By Ashley Tang and Bernadette Christina
KUALA LUMPUR, Aug 7 (Reuters) – Palm oil harvests on Southeast Asia’s islands of Borneo and Sumatra are being disrupted as rising prices of fuel and supply shortages force smallholders to cut back on fruit collection, threatening yields of the world’s most widely used edible oil.
Longer harvest disruptions could curb output in top producers Indonesia and Malaysia with an El Nino weather pattern expected to cut rain and dent yields after Malaysian benchmark palm futures have risen more than 15% this year.
The impact on harvesting has been worst in the Malaysian states of Sabah and Sarawak on Borneo, where unsubsidised diesel prices have surged almost 120%, while farmers on Indonesia’s Sumatra have been hit by fuel shortages, industry officials say.
“Financial constraints will make it unviable for smallholders to harvest crops, leading to abandoned fields and a direct decline in state palm oil productivity,” said Napolean R Ningkos of the Sarawak Dayak Oil Palm Planters Association.
Sabah and Sarawak together accounted for 43.9% of Malaysia’s crude palm oil output of 20.28 million metric tons in 2025, making a vital contribution to world supplies of palm, which is used in items from cooking oil to household products.
Sumatra accounts for 55% of Indonesia’s palm oil output, data from the agriculture ministry show.
RUGGED TERRAIN, EXPENSIVE FUEL
The remote locations of Borneo’s sprawling palm plantations make it harder for farmers to gather and transport bunches of the fresh fruit to collection points or mills, officials said.
While Malaysia provides subsidised diesel at 2.10 ringgit per litre, capped at 200 litres a month, the allocation falls well short of farmers’ average operational needs of at least 500 litres a month, said Napolean, the association’s president.
“Farmers have now reduced their harvesting rounds from around 2.5 rounds to 2 rounds to just 1.5 rounds, or one each month,” he added.
“Their journey involves significant fuel consumption. The current diesel subsidy quotas, designed for the relatively flat lands and infrastructure of West Malaysia, are inadequate for Sabah and Sarawak’s rugged interior.”
The concern comes as global fuel prices have risen and supplies tightened since the U.S.-Israel war on Iran broke out in late February.
The prospect of the El Nino in the latter half of the year is another dark spot in the outlook. Severe El Nino conditions in 2015 and 2016 cut palm oil output in Malaysia by up to 18%, while Indonesia’s output dropped by 3%.
HIGHER TRANSPORT, POWER AND MACHINERY COSTS
Raphael Golout, president of the United Sabah Smallholders Association, representing owners of small landholdings, said the greater financial burden stemmed not only from higher transport costs but also bigger expenses on power generators and other machinery.
Napolean and Raphael called for revision of the diesel subsidy policy to better reflect the geographical and economic challenges faced by farmers in Sabah and Sarawak.
The harvesting delays could reduce Sarawak’s yields by 15% to 20%, Napolean said.
In Sumatra, one of Indonesia’s main palm oil hubs, farmers’ operations have been curtailed by tight diesel supplies since mid-July, said Gulat Manurung, the chairman of smallholders’ farm group APKASINDO.
“Farmers’ fruit bunch transportation was affected, as all vehicles and equipment used diesel engines,” he said, a problem resolved with longer harvesting intervals of eight to 12 days from the usual period of eight to 10 days.
(Reporting by Ashley Tang in Kuala Lumpur and Bernadette Christina in Jakarta; Editing by Naveen Thukral and Clarence Fernandez)
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