The extraction rate of crude palm oil is one measure that points to how well palm oil producers are managing their businesses. A higher extraction rate, which means the management is extracting more oil from the land under palm tree cultivation, is more indicative of good management than a lower extraction rate. There are different factors that influence a producer’s extraction rate of crude palm oil.
One factor that influences the extraction rate of crude palm oil is the soil that the palm tree grows in. The tree tends to do better in fresh agricultural soil, rather than recycled soil. If the tree is planted on soil that has not been recycled from previous agricultural use, it is likely to lead to a better extraction rate. If the soil has been used to grow other varieties of crops, it is not as good a choice as fresh soil.
Age of Trees and Mills
Oil palm trees that are older tend to result in a lower palm oil extraction rate. Use of older palm oil mills also tends to result in a lower palm oil extraction rate. If older palm oil mills are to yield a higher extraction rate, the producers should upgrade these mills with newer technology.
In Malaysia, a major world producer of palm oil, large-scale producers of palm oil tend to have a higher extraction rate than small-scale producers. According to The Star, a Malaysian newspaper, the bigger plantation groups on the country had an oil palm extraction rate of 21 percent in 2008. Smaller Malaysian producers, who did not engage in tree replanting, had an extraction rate of 18 percent in 2008.
Malaysian Government's Role
The Malaysian government is engaged in an undertaking to hike up the Malaysian industry’s palm oil extraction rate to 23 percent by 2020. With this in mind, the Malaysian government has provided incentives to small-scale producers, who account for about 45 percent of the country’s palm oil production, to replant their unproductive palm trees with better clones, according to The Star.