The use of Laran and Binuang for forest plantations and intercropping with oil palm in Sabah

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1 Sepilok Bulletin 3: 1-13 (25) The use of Laran and Binuang for forest plantations and intercropping with oil palm in Sabah Y.F. Lee', F.R. Chia, M. Anuar, R.C. Ong & M. Ajik Forest Research Centre, Sabah Forestry Department, P.O. Box 147, 9715 Sandakan, Sabah, Malaysia. *Author for correspondence Abstract. The feasibility of using Laran (Neolamarckia cadamba) and Binuang (Octomeles sumatrana) for monoculture plantations and intercropping with oil palm is discussed. Financial analysis of Laran and Binuang plantations gives a high internal rate of return of 12 to 29%. Plantations of Laran and Binuang are recommended in areas devoid of regeneration of timber species in commercial forest reserves, and on sites where other crops cannot be grown due to pest and disease infestation. The results of a study on the canopy opening of oil palm plantations show that interplanting Laran and Binuang with oil palm is highly feasible. This agroforestry system capitalises on the unutilised sunlight during the early growth of the oil palm before canopy closure which occurs at the age of about 8 to 1 years. Introduction of the timber species in oil palm plantations is expected to incur minimal costs and could yield about RM 19,8 worth of timber per hectare in 1 to 12 years. Planting timber trees within oil palm plantation is also an insurance against risks of low price of palm oil and outbreaks of pests and diseases. If oil palm becomes less productive for these and other reasons, the land is still used for timber production. Laran and Binuang are common indigenous species which are considered favourable from the environment point of view. If it is decided to keep both timber trees and oil palm at all times, the number of planting points of oil palm needs to be reduced. Keywords: agroforestry, financial analysis, intercropping, Neolamarckia cadamba, Octomeles sumatrana, oil palm, plantation INTRODUCTION For the past century, dipterocarps have been the mainstay of the timber industry in Sabah. The supply of dipterocarps and other widely used commercial timbers, however, has decreased drastically in recent years owing to over-harvesting practised in the natural forests. Moreover, most indigenous dipterocarps and other commercial timber species grow rather slowly. As a result, no plantation of these species of significant scale has been established in Sabah. 1

2 At least partly in response to the shortage of common commercial timbers, including dipterocarps, and with the advancement of timber utilisation technology introduced recently to Sabah, two indigenous fast-growing commercial timber species, Laran (Neolamarckia cadamba or Anthocephalus chinensis) and Binuang (Octomeles sumatrana) have been used as substitutes for the light hardwood dipterocarps (particularly Seraya and Urat Mata from Shorea and Parashorea genera respectively). Early plantation trials of these two species by the Sabah Forestry Department have shown that they can grow reasonably well. However, these trial plots were established at a narrow spacing (typically 3 m x 3 m) and were not thinned. When the Sabah State Government began to promote large-scale forest plantation programmes in mid-197s and early 198s, these two species were not selected because, being heavy light-demanders planted at narrow spacing, they had been out-performed by exotic species such as Acacia mangium, Falcataria moluccana and Gmelina arborea. In the last decade or so, the potential of Laran and Binuang was rediscovered. An estateowner in Tawau has made profit from plantation of Binuang (R. Tan, pers. comm.). Visionary investors, such as TSH Forestry Sdn. Bhd. and Syarikat Ladang LAK Sdn. Bhd., have planted significant areas of Laran and Binuang. Methods for storage and handling of the seeds of these two species have been worked out; hence supply of planting materials can be assured (R. Chong, pers. comm.). Recognising the commercial importance of these two species, the Sabah Forest Research Centre initiated a breeding programme on them in 21. Early growth of Laran surpasses that of Sentang and Acacia mangium (Ajik 25). In the Segaliud Lokan Forest Reserve (managed by KTS Plantation Sdn. Bhd.), Binuang of good seed sources could reach over 1.5 m in height at the age of 6 months (Ajik, unpublished data). These two species produce very valuable timber. Though these two timber species are not durable in outdoor conditions, they are much sought after for such high end-uses as panels and face veneer. This paper presents the financial analysis of plantations of these two species, and based on prevailing economic circumstances and technical considerations, explores the feasibility of using them for intercropping with oil palm during the first half of the rotation (25 years) of this agricultural crop in Sabah. FINANCIAL ANALYSIS OF MONOCULTURE PLANTATIONS Table 1 gives the assumptions used in this analysis. Table 2 shows the results of the analysis. The following can be deduced from this analysis: The internal rate of return (IRR) is about 12-29% in different scenarios. Net present value (NPV) at a discount rate of 9% is positive in all scenarios. In a normal forest, the earning is RM14,9 to 7,6 per hectare. 2

