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RPCs pave new paths to profitability through oil palm diversification

7 June 2017 10:48 am - 0     - {{hitsCtrl.values.hits}}

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Under the management of the Sri Lankan regional plantation companies (RPCs), the domestic plantation sector has been able to achieve important progress towards the diversification of its traditional mix of cash crops. With a view to promoting greater awareness of these important advancements in crop diversification, a media tour was organised by Elpitiya Plantations PLC of Talgaswala Estate, a low-country plantation situated in close proximity to Galle, which is the site of one of the island’s most successful oil palm plantations. 


Internationally, palm oil remains a ubiquitous part of modern life, being commonly utilized as primary ingredient in food, soaps, cosmetics, candles, biofuel, animal feed and many other consumer products. While approximately 64.5 million tonnes of palm oil were produced globally in 2016, the demand for the commodity has outpaced global production.   


The first efforts towards the establishment of the very first oil palm plantations in Sri Lanka were carried out by Carson Cumberbatch in the 1960s, before subsequently coming under the management of Watawala Plantations PLC, currently the largest oil palm cultivator in the country with approximately 3,157 hectares under cultivation under a diversification effort that began over a decade ago.


Following in these pioneering footsteps, several other RPCs have since entered the sector. Namunukula Plantations PLC manages an extent of 2,020 hectares of oil palm under cultivation, followed by Elpitiya Plantations PLC with 1,571 hectares and Agalawatte Plantations PLC with 1,294 hectares at the start of the current financial year. Together, these top three producers also operate an oil palm processing plant as a highly successful joint venture.   


Meanwhile, Kegalle Plantations PLC is planning to plant 1,125 acres of oil palm in its current rubber fields, while Bogawantalawa Tea Estates PLC has also announced its intentions to plant 700 hectares of oil palm in the near future.


Among these prominent RPC diversifications into the oil palm industry is Elpitiya Plantations PLC. Managed by the Aitken Spence group since 1997, the company’s seven low elevation estates have undergone a strategic realignment following a more concerted diversification into oil palm cultivation that expands on the preliminary oil palm crop established in Sri Lanka during the 1960s.  


At the forefront of Elpitiya Plantations PLC’s diversification into oil palm is General Manager Low Country A.G. Geethkumara. Holding over 26 years of experience in the plantation sector, Geethkumara is a veteran of the industry who possesses extensive academic qualifications in agriculture and plantation management. 


“Oil palm is an extremely valuable crop that is highly prized on international markets due to the sheer variety of applications for the oil it produces. While demand for oil palm is already extremely high, consumers are becoming increasingly aware of the environmental impact of irresponsible oil palm cultivation, they are also more willing to pay a premium for sustainably cultivated alternatives and this is an area which we are confident that Sri Lankan RPCs can tap into, given the exemplary and extremely stringent environmental conservation standards in place within the RPC sector.”


While acknowledging the difficulties arising from a lack of proper awareness on oil palm cultivation – which is approximately similar in terms of resource consumption and environmental impact to coconut and rubber -  Geethkumara reiterated the vast potential that oil palm holds for Sri Lanka’s tightly regulated plantation sector. 


“At present there is almost no evidence whatsoever to show that oil palm is in-and-of-itself, detrimental to the environment and these findings are based on extensive research over an extended period of time across globe. In fact most of the resistance to oil palm cultivation stems more from a reluctance to adapt mindsets than it does with the actual physical properties of oil palm. But here too, attitudes are changing very quickly, and within our own plantations, we’ve had no real issues with oil palm and this too is because our employees themselves are strongly in favour of oil palm cultivation. Simply put, it requires less labour to earn substantially more per harvest than any of the other major cash crops,” he elaborated. 


This view has been supported by scientific research which has proved that the effect of oil palm cultivation on water tables is largely similar to that of rubber or tea, even reducing transpiration rates during drought periods of approximately 40-60mm during dry months, which is largely similar to the rates seen in rubber.  

 


Competitive advantages
“The truth of the matter is that oil palm is an extremely valuable crop that requires approximately the same amount of resources as rubber or coconut to produce in terms of rainfall and slightly more fertilizer. In that regard, these trees are not substantially different in any way from other plantation crops, except in so far as they have the potential to drastically improve the earnings capacity of the plantation sector. 


“The fact that Sri Lanka has such strict regulations in place around the plantation industry, both through our statutory obligations and through voluntary binding standards imposed on the companies as part of securing the numerous international certifications which Sri Lankan regional plantation companies (RPCs) have set international benchmarks in,” Geethkumara stated.


With over 452.4 hectares of oil palm under cultivation out of a total of 1,033 hectares, at Talgaswella estate alone - Elpitiya Plantations has made significant headway into the country’s burgeoning oil palm industry and the results of this strategic shift are proving to be highly beneficial to the company and the wider plantation industry.


The field level cost of production is only about Rs.20/Kg of fresh fruit bunches (FFB) as against a selling price of approximately Rs.40, enabling massive profit margins for sustainable producers like Elpitiya Plantations.  


“Oil palm requires far less labour to harvest and the harvesting work is less frequent and less intensive than what is required to maintain our tea plantations. These factors align extremely well with the current trends in our industry, at a time when labour shortages are a serious challenge. 
“Given this fact we are able to gather significantly greater value out of each harvest since 25 percent of the total weight is oil. Hence, this crop stands as one of the most promising options for crop diversification in Sri Lanka,” Geethkumara explained.


Elpitiya Plantation’s Talgaswela estate stands as one of the company’s most successful multi-crop plantations. The estate is primarily comprised of oil palm which covers 452.40 hectares, followed by 130.98 hectares of rubber, 24.72 hectares of tea, 10.59 hectares of coconut, 4 hectares of cinnamon and 0.4 hectares of banana. In total, Elpitiya Plantations manages low-country plantations in the extent of 5,059 hectares.  


In addition to its substantial primary produce, the plantation is also working to build up a large supply of herbs, including over 124 species of indigenous herbs. Meanwhile, the company has also conducted extensive training programmes for cinnamon peelers, which has enabled workers to further supplement their income with a less physically intensive form of work that requires a higher degree of skill and therefore provides better opportunities to grow their incomes. 
Moving forward, Geethkumara stated that the company plans to further develop its capacity for oil palm production through the replacement of older rubber trees with oil palm, a process that is already underway. Similarly, the company’s award-winning welfare initiatives are also anticipated to be further expanded, with a particular focus on education. 
“Ultimately, what is required for the plantation industry to prosper is a well-rounded strategy that covers all aspects of the business. While oil palm is the most promising diversification open to us, we will also look to develop other cash crops and improve our own capacities to harvest them, all the while providing the best possible care and support to our employees. We are confident this is a strategy that will yield positive results for the company and for the plantation industry moving forward.” Geethkumara asserted.

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