Further afield: Rubber, timber, pepper and cocoa are significant export earners

While palm oil has come to dominate the Malaysian plantations sector in recent years, the country is also an important producer of a variety of other plantation crops. Indeed, for many years Malaysia has been one of the world’s leading rubber producers, while the country also has significant timber, cocoa, pepper, jathropa, kenaf (similar to jute, or hemp) and tobacco plantations. All of these make an important contribution to export revenues and to rural employment.

Acreage & Output

Malaysia is the sixth-largest producers of natural rubber, along with Indonesia and Thailand, with this trio providing some 66% of global supply. The hevea brasiliensis tree was brought to the peninsula by British colonial planters in the 19th century. For nearly a century, rubber was the dominant plantation crop in the country, only finally being overtaken by oil palm, in terms of acreage, in 1989.

Figures from the Malaysian Rubber Board (MRB) suggest some 80% of planters grow on plots of up to 2.5 ha. The MRB forecast a total 1.06m ha under rubber cultivation for 2013, divided between smallholders – with 979,860 ha – and estates with 77,410. The total was thought likely to be up slightly from the 1.04m in 2012, but less than the 1.43m ha of the year 2000, with the total in steady decline – largely in favour of oil palm.

The MRB data shows that in 2013 Malaysia produced 826,421 tonnes of natural rubber, comprising 753,472 tonnes of dry rubber and 72,949 tonnes of latex. This was down on 922,798 tonnes in 2012, though roughly similar to production in the year 2000.

Consumption

Natural rubber exports in 2013 stood at 847,090 tonnes, mainly to China and Germany, composed of 813,512 tonnes of dry and 33,578 tonnes of latex – figures which show that domestic consumption of rubber exceeds domestic production. Indeed, in 2013, Malaysia imported 1.004m tonnes of rubber, mainly from Thailand and Vietnam, broken down into 660,186 tonnes of dry and 344,619 tonnes of latex.

This is because of the success of Malaysia’s rubber products industries, with latex consumption hitting 377,981 tonnes in 2013, up from 365,571 tonnes in 2012. Indeed, while in 2013 natural rubber contributed RM7.03bn ($2.2bn) to Malaysia’s total exports – or 0.98% – rubber products contributed RM14.62bn ($4.6bn), or 2.03%. The industry as a whole contributed RM33.73bn ($10.5bn), or 4.69%, with hevea wood products (those made with wood from the hevea brasiliensis rubber tree) contributing RM6.83bn ($2.1bn), or 0.95%. Other products made up the rest. Domestically, latex products accounted for 606,128 tonnes out of the 724,931 tonnes of total rubber consumption in 2013, with rubber gloves the major product. Tyres were the second-largest product range, with 53,226 tonnes.

Challenges

For the plantations sector, rubber has, however, become an increasingly challenging crop as global prices have fallen. This is due to oversupply, with worldwide surpluses near-doubling from 243,000 tonnes in 2011 and 644,000 tonnes in 2013. China, the US, the EU and India are the world’s top-four consumers, with China alone taking 34.9% of the global total in 2013, yet large stockpiles there saw natural rubber futures fall 41.2% in price between 2011 and 2013. Malaysia responded to this glut along with Indonesia and Thailand. Between October 2012 and March 2013 the three agreed to curb exports by 300,000 tonnes, although subsequent agreements have proved hard to reach. The three work through the International Tripartite Rubber Council, which is also looking at a replanting and fresh planting to control future supply.

Global demand rose in 2013, with consumption up 3.3%, according to the International Rubber Study Group (IRSG), with natural rubber consumption up 2.7%. Demand is expected to rise in 2014 as the European and US economies continue to revive, while India expects stronger demand in the year ahead coupled with lower domestic supply, following rain damage to plantations in June-September 2013. The IRSG forecasts a 4.4% hike in rubber demand globally in 2014.

Yet the extent of Chinese growth in 2014 remained a concern as the second quarter of the year began. At that time, these concerns were undercutting a customary seasonal lift in natural rubber prices, when the dry season affects output in Thailand, Indonesia and Malaysia. Nonetheless, the analyst consensus is of stronger demand fortifying prices in 2014, with beneficial effects for growers. The Malaysian government has also signalled that it may step in to support rubber smallholders, who are often more negatively affected by global pricing trends than the larger estates.

According to Salmiah Ahmad, the director-general of MRB, the rubber industry stands to benefit from greater cross-border activities brought on by economic integration in the region. “The liberalisation of trade in the region through elimination of both intra-regional tariffs and non-tariff barriers has contributed towards making local rubber manufacturing more efficient and competitive in the global market,” Ahmad said.

Forestry

The third-largest plantation crop in Malaysia is timber. Previously, timber needs had usually been sourced from natural forest, but with pressure on this growing, in 2005 the government tasked the Ministry of Plantation Industries and Commodities with a major expansion of the area under timber. Some 375,000 ha of new timber plantation was to be created by 2020. Each 25,000 ha would produce 5m cu metres of timber, once established. The Malaysian Timber Industry Board also established a special purpose vehicle, the Forest Plantation Development, to manage a programme of soft loan disbursement for timber plantation firms.

According to the Malaysian Timber Council, in 2001 some 250,000 ha was accounted for by timber plantations, rising to 310,000 ha by 2009, or 1.7% of the country’s forested area. More recent figures were unavailable, with land usage increasingly controversial, while the growth of oil palm plantations has also put pressure on the land bank. The Malaysian Timber Certification Scheme has been in operation since 2001 with the aim of ensuring sustainable practices in forest plantations, and a reliable chain of custody. Rubber wood is a major crop along with faster-growing teak and tropical wood varieties. In January 2014 Malaysia exported RM1.72bn ($536.8m) of timber products. Wooden furniture and plywood made up over RM1.22bn ($380.8m) of this total between them.

Cocoa Revival

Another plantation crop with a distinguished history in Malaysia is cocoa, although this too has become increasingly marginalised in recent times due to the ascension of oil palm. In late 2013, however, the Malaysian Cocoa Board (MCB) announced that it had hopes of a revival due to local production falling short of domestic demand for chocolate. The MCB claimed that some 8000 tonnes of cocoa beans were being produced in Malaysia as of September 2013. New cocoa seed clones were then introduced to the industry, with the hope that these could cut a year off the maturation time of the trees.

Pepper

Pepper is also grown on plantations, particularly in Sarawak. According to the Malaysian Pepper Board (MPB), the peninsula was home to just 200 ha of pepper plantations in April 2014. Some 98% of Malaysia’s 14,000 ha of pepper is in Sarawak, with the state producing most of Malaysia’s 2013 total output of 26,500 tonnes of pepper. These plantations have been enjoying success, as global pepper prices have surged. Global consumption has been rising at a rate of 4.8% per annum between 2001 and 2013, while global production has grown just 0.3% a year over the same period. Pepper has been targeted for further government support – for 2014, the MPB has been allocated twice its 2013 budget of RM14m ($4.4m), with a target to develop a further 785 ha of plantations in the year.

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The Report: Malaysia 2014

Agriculture & Plantations chapter from The Report: Malaysia 2014

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