Simulation of financial profitability and sensitivity analysis of oil palm production in Malaysia / Mohd Saiful Ikhwan Halim

The production cost of oil palm has increased dramatically, however the price of Fresh Fruit Bunch (FFB) have not risen that much. Thus, this research have been carried out to know the latest production cost of oil palm in Malaysia. This research is a qualitative research and the information on oil palm production cost was collected from literature review of previous study. Meanwhile, the price of FFB that have been used in cash flow is based on the average price of FFB by MPOB in May 2019. This research uses sensitivity analysis to value the potential of oil palm production. The result show that the NPV value is RM5030.9. IRR value is 13.48%, ROI is 35% and payback period is 8 years 10 months. This analysis have used discounted rate 10% and the FFB price is RM391/ton consistence over 25 years. Based on this study, establishing an oil palm plantation seems to be not very profitable investment on the basis of the assumptions made compared to 2013. It is because the cost of operation are increase every years and the FFB price are very low. This paper could help future farmers to make decisions weather to cultivate oil palm or other crops on their lands. This paper also prepare the latest information about the production cost of oil palm.