3 Table 1. Assumptions used in financial analysis of Laran/Binuang plantations. General Scenario Land is free; initial spacing is 5 m x 5 m; rotation is 12 years; plantation in typical lowlands of Sabah; growth rate of plantation is not adversely affected by abnormal conditions; price of log at mill gate (Pm) is RM25-35 per m3, harvesting and transportation cost is RM1-15 per m3 (Ch), stumpage price = Pm Ch; royalty rate is RM1 per m3 of logs. Area (ha) Development cost per ha (RM) Annual maintenance cost (RM/ha) Yield after 12 years (m3/ha) Stumpage Price (RM/m3) 1 Higher cost + lower timber price 2 Base + lower timber price 3 Base + higher cost Base Base + higher timber price 6 Base + higher yield Higher timber price + higher yield Table 2. Financial analysis of Laran/Binuang plantations (assumptions in Table 1). Year Cash Flow Year 1 to 11, cash flow per year 12 Total Investment Net Cash flow in 12 years NPV 9% IRR (%) Income RM/ha (in 12 years) Scenario Scenario Scenario Scenario 4 (base) Scenario Scenario Scenario Benefits of plantations of Laran and Binuang The profitability of planting Laran and Binuang, as shown in the financial analysis, is comparable to, if not better than, that of oil palm which is the main agricultural crop planted in Sabah. In addition to the attractive rate of return, the following benefits also accrue from plantations of these two indigenous species: 3

4 Plantations of Laran and Binuang will supply reasonably good quality logs for the timber industry in Sabah which is facing serious shortage of raw materials (Abi & Lim 25); the problem of shortage of timber is expected to be more acute in the future as no effective step has been taken to replenish the timber resource in Sabah. Timber plantation is less labour-intensive compared with agricultural crops like oil palm and cocoa; if more timber plantations are established instead of plantations of agricultural crops, reliance on foreign labour will be reduced. The price of these two timber species per unit of biomass harvested is very high; assuming a density of 4 kg per m3 and a price of RM32 per m3, the price is RM8 per tonne of logs of these two species; fresh fruit bunches of oil palm have never fetched such a high price. Laran and Binuang are indigenous species which are more environmentally friendly than exotics. Problems associated with long gestation period The potential problems associated with long gestation periods of about 12 years are as follows: Cash flow is a major stumbling block for most planters; only cash-rich investors can afford to wait for a long time for positive cash flow. From the time of planting to harvesting, timber plantation is exposed to risks of damage by pests, diseases and fire and other problems that may occur; if any of these problems crop up before the trees are big enough to fetch a good price, the loss will be very substantial. Early positive cash flow in the case of agricultural crops like oil palm reduces such risks. Despite these problems, in commercial forest reserves which are managed primarily for timber production, planting Laran and Binuang is still an attractive option in areas devoid of regeneration of timber species. Planting of Laran and Binuang on sites where other crops cannot be grown due to pest and disease infestation is also an option for planters to consider seriously. On land earmarked for industrial plantations of perennial crops, intercropping of Laran and Binuang with crops which generate early positive cash flow is a recommended agroforestry system. Such a system involving intercropping with oil palm is described in the subsequent sections of this paper. Background INTERPLANTING BINUANG AND LARAN WITH OIL PALM Intercropping of oil palm with other crops, e.g. rubber, teak, Sentang, has been investi gated by many researchers as reported by Mohd Noor (21). However, so far no intercropping system has been adopted on an operational scale. The rejection of introduction of timber trees to oil palm plantations by planters is usually due to one or more of the reasons given in Box 1. 4

