Special feature: A look into Bohol’s oil palm industry

CEBU, Philippines - About 6,500 hectares of land in the province of Bohol is  planted with oil palms, bringing in an estimated P5 billion income a year.

But what was supposed to be a thriving industry is no longer so because at least 80 percent of oil palm growers, members of the Stakeholders Convergence on Oil Palm Industry (SCOOPI), have ceased operations because of bankruptcy.

SCOOPI president Engr. Romeo Cabading blames the “excessive”, “usurious” and “anti-poor” contract between the farmers and the palm fruit buyer, the Philippine Agricultural Land Development and Mills Incorporated (PALM, Inc.) for the failure of the industry in Bohol.

“Failure ang industry as of now because only 2,000 hectares out of the 6,500 is producing, and this is because the farmers could no longer pay for the loans due to excessive and usurious loan interests, mao na’ng moresulta mabangkarote nalang sila,” said Cabading.

“In general, if the oil palm industry is successful, nindot unta ni for Bohol because this is a P5-billion-per-year industry,” he said. Cabading explained that a one hectare oil palm farm can produce 10 tons of fresh fruits a year, and for every five tons of fruits, a ton of crude oil can be produced. Palm oil is a raw material for cooking oil. And the palm oil from Bohol, the crude produce, is exported to Pakistan and Malaysia where it is processed to become one of the world’s expensive oil, he added.

The issues

The 2,500 SCOOPI members from all over Bohol are crying foul over the 14 percent per annum existing interest rate imposed on their loan by PALM, Inc. Cabading said that because of this “very high” interest, there is very little left or none at all to the farmers that most of them were forced to stop operating altogether.

Eighty percent of oil palm growers rely on loans while the remaining 20 percent are considered big-time oil palm growers who do not rely on financing institutions.

“The existing interest rate of 14 percent per annum is very high, considering the very low current banking rates. Being an agricultural loan in nature, rates should be lower than commercial rates,” he said.

Another issue that oil palm farmers are faced is that PALM, Inc. does not give cash and instead provides growers with farm inputs like fertilizers.

“Growers are charged 14 percent per annum on farm inputs bought on credit from Palm, Inc. This should not be allowed. We must accept at this point in time that oil palm is not suitable to the soil conditions of Bohol. Massive intervention is needed in order for the tree to produce fruits. Therefore, the company should supply inputs at subsidized rates or even free fertilizers if they want the industry to be successful in Bohol,” SCOOPI, in a position paper, said.

Also, Cabading said that it might be impossible for growers to pay their monthly amortization, especially if their farms are still undergoing rehabilitation. With this, SCOOPI appealed last July that all proceeds from the farms being rehabilitated will go for rehabilitation and not for loan amortizations. This is still, however, being studied.

SCOOPI requested, during its regular meeting last July 25 in Tagbilaran City, to lower the rate by 50 percent, but Malaysian national Lim Chan Lok, PALM Inc.’s chief executive officer, only promised to give them eight percent. Cabading said SCOOPI welcomed the lower interest rate but Lok did not say when this would take effect. The interest rates imposed on oil palm growers in Bohol remains at 14 percent as of this writing.

Cabading, who became president of SCOOPI two years ago, said he had no idea of the “anti-poor” memorandum of agreement entered into between his group and PALM, Inc., the exclusive buyer of their oil palm fruits, until he learned that only 20 percent of the total oil palm farm land in Bohol is actually producing fruits. And the reason can be traced to bankruptcy, he said. Cabading shared that he asked for a copy of the MOA so their lawyers can look into it and Lok has yet to give him one.

The SCOOPI president said that for the past years, farmers were just borrowing money from PALM, Inc. not caring if they could pay the loan and its interests within the period given to them. Cabading said that once a farmer could not pay for his loan, PALM, Inc. stops giving him fertilizer. Cabading, who owns and operates 25 hectares of oil palm farm, said oil palms have to be given fertilizer for it to grow fruits, without fertilizer the whole farm becomes useless.

Another problem faced by oil palm farmers in Bohol is the low buying price of fresh fruits compared to their counterparts in Augusan, in Mindanao. Cabading said the buying price today is P3.80/kilo (this was P8 in Sept 2008, but dropped to P2 in October of the same year because of the recession in the USA, and climbed a little higher again in July this year at P3.80). In Mindanao, however, the price is P4.30 per kilo, which is a difference of P.50 from Bohol’s P3.80.

In last July’s meeting, Cabading asked why PALM, Inc. could not give them a similar price, only to be told by Lok that there is an existing “marketing agreement” on that. Cabading said the P3.80 is just too small for them especially that they have to pay for the harvesters and farm inputs. SCOOPI appealed that they should also have the same price with Agusan. Lok told them PALM, Inc. will look into it. As of this writing, the price was still at P3.80.

It has also baffled SCOOPI they have to shoulder the cost of transporting the fresh fruits from Bohol to Nasipit where the goods will be joined by the harvests from Agusan.

“This issue is rather new, and not incorporated in the FFB (fresh fruit bundle) pricing formula as originally presented by Palm, Inc. and as agreed. The growers are demanding for the removal of these extra charges. Further a refund shall be made starting when the charges were actually implemented unilaterally,” SCOOPI said in its position.

Also, SCOOPI has asked Palm, Inc. to pay them not later than  15 days after the harvest period to cover expenses for harvesting, trucking and other related expenses. Cabading said that at present, it usually takes three to four months before farmers get their payment. Lok reportedly told them that since the produce from Bohol growers could not fill a cargo ship, Palm, Inc. has to wait at least three months to fill a ship to the brim before the ship is allowed to go to Nasipit. And it is only after all the goods, from Bohol and Agusan, are delivered to specific areas that the growers are given their payments.

Cabading said since there is no competition, PALM, Inc. remains the sole buyer of their harvests, which means they could not demand.

The SCOOPI president is, however, thankful that the Bohol provincial government is supporting their cause by sending its consultants during their July meeting with PALM, Inc. to help both parties arrive at a win-win solution. Cabading said they are willing to sit down again with PALM, Inc. to resolve their issues, so that oil palm growers will truly benefit from the agreement, and also, so that the entire 6,500 hectares will once again produce fruits to sustain the industry.

“That’s P5 billion unta. Imagine the multiplying effect on the economy if it were the case,” said Cabading. — /QSB (FREEMAN)