Home grown: Growth in base crops for domestic use paves the way for exports


A tropical climate, abundant fresh water and vast tracts of land for farming have endowed Sarawak’s agriculture sector with ample resources to achieve sustainability in several staple food categories, including grains, fruits, vegetables and edible oils. While self-sufficiency in rice is still a work in progress, the state’s farmers are now productive enough at growing base crops for the industry to turn towards the more profitable export sector. Increases in productivity and cultivated area in many crops are allowing local goods to supplement agricultural imports and help meet demand as the rising population and GDP fuel new consumption. This in turn has eased pressure on local farms to supply the domestic market, allowing the sector to focus increasingly on more lucrative crops destined for foreign shores.

PALM OIL: As in the rest of the country, the primary cash crop in Sarawak remains palm oil, of which it contributed 3.12m tonnes valued at RM7.35bn ($2.2bn) to international markets in 2013, according to the Department of Statistics Malaysia (DOSM). While the volume of these exports continues to expand as cultivated acreage and production grow, their value has been considerably more volatile over the past five years.

During the first decade of the millennium, global prices for crude palm oil (CPO) surged upwards, spurred on by steady upward pressure on demand, which peaked in 2011, producing Sarawak’s record export figure for CPO – RM8.27bn ($2.5bn), up from RM5.7bn ($1.7bn) in 2010. Those heady days would prove short-lived, however, as the combined effects of relentless plantation expansion and slowing demand due to the financial downturn sent commodity prices into a nosedive – Malaysian palm oil futures fell from $1250 per tonne in February 2011 to $714 by December 2012.

More recently, CPO export demand increased in 2013, and although average prices stayed below the previous year’s, it was on an uptrend from a low of RM2221 ($675.63) per tonne in January to RM2574.50 ($783.16) in December. The rollercoaster pattern of prices reversed once more in 2014, peaking at RM2800 ($851.76) per tonne in March before receding to RM2170 ($660.11) in December, due again to slackening demand.

Some of the blow dealt by softer commodity prices has been cushioned by the sector’s progressive tax structure, which acts as a sort of windfall tax while also encouraging domestic downstream activity. The export duty levied on CPO (though not processed products) follows a graduated scale that is pegged to a basket of average market prices. The tax rate begins at 4.5% when prices reach RM2250 ($684.45), rises to 5% when they hit RM2401 ($730.38) and so on up to a maximum rate of 8.5% when they pass RM3450 ($1049.49). In 2014, since average prices were below the minimum threshold at RM2036 ($619.35) the export duty rate was nil, according to the Malaysian Royal Customs Department.

PEPPER: Another commodity for which Sarawak has become increasingly well known is spices – especially pepper. According to the Malaysia Pepper Board (MPB), the state makes up some 95% of the country’s pepper output, exporting 13,061 tonnes of the stuff in 2013. While this fell shy of the peak of 14,787 tonnes in 2011, soaring prices have caused pepper’s export value to more than double from RM144.81m ($44.1m) in 2009 to a record RM289.86m ($88.2m) in 2013.

Even as acreage increases, global demand has been outstripping supply, causing an ongoing price increase in both black and white pepper varieties. The price per tonne of Kuching Grade 1 white pepper, for example, rose from RM29,000 ($8821.80) at the start of 2014 to RM37,000 ($11,255) by December, while that of black pepper increased from RM19,600 ($5962) to RM27,000 ($8213), according to the MPB.

Looking to further expand this growing sector, the federal government has increased its budget outlay for pepper development to RM29.4m ($8.9m) in 2014, more than double the previous year’s, the MPB told local media. Much of these funds go to farmer assistance programmes such as new planting (or replanting) of unproductive areas, farm expansion projects and maintenance, with a special emphasis on export-quality products such as white creamy pepper. The budget also includes necessary – and often expensive – inputs such as fertiliser and pesticide, as well as technical help for farmers under a planting and maintenance scheme for matured pepper vines. The MPB aims to expand pepper farm acreage from its current 14,000 ha to 20,000 ha by 2020, most of which will be in Sarawak.

Federal programmes and higher prices seem to have created a tailwind for the sector. In the first 10 months of 2014, pepper production reached 11,914 tonnes, surpassing the 10,605 tonnes produced in the same period in 2013. Export values in that span also rose to RM339.43m ($103.3m), compared to RM231.45m ($70.4m) in the same period in 2013.

In all, Sarawak produced 3971 tonnes of spices worth RM22.38m ($6.8m) in 2013, according to the Department of Agriculture. Other key spices were ginger, of which the state produced 2596.1 tonnes worth RM17.91m ($5.4m), and Calamondin limes, with output of 1212.7 tonnes valued at RM3.89m ($1.12m).

FOOD PRODUCTS: One area that commands considerable global demand yet has not been widely discussed as a major export for Sarawak is food. Food exports have shown impressive growth over the past four years, nearly doubling in value from RM510.3m ($155.2m) in 2009 to RM990.1m ($301.2m) in 2013, according to the DOSM. This trend continued into 2014, with the year-to-date figure reaching RM891.7m ($271.3m) by October, well ahead of the RM810.7m ($34m) from the same period in 2013.

Though this trend is encouraging, such rapid growth is due partly to the relatively low base from which it started. Moreover, food exports remain vastly outpaced by food imports, which account for some 10% of the total value of its imports each year, reaching RM3.85bn ($1.2bn) in 2013, up from RM2.62bn ($797m) in 2009. The vast majority of this is rice, of which significant quantities must be imported each year. Although current production levels are unable to meet domestic demand, the government’s emphasis on food self-sufficiency could eventually see Sarawak in a position to export to regional markets like Singapore.

PRODUCE: One bright spot in the near term is fresh produce. Sarawak was Malaysia’s second-largest fruit grower in 2013 behind Johor, cultivating 169,851 tonnes worth RM504.78m ($153.6m), out of a national total of 1.51m tonnes worth RM4.57bn ($1.4bn). The most lucrative fruit grown there in 2013 was durian, with a harvest worth RM194m ($59m), followed by pineapple (RM71.63m, $21.8m), banana (RM61.88m, $18.8m), and rambutan (RM35.90m, $10.9m).

Fruit and vegetable farmers are also set for assistance from the federal government, which allocated RM6bn ($1.8bn) to the Ministry of Agriculture and Agro-Based Industry in the 2015 budget to strengthen the food supply chain. Relevant initiatives include programmes to speed up planting and replanting of fruit trees such as durian, mangosteen, langsat, rambutan, and the introduction of weekly vegetable auctions at 85 trading centres run by the Federal Agricultural Marketing Authority and at selected farmers markets nationwide.