5 Box 1. Arguments against introduction of timber trees in oil palm plantations (i) Management of mixed plantation is more complicated and technically more difficult because it is necessary to tend two crops instead of one; workers need to be trained to grow timber trees. Harvesting of the timber trees is difficult when it is necessary to minimise damage to the oil palm. The rotation of the timber trees (e.g. teak and Sentang) intercropped with oil palm is too long (25 years or longer). Most pragmatic and risk-averse planters are more interested in the yearly positive cash flow than the revenue from timber that can only be realised decades later. Moreover, competition for light (particularly after closure of the oil palm canopy) and nutrients reduces production of fresh fruit bunches (1113) to an unacceptable level. (iii) Timber supply from the natural forest has been abundant until recently; hence timber price was not high enough to financially justify intercropping. (iv) Techniques of cultivation and harvesting and marketing of timber species are not familiar to many planters. (v) Planters have generally been satisfied with the profit from the monoculture oil palm plantation for the past decade because the price of FFB has been generally sufficiently high, and no significant natural disaster (such as drought, flood or outbreak of pest and disease) has occurred. Experiment on intercropping of timber species with oil palm in Sungai Daling, Beluran Chia et al. (24) have reported the early results of a trial on intercropping of oil palm with rubber, teak and Sentang. This experiment, which is still being assessed, shows no decrease in the yield of fresh fruit bunches (FFB) of oil palm in intercropped plots at the age of 6 years for plots with a density of timber trees and 138 palms per hectare (Chia, unpublished data). This result may be extrapolated to deduce that at the age of about 8-1 years (at which the palm canopy begins to close), the yield of FFB will not be reduced by the introduction of timber trees, and will only decrease slightly at the age of 1-12 years. To obtain supporting data for this hypothesis, a survey on the canopy cover of oil palm plantations of different age classes was carried out. Measurement of canopy cover of oil palm plantations Blocks of different age classes of oil palm plantations of IJM Plantations Bhd. in Beluran were selected for this study. The canopy opening at the centre of the standard planting triangle/ rectangle/square, or the edge of oil palm crown, was measured by using a spherical densiometer. Ten measurements were taken for each age class. The canopy opening of the plots in Sungai Daling reported by Chia et al. (24) was also measured. The results of this study are shown in Table 3. Figure 1 depicts the results for the monoculture of oil palm. 5

6 Table 3. Canopy opening of oil palm plantations of different age classes. Canopy openkig % (standard deviation) Age class (years) 6-year-old oil palm intercropped with Rubber Teak Sentang 1 () 1 () 24 (13) 22 (16) 8 (2) 3 (2) () 2 (3) 4 (3) 4 (6) 12 Canopy opening Age of oil palm plantation (years) Figure 1. Canopy opening of progressively older oil palm plantations. This study on canopy opening of oil palm plantations supports the hypothesis stated earlier that at the age of about 8-1 years (when the palm canopy begins to close), the yield of FFB will not be reduced by the introduction of timber trees, and will only decrease slightly at the age of 12 years. Recommended layout and spacing of oil palm and Laran/Binuang Based on the results of the survey on the canopy opening of oil palm plantation, we suggest that in the intercropping of oil palm with Laran and Binuang, the standard spacing of 9 m x 9 m (triangular spacing, giving a density of about 135 palms per hectare) be maintained. In addition to the palms, a row of timber trees is planted roughly at the centre of each of the triangle formed by the palms. This gives a planting density of 135 trees per hectare for both oil palm and timber species. Assuming that 11 timber trees reach maturity in 1-12 years, the volume of timber is 1.2 m3/tree, and the stumpage price of timber is RM15/m3, the yield of timber at maturity is shown in Table 4. 6

