Felda Acquisition Indicative of Malaysian Palm Oil Land Premium

A recent palm oil plantation deal in Malaysia, the world’s second biggest palm oil producing country after Indonesia, has demonstrated the increasing premium being placed on palm land.

Felda Global Ventures announced it has acquired various palm businesses from vegetable oil producer, Golden Land Berhad for $173.9 million. The deal included the sale of 8,478 hectares of palm plantations, as well as processing and marketing assets.

One 836 hectare parcel of mature palm land sold for $1.9 million, or more than $22,744 per hectare - exceeding the average price of Malaysian palm oil land of $19,000 per hectare, and the average price for Indonesian palm land of $16,500.

This increase in value is being attributed to the tight availability of plantation land in the country. Urban sprawl is squeezing out possible plantation establishment and expansions, resulting in the high demand, climbing prices, and very rapid sale of any mature plantation land when placed up for sale. As a result, plantation owners in Malaysia are beginning to sell off their plantations in the country in order to reinvest in Indonesian plantations.

This trend is proving to not be specific to Malaysia and Indonesia however. Growers in Indonesia are facing similar dynamics, caused by stringent sustainability requirements and land clearing restrictions, causing them to look to reinvesting in production in the Philippines and in Africa.

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