Palm Oil Industry in China Faces Labor Cost Challenges

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Palm oil fruit. Photo by: Sawit Fest 2021 / Eko Taufik Wirawan

PALMOILMAGAZINE, JAKARTA – Robert Hii, a palm oil industry observer and founder of the independent website CSPO Watch, emphasized the cost factor associated with palm oil cultivation. He noted that while palm oil is recognized as a viable crop for development in China, Malaysia and Indonesia have not shown significant interest. The challenges, such as workers’ wages, remain largely unaddressed, though solutions are possible.

“Other writers often describe palm oil as a cheap oil, but this is misleading. Palm oil can be more productive regionally compared to soybean or rapeseed oil. It’s a labor-intensive crop, yet this is not reflected in its global price,” Robert stated, as quoted by Chinadialogue.

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He also pointed out that soybean and rapeseed can be planted and harvested by machines, whereas palm oil requires manual cultivation. Fresh fruit bunches (FFB), weighing over 20 kilograms, must be harvested and transported manually. Robert interviewed many workers who suffer from kyphosis—a spinal deformity caused by heavy physical labor. The only other vegetable oil with similar cultivation demands is olive oil, where the extra labor cost is reflected in its price.

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The palm oil sector in Southeast Asia relies heavily on low-wage labor. According to a 2020 report on fair wages in the Indonesian palm oil sector by the Earthworm Foundation, harvesters earn an average of Rp 120,000 per day (about 54 yuan or US$ 8.50) if they can harvest 1.2 tons of FFB per day. However, not every harvester can meet this target.

Palm oil plantation in Malaysia depends on migrant workers from Indonesia. They got their salary about RM 1.100 per month or 1.675 yuan or US$ 262 in 2019 and increased to be RM 1.200 in 2020.

Knowing that there is no palm oil industry in China, rubber industry can be the comparison. Chief of Palm Oil Development Group at Rubber Research Institution from Tropical Agriculture Science Academy China, Zeng Xianhai said, rubber workers in Hainan and Yunnan got 3.000 – 4.000 yuan per month or about 4.000 – 5.000 in private rubber plantation.

Zeng and Lin Weifu agreed that China is not ready to develop palm oil plantation massively. It gets lots of pressure to develop the plantation at the scale 10.000 mu (667 hectares) to get profits.

In China, the land is cultivated in smaller parts. It will spend much to get transfer of usufructuary. It is difficult to develop big scale plantations. Rubber expert, Lin Weifu said, market prospect of new Re-you 6 (palm oil seed) is difficult to know because there is no cost estimation without big scale mill where there is no operating still in China. For now, they only did was just laboratory test.

Lin mentioned that it was a dilemma. If they kept planting palm oil, the first planting would be harvested in the two or three years to go without pressure to extract palm oil. If there was a company to produce machine (to process palm oil), it was impossible because there was no supply for them. Actually, there had been companies discussing with researcher team to cooperate in reducing palm oil import. But they were not interesting for realizing the massive numbers of investment and the planting to do. “He thought, the next expansion would continue after production test done in small scale and other infrastructures would be prepared and ready,” Lin said.

Discussing about costs, Zeng Xianhai said China could not directly compete to price but needed to differentiate the country with other producers. This would need unique variety. He suggested ‘Re-you 40’ as the sample. Its characteristic is that the oil is less than 30% of saturated and unsaturated fat, it is 50% smaller than common palm oil. This could help to minimize cardiovascular disease risk.

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