7 Table 4. Projected yield of Laran/Binuang per hectare at the age of 1-12 years. No. of timber trees reaching maturity 11 Volume of timber = 1.2m3/tree x 11 trees Stumpage value of timber = RM15/m3 x 132 m3 132 m3 RM19,8 The projected revenue of RM19,8 per hectare can be considered a "bonus" for the oil palm grower whose management of the timber crop should incur minimum costs (the most significant of which is that of planting materials) after planting, because tending of the timber trees is almost automatically taken care of when the palm trees are tended. To quantify the yield of Laran/Binuang interplanted with oil palm, an experiment to study the yield of these crops planted at different spacing and layout was initiated recently by the Sabah Forest Research Centre. More arguments for intercropping Laran/Binuang with oil palm Apart from the attractive financial return from interplanting Laran and Binuang with oil palm indicated in Table 4, the benefits of mixed planting are as follows: Better use of resources at the site, especially with respect to sunlight, can be achieved. Better utilisation of sunlight and other resources by intercropping timber trees prior to canopy closure of oil palm plantation has a similar effect to that of rearing cattle in young oil palm plantations (Zainuddin et al. 2). However, in contrast to rearing cattle or goats which feed on palm fronds and can only be introduced after the palm stems are high enough (about 5 years), planting timber species and oil palm can be carried out simultaneously. Reduced weeding cost in oil palm plantation can be achieved as the shade from the timber trees can suppress the weeds. Reduction of the frequency of weeding, which is normally carried out with herbicide, is also more environmentally friendly. Slight decrease in the yield of FFB is expected in the mixed planting, but this is more than compensated for by the production of timber. Planting timber trees within oil palm plantation is an insurance against risks associated with planting oil palm. Revenue from oil palm plantation will be reduced if the following occurs: sharp drop in price of palm oil/ffb, epidemic of pest (e.g. shoot borer) and disease (e.g. Ganoderma). If oil palm is not productive for these and other reasons, the land is still used productively for timber production. Laran and Binuang are common indigenous species which are considered better than exotics from a conservation perspective, particularly with respect to the conservation of the biodiversity of indigenous fauna and flora associated with them. In a typical oil palm plantation in Sabah (except podzol, soil derived from ultrabasic rock, and drained mangrove swamps), the site conditions should be suitable for Binuang and/or Laran. 7

8 The Right Honourable Chief Minister of Sabah, Datuk Musa Haji Aman, has, on several occasions (e.g. in his speech during the state level World Forestry Day celebration in April 25), recommended to oil palm estates to set aside 5% of their land for timber plantation. Intercropping Laran and Binuang with oil palm is a way of positively responding to the Chief Minister's recommendation. With reference to the arguments against the introduction of timber trees in oil palm plantations stated in Box 1, the reasons which counter these arguments are given in Box 2. Box 2. More arguments for introducing Laran/Binuang in oil palm plantations Complicated management is not necessarily a bad thing. It has been argued that high complexity is correlated with high stability and sustainability. Planters and workers should be able to acquire the skill for tending Laran and Binuang easily. By adopting an innovative approach, synergy between the oil palm and timber crop can be achieved. For example, pruned palm fronds can be stacked along the rows of timber trees, providing the trees with nutrients and improving the fertility of the site in the process. Directional felling can be introduced to minimise the damage to the palms during harvesting. (ii) The rotation of Binuang and Laran is only 1-12 years which is about half of the normal commercially productive life span of oil palm. As explained earlier, the suppression of FFB yield by these two species is not expected to be excessive. It is highly probable that the timber trees will grow faster than monoculture stands and may be harvestable in less than 1 years because of the synergy or positive interactions between the timber species and oil palm, which has been observed by Chia et al. (24), and the wider spacing in this agroforestry system as well as the much faster height growth of the timber trees (compared with the palms) which enables the timber trees to maximally utilise the resources at the planting site. Of course it is possible to keep the timber trees for a long time, up to 25 years, but soon after canopy closure of the oil palm, the growth of the timber trees is expected to be at the expense of the oil palm. The price of Binuang and Laran logs is high; in fact at RM8 per tonne of logs, it is much higher than that of FFB. (iv) Techniques of cultivation and harvesting and marketing of timber can be learned. (v) Higher revenue generated by better utilisation of the resources at the plantation site should be welcomed by planters. 8

