Post-pandemic outlook for palm oil industry remains bright — CPOPC - MIDA | Malaysian Investment Development Authority
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Post-pandemic outlook for palm oil industry remains bright — CPOPC

Post-pandemic outlook for palm oil industry remains bright — CPOPC

07 Sep 2021

The post-pandemic outlook for the palm oil industry in Malaysia remains bright, backed by balanced supply and demand as well as an expected recovery from labour shortages next year.

Council of Palm Oil Producing Countries (CPOPC) executive director Tan Sri Dr Yusof Basiron said palm oil prices were relatively high for most of 2020 and 2021, and for producer countries, whose economies were affected by the pandemic, the increased revenue from the palm oil sector was much welcomed. 

Consumers, on the other hand, were affected by high prices of oils and fats. He said lower supply of rapeseed and sunflower oil and strong demand for soybean and its oil led to the recent period of high soybean oil prices. 

However, Yusof said, lower prices of palm oil relative to soybean oil were benefiting consumers, especially those whose incomes were affected by the economic slowdown due to the Covid-19 pandemic.

“The current trend of a long period of high prices experienced by palm oil (and other oils and fats) may be part of a new long-term shift in the supply and demand balance of palm oil as well as for other oils and fats. 

“While demand for oils and fats continued to grow according to past trends due to expanding populations, supply of palm oil may not be increasing at a high rate of growth as in the past,” he said in his keynote address at the second edition of the World Palm Virtual Expo and Conference today. 

Yusof also said the moratorium on new land expansion for oil palm cultivation in Indonesia and similar lack of new land for oil palm cultivation in Malaysia limited the growth rate of palm oil production in recent years and in the long term.

As other oils and fats were growing at a lower rate than palm oil, he said, it was unlikely that next major crop, such as soy production, would grow at “super high rate” to compensate the lack of rapid expansion in palm oil production as in the past. 

Therefore, Yusof said, the future supply of oils and fats had to experience a slowing growth relative to demand, and prices had to rise to reflect the new supply and demand balance. 

“If this outlook holds true, palm oil producers will continue to enjoy remunerative prices for their palm oil, and maximising production of palm oil will be pursued by improving yields through better agronomic practices,” he added.

According to him, yield improvement for the palm oil industry had not happened, unlike with other oilseed crops where a 50% increase in yield was achieved in the last few decades. 

“If the palm oil industry can seize the opportunity to improve its yield by 50% like other oilseed crops, over 35 million tonnes of palm oil can be additionally produced per year without any plantation land area expansion.

“This will represent an opportunity for a huge increase in revenue for palm oil producers, given the projected high prices prevailing in the near future,” Yusof said. 

Meanwhile, Faye Loo, an analyst at global agricultural commodity and agribusiness economic consulting firm LMC International, said rising Covid-19 cases had caused experienced foreign workers from Indonesia and Bangladesh to leave work as their permits were not renewed. 

On top of that, there were also no new arrivals of workers due to border closures.

She expressed hope that the situation would recover in 2022, thus increasing production and yields.  

According to her, an estimated 75,000 additional workers are needed to ensure good plantation operations in Malaysia.

“The effect of a lack of workers has caused harvesting intervals to prolong to above one month at some plantations.

“In some cases, fruits were being left to rot on trees because they were not harvested in time, while some neglected maintenance in trying to focus on harvesting work led to palm fruit trees being left unpruned,” said Loo. 

For 2022, she said, LMC expects Malaysian palm oil production output to slightly rebound to 18.4 million tonnes, and Indonesia’s to be up by two million tonnes to 47.2 million tonnes.

This year, she said, Malaysia’s output is expected to be similar to that of 2020 at 18.1 million tonnes, while for Indonesia, the volume is expected to be 45.5 million tonnes.  

Source: Bernama