Smallholders Face Mill Intake Risks Amid Palm Oil Glut - Analyst
By Danni Haizal Danial Donald
KUALA LUMPUR, Nov 12 (Bernama) -- Independent smallholders are likely to bear the brunt of Malaysia's rising palm oil stockpiles and weakening prices, as they have little flexibility to delay sales and risk facing stricter palm oil mill intake quotas and fruit rejections, according to an analyst.
Professor Asad Ata, an expert on operations and supply chain management at the Asia School of Business, said that unlike large plantation companies which have their own mills and storage facilities, smallholders must sell their fresh fruit bunches (FFB) soon after harvesting to prevent deterioration in quality.
He said FFB needed to reach mills within a day of harvesting, as delays would cause the free fatty acid (FFA) content to rise, potentially resulting in lower grading and deductions from payments.
“A plantation company with its own mill and storage can hold crude palm oil (CPO) in a tank for a while, at a cost, but a smallholder with three hectares and a lorry coming on Thursday has to sell on Thursday at whatever the dealer offers.
“I have learned that a glut rarely begins with a palm oil mill simply refusing fruit. It usually starts with the mill setting an intake quota, then rejecting more bunches at grading, and only in a really bad year does a mill shut its gates for a few days,” he told Bernama.
According to the Malaysian Palm Oil Board (MPOB), Malaysia’s total palm oil stocks rose by 110,610 tonnes, or 3.15 per cent, to 3.62 million tonnes in October this year from September. Exports surged 55.75 per cent in October 2026 to 1.70 million tonnes from a month earlier.
Although analysts expected palm oil stocks to start easing in the first quarter of next year as production slows, Ata said the immediate concern for smallholders was whether nearby mills would continue accepting their deliveries.
Protect smallholders’ income
He noted that smallholders should also avoid cutting fertiliser application and other essential planting inputs during the current low-price environment, as this could undermine productivity when market conditions improve. "A plantation that goes short of fertiliser this year gives less fruit later, possibly just when prices have recovered. It is worth reviewing inputs with someone who knows the plantation rather than cutting across the board," he added.
He said smallholders should maintain harvesting schedules, ensure ripe bunches were collected on time and work with reliable dealers who had access to several mills to reduce the risk of rejected deliveries.
“The harvest cannot wait for the market anyway, since smallholders cut on schedule whatever is happening outside and it is the collection centre's job to find a mill, and the good ones keep two or three mills in rotation for precisely that reason.
“Thus, in practice one of the most useful protections a smallholder has is the quality of the dealer, and it is worth asking yours how many mills he can deliver to when the usual one goes on quota,” he continued.
Ata also advised smallholders to keep proper records of FFB weights, grading results and deductions, while using MPOB's daily reference prices as a benchmark to assess the prices offered by dealers.
Mechanisation and technology
On longer-term competitiveness, Ata said mechanisation, cooperative arrangements and better access to market information could help smallholders manage costs and strengthen their bargaining power. He added that sharing machinery through cooperatives, contractors or groups of neighbouring farmers would be more economical than purchasing expensive equipment that might remain idle for much of the year.
“For the next few years, mechanisation is mostly around the harvester, cutters, small tractors and grabbers that move bunches from the field to the roadside, and drones that can help with spraying and fertilising where they suit the plantation,” said Ata.
He also urged smallholders to ensure their land mapping records and certification documents are to safeguard access to export markets as international traceability requirements, particularly under the European Union Deforestation Regulation (EUDR), become increasingly stringent. "A plantation with its records in order stands a better chance of having its fruit accepted when mills have to choose between suppliers," he advised.
-- BERNAMA