China demand pushes up durian farming in Malaysia: Analysis

File photo showing durians at a roadside stall in Negeri Sembilan, Malaysia.
File photo showing durians at a roadside stall in Negeri Sembilan, Malaysia.PHOTO: BLOOMBERG

KUALA LUMPUR (XINHUA) - Rising consumption and prices have attracted large-scale durian farming in Malaysia recently, thanks to its rising prominence in China.

As the planting is gaining momentum, some analysts foresee the "king of fruit" to overtake oil palm as preferred new investment in Malaysia moving forward.

Maybank Kim Eng said in a report on Tuesday (May 22) that as durian cultivation could potentially generate nine times more revenue compared to palm oil on a per hectare basis while generating Earnings Before Interest and Taxes (EBIT) margin in excess of 50 per cent, it believed this might compel some oil palm planters to switch crop at the next replanting cycle given the scarcity and high cost of land and rising wages.

Witnessing growing interest on large-scale durian farming in Malaysia lately, it said, the euphoria was understandable as estate for the most prominent Musang King durian was said to generate nine times more in revenue than oil palm at RM150,000 (S$50,605) per hectare in 2017.

"Considering the rising demand (of durian), there is immense opportunity for Malaysia to increase its market share once China allows Malaysia to export fresh durian as Malaysia's durian is more superior in taste," it said.

According to the United Nations Commodity Trade Statistics database in 2016, Thailand was the world's leading exporter of fresh durian, with 402,661 metric tons worth US$495 million.

Among them, 303,430 metric tons of durian worth US$394 million were exported to China.

As comparison, Malaysia exported only 17,754 metric tons worth US$17.9 million in 2016. Singapore was Malaysia's largest export market, accounting for 16,595 metric tons or US$8 million.

China, however, accounted for merely 691 metric tons or US$6.8 million.

It is noted that Malaysia currently exports downstream durian products to China, while fresh fruits are exported through indirect channels such as Singapore and China's Hong Kong.

The research house also highlighted that there were more than 200 durian varieties in Malaysia, more than Thailand where focus was on only a few varieties.

Among the Malaysian species, Musang King has been a favourite among the Chinese consumers.

"The durian industry in Malaysia is therefore very much still at the initial stage. Over time, we foresee greater investments pouring into this sector as large-scale farming gains traction and proven to be successful," said Maybank.

The research house, however, also saw the key risk to the durian industry was largely premised on the continuous demand for quality durian from China, the main export market.

Unlike oil palm commercial planting which has about 100 years of proven success, large-scale durian farming in Malaysia is considered young by comparison and lacks comprehensive technical know-how.