly as dealers, who also, in many cases, provide loans and advances to independent smallholder so that they can get their supply of fertiliser?

Unripe FFB bunches in the country is said to be losing an extraction rate of about 2% against the 20% achieved now, meaning that one-tenth more oil could have been produced from the FFB needed to produce 17 million tonnes of CPO.

The loss of 1.7 million tonnes of CPO, due to premature harvesting, can be as high as RM4bil a year in sales.

Deputy news editor Hanim Adnan believes the relationship between FFB dealers and palm oil millers is generally harmonious, but that one or two bad hats in the industry could spoil it.


Crop Dealer