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Palm plantation deal highlights Malaysian land premium

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A palm oil plantation deal has highlighted the growing premium in land prices in Malaysia, the second biggest producer of the vegetable oil, to those in top-ranked Indonesia.

Felda Global Ventures, Malaysia's third largest palm oil producer, on Monday announced that it had acquired a number of palm businesses from Golden Land Berhad, another listed producer of the vegetable oil.

The $173.9m deal included 8,478 hectares of oil palm plantations, as well as associated processing and marketing businesses.

One parcel of 836 hectares of mature palm land was sold for $1.9m, or more than $22,744 a hectare.

That is even more than the average for Malaysian palm oil land, of about $19,000 per hectare, according to Edward Hugo of VSA Capital.

In Indonesia, land average about $16,500 a hectare, he said.

Property edges out plantations

Mr Hugo notes that palm oil production is increasingly being squeezed by rising land demand in Malaysia.

"Property is more valuable per hectare than palm oil plantations," he said, adding that it was "increasingly hard to get new plantations of the ground In terms of land available".

"Anything mature that comes up for sale is bought up very quickly," said Mr Hugo.

In fact, palm oil giant MP Evans have already stated a strategy of selling off all Malaysian land holdings, in order to reinvest in Indonesian plantations.

Indonesia to follow Malaysia trends

But Mr Hugo noted that similar dynamics were starting to take hold in Indonesia, as regulation, and a general trend to sustainability, prevents the clearing of virgin forest for oil palm plantations,

Mr Hugo said that growers were increasingly looking to Africa and the Philippines to grow their plantation portfolios.

Felda Global Ventures said on Monday that it has been "aggressively expanding its landbank size" while seeding to improve the ratio of mature plants in its portfolio.

"FGV will continue its efforts in land bank expansion and operational improvement, in order to drive towards its overall strategic priorities," the company said.

The latest acquisition was "consistent with" its business plan, and "improve FGV's age profile of oil palms", the group added.

FGV shares closed down 0.5% at 1.91 ringgit in Kuala Lumpur. Shares in Golden Land, which ended the last session at a 21-year closing high of 1.91 ringgit, were off market.


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