Palm oil firms turn to new technologies as labour crunch persists

Singapore

THE palm oil industry is grappling with an issue that predates the virus pandemic: A labour shortage. To cope, companies are investing in new technologies that will allow them to reduce their manpower requirements.

On July 20, the Malaysian Palm Oil Association (MPOA) warned that the worsening manpower shortage that could see Malaysia lose up to 25 per cent of its potential palm oil yield.

MPOA's chief executive Nageeb Wahab said that prior to the pandemic, the industry was already short of some 36,000 workers. As countries have now shuttered their borders to curb the spread of the virus, the industry is now facing a dearth of workers - which could delay palm fruit harvesting and halt oil output.

Singapore-listed palm oil plantation owner Golden Agri-Resources said that although it has not seen a "significant decrease" in job applicants, the industry's available external talent pool has "increasingly become more limited."

The company's recent internal research survey found that only five per cent of participants expressed an interest in taking an agriculture major in university.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Meanwhile, oil palm giant Wilmar International also said the "greatest challenge" for the industry going forward is adequate manpower. According to the company, the palm oil industry is "highly dependent on manual labour".

Prior to the pandemic, Wilmar was able to actively recruit workers to replace those who had either left or been repatriated. With the inability to do so now, Wilmar is bracing for the worse as its foreign workers may choose not to return.

"The current freeze on labour recruitment and closing of the borders due to Covid-19 will have further detrimental effects on the industry," said Wilmar.

"We foresee tighter government controls in the recruitment of foreign labour making the process more laborious, lengthy and time consuming."

Covid-19 has "put more pressure" on a sector that has already been struggling to garner interest from the younger generation, said DBS analyst William Simadiputra.

As South-east Asian countries grow more affluent, there are more job opportunities available - many of them in more comfortable, urban environments.

Nirgunan Tiruchelvam, head of consumer sector equity research at Tellimer, said there are now fewer people in the "relevant age group and socio-economic background" who can match the palm oil industry's demands.

Urbanisation, too, has impacted the availability of labour. Wilmar pointed out that a "large number" of Malaysia's rural workforce have moved to urban areas or cities to seek employment opportunities.

Both Golden and Wilmar told BT that they have no immediate concerns about their workforce, as they are currently operating at 95 to 96 per cent of their desired workforce sizes for plantation operations.

They are, however, mindful of how long term labour shortage issues could adversely impact production and productivity.

Wilmar has been making improvements in its field designs during replantings, to cater for future mechanisation. Such improvements include constructing wider terraces and building harvesting paths. This allows for mechanised fertiliser application and mechanised in-field fresh fruit bunch evacuation.

The company is also using drones for monitoring and mapping purposes, and handheld devices to conduct quality checks and monitor operations and activities.

Golden-Agri is making similar moves. In its 2019 annual report, the company said that newer replanted estates are developed using the latest techniques and higher yielding planting materials and are designed to accommodate infrastructure necessary for in-field fertilising and harvesting mechanisation.

In responses provided to The Business Times, the company said it remains committed to providing enough employment "for the community surrounding our plantations". When it gets more difficult to hire, the company will move towards greater mechanisation.

Bumitama Agri, meanwhile, said in its 2019 annual report that it recognises the need to optimise yield and increase extraction rate. It is looking into yield enhancement, productivity and automation initiatives.

At First Resources, the number of contracted workers has fallen from 4,031 in 2018 to 2,591 in 2019. Apart from "tough" conditions and lower productions, the company attributed the decrease to the mechanisation of some of its field activities.

The company also said it had adopted practices such as customised fertilisation and replanting with its own higher-yielding planting materials to boost yields and reduce reliance on manual labour.