KUALA LUMPUR: The 2025 Budget may see the inclusion of two key proposals on the plantation sector namely a revision on the windfall profit levy on palm oil and additional allocations for palm oil replanting programme.
Public Investment Bank Bhd (PublicInvest Research) said the windfall profit levy was applied on the fresh fruit bunch (FFB) producers when crude palm oil (CPO) prices were RM3,000 per tonne in Peninsular and RM3,500 per tonne in Sabah and Sarawak.
It said the windfall profit levy threshold could rise to RM4,500 per tonne as the cost of producing one tonne of palm oil has surged from RM1,800 to between RM2,800 and RM3,000.
"In-short, the CPO price range of RM3,000-4,000 is now a normal trend in view of the current cost structure," it said. It added Malaysia's Palm Oil Association estimated that 664,000 hectares or about 12 per cent of the nation's planted area is in the age group of 25 years and above, and subject to replanting.
It is projected that over a third of the planted area could be classified as old by 2027 and far from revisiting the national long-term average FFB yield of 18 million tonne level if there is no prompt action taken in the near-term.
"Currently, there are about 1.5 million hectares of oil palm plantations managed by smallholders, which make up 26.4 per cent of the total planted area in Malaysia. "Based on the estimated replanting cost of RM20,000 per hectare, the total cost involved for the entire old oil palm area would be approximately RM13 billion. Assuming 175,296 hectares (26.4 per cent of 664,000 hectares) of the nation's old oil palm area belonging to the smallholders would require at least RM3.5 billion to fully replant," it noted.
Meanwhile, it was reported that the European Commission has suggested a 12-month delay tothe implementation of European Union Deforestation Regulation that is aimed at curbing deforestation-linked commodities.
The firm believes it is a huge relief for the global vegetable oil markets.It maintained a "Neutral" call on the sector with a full year CPO forecast of RM3,800 per tonne.