9 Maintenance of permanent mixed plantation If it is necessary to keep both timber trees and oil palm at all times, the layout of the two crops can deviate from that of standard oil palm monoculture. To sustain long-term intercropping, the number of planting points per hectare of oil palm may need to be reduced, say, from 135 palms to 1 palms. A suggested system is shown in Appendix 1. In this system, oil palm and Laran are planted in alternate 14 m-wide strips. The density of oil palm is 12 trees per hectare throughout the rotation of about 25 years (assuming no mortality), while that of Laran planted in the first rotation (about 12.5 years) is 214 trees per hectare. In the second rotation, two rows of trees are planted at a spacing of 5 m x 5 m in the middle of the Laran strips giving a planting density of 143 trees per hectare. This system has the advantage that in the first 12.5 years, Laran, which grows rapidly, is allocated more space. In the second 12.5 years, oil palm has more growing space. This system also reduces damage to the oil palm during harvesting of timber from the first rotation of Laran. Compared with the standard density of 135 palms per hectare, the density of trees in this system is high and is probably more appropriate for the dwarf varieties of oil palm. CONCLUSIONS The above analysis and discussion clearly indicate that the use of Binuang and Laran for monoculture plantations and intercropping with oil palm is highly feasible. More studies on these two timber species, including breeding programme, are in progress at the Sabah Forest Research Centre. These studies are expected to further confirm the viability and promote the wide use of these two species in land management. The viability of planting Binuang has been demonstrated by the actual profit realised by a planter in Tawau. The feasibility of planting Laran has not been clearly demonstrated by actual return yet, although at least several hundred hectares have already been planted in Sabah. Demonstration of the feasibility of intercropping these two timber species with oil palm is still in the theoretical and experimental stage. If planters can cooperate with agroforestry researchers in developing this promising agroforestry system, realisation of actual profit will be expedited. ACKNOWLEDGEMENTS The authors wish to thank Mr Pius Gubilil, Mr Ajis Ampawih and others in the Agroforestry Section of the Sabah Forest Research Centre, for their help in the study on the canopy opening in oil palm. UM Plantations Bhd. kindly permitted the study on canopy opening of its oil palm plantations in Beluran. 9

10 REFERENCES Abi, A. & Lim, R.M.L. (25). The timber industry in Sabah: seven years after the implementation of sustainable forest management. Paper presented at the 14th Malaysian Forestry Conference, September 25, Kota Kinabalu. 17 pp. Ajik, M. (25). Early growth performance of Laran (Neolamarckia cadamba) in Segaliud Lokan, Sabah. Sepilok Bulletin 2: 1-7. Chia, F.R., Rahim, S., Martin, R.A., Anuar, M. & Kodoh, J. (24). Preliminary results on the growth and yield of high value timber species and oil palm under agroforestry system. Paper presented at the National Agroforestry Seminar, September 24, Forest Research Institute Malaysia, Kepong. 9 pp. Mohd Noor, A.G. (21). Experiences of agroforestry under estate condition. Paper presented at the National Agroforestry Seminar, April 21, Melaka. 8 pp. Zainuddin, M.N., Kamisan, P. & Abdul Kadir, M.Y. (2). Implications of cattle integration on weeding in mature oil palm - YPJOPE's experience. The Planter 76(89):

11 Appendix 1. Layout of intercropping oil palm with Laran (for the first rotation of Laran). Oil palm and Laran are planted in alternate 14 m-wide strips; two rows of oil palm or three rows of Laran in a strip. Planting distance: within row of oil palm: 7 m within row of Laran: 5 m Laran strip (14m) Oil palm strip (14m) 5.5m 4 5.5m 5m 9 A_1 W-_ s s I 4* 5m 7m m _ - 5m Oil palm Laran 11

12 Plate 1. Measurement of canopy opening with a spherical densiometer. (Photo: Soinin Satman) Plate 2. Six-year-old oil palm intercropped with Sentang in Sungai Daling research area. (Photo: Ajis Ampawih) 12

13 Plate 3. Newly planted oil palm intercropped with Binuang in Sungai Daling research area. (Photo: Ajis Ampawih) Plate 4. Three-year-old Laran stand in Segaliud Lokan Research Station. (Photo: Kuina Kimjus) 13