Impact of increases in fertilizer prices on long term-term economic vialibility of palm oil production
MOHD ARIF SimehSurges in fertilizer prices in recent years have led to a sudden increase in the production cost of fresh fruit bunches (FFB) of oil palm as the share of fertilizer cost in the overall field cost has escalated from 30%-35% in 2007 to as high as 50% in 2008. This phenomenon created concerns among industry members because net revenue from FFB production was cost-squeezed to payback the initial capital outlay and to finance field operations. Increases in fertilizer prices can affect investment viability and the economic attractiveness of oil palm planting and replanting. This article attempts to give an overview of and evaluate the impact of rising fertilizer prices on the long-term viability of palm oil production in Malaysia. Evaluation of various scenarios of fertilizer price increases on investment payback period and on production cost (per hectare and per tonne of FFB), as well as the determination of threshold crude palm oil (CPO) prices for viable cultivation and replanting of oil palm were undertaken using system dynamics – a programmable master schedule known as e-FA (e-Fertilizer Application).
Tags: FERTILIZER, MPOB PUBLICATIONS, PRODUCTION COSTS, PALM OIL-Production, PALM OIL & OIL PALM INDUSTRY-Malaysia, soil fertility
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