Major Indonesian palm oil producer Eagle High Plantation (EHP) is now shifting its focus to improving its oil quality by producing premium oil to boost the company’s profits.
In a company email sent to investors, EHP Head of Investors Relations Sebastian Sharp said that now the company has recovered from the lows of the holiday season in mid-year, it is shifting its focus to another key target, which is oil quality, measured by its low level of Free Fatty Acid (FFA) at less than 3.5 percent compared to regular oil’s of five percent.
“As premium quality means premium price, this should help our profits….producing high-quality low FFA oil has now become our key target,” Sharp said.
He said that so far the company produces palm oil with an FFA level average of 4.5 percent. The company said that it had been able to produce an oil with an FFA level of 3.5 percent only once in the past 4.5 years.
“High-quality oil is sought after because it’s used to make premium consumer products & as not many plantations can produce it, there is a premium price for quality oil. Not only a premium price, but as buyers need it, during a slow market, quality oil will sell faster,” Sharp said explaining the decision to shift to premium oil production.
EHP, he added, is planning to bring three of its ready mills to be able to produce premium oil meeting the less than 3.5 percent FFA standard within the next months, adding that he believed there were currently only two listed companies that update their FFA data every month and EHP was one of them.
When the palm oil fruit starts to decompose, its fatty acids break down and release free fatty acid. The higher the FFA, the more rancid is the oil and thus, worsening the quality. A low level of FFA can be found in fruits that were harvested at the perfect time and processed immediately.
The later the fruit is harvested and the longer the process, will age the fruit and the older it gets, the higher its FFA will be.