Malaysia’s oil palm industry remains resilient during the Movement Control Order (MCO) and the National Recovery Plan (NRP) currently being implemented nationwide as the agriculture sector continues to be one the main contributors to the country’s Gross Domestic Product (GDP) growth during the COVID-19 pandemic.
Director-general of Malaysia Palm Oil Board (MPOB) Dr Ahmad Parveez Ghulam Kadir said during the first implementation of the MCO from March 18 to April 28, 2020, agriculture was the only sector that recorded positive growth of 0.9 percent year-on-year for the second quarter of 2020.
He said that economic activities in the agriculture sector are allowed to operate during the MCOs and players continue their activities in the plantations and the supply chains as usual – however, they must adhere to strict standard operating procedure (SOP) issued by the Malaysian National Security Council (MKN), especially on the limitation of workers up to only 60 percent, which took effect on May 26 this year.
Dr Ahmad Parveez said the average price of crude palm oil (CPO) rose 66.9 percent or RM1, 628 to RM4, 061.50 per ton for the first half of 2021 from RM2, 433.50 per ton for the same period in 2020. In sync with that, export value of palm oil increased 36.3 percent or RM7.69 billion to RM28.87 billion for the period of January – June 2021 from RM21.19 billion in the previous corresponding period.
“Export volume of palm oil during the period of January-June 2021 was 7.07 million tons, lower by 9.3 percent as against 7.80 million tons during the same period of 2020 due to stiff competition from other competing vegetable oils and import policy in importing countries.
“Prices of CPO and soybean oil in the world market were on an upward trend during the period of January-June 2021 compared to the previous corresponding period due to the resumption of social and economic sectors in many countries as well as supply tightness in the global vegetable oils market which has supported prices. During January-June 2020, prices were traded lower in line with the global economic recession as a result of the COVID-19 pandemic,” he said in a statement.
He added that MPOB expects the price of CPO to be firmer this year and may average at around RM3, 600 per ton, primarily due to the expected firmer soya bean oil price and slower palm oil production growth especially in the first quarter of this year.
The COVID-19 pandemic has moderate impact on export demand as palm oil is an essential product for edible and non-edible use. Export of palm oil and palm-based products during January – June 2021 declined by 8.5 percent to 11.14 million tons from 12.17 million tons during January-June 2020.
Dr Ahmad Parveez said, total sales of oil palm seeds and seedlings increased by 33.4 percent during January to June 2021 to 27.73 million seeds and seedlings as against 20.79 million of oil palm seeds and seedlings for the previous corresponding period as activities including transporting of seeds and seedlings are allowed during the current MCO. During the first MCO, seed producers and nursery operators were not allowed to operate. However, their operations were later allowed with strict SOP.
Total production of fresh fruit bunches (FFB) decreased by 7.2 percent to 42.76 million tons during January-June 2021 compared to 46.09 million tons in the same period of 2020 due to labor shortage.
“Plantations now need to seriously consider embarking into mechanization and automation to address the shortage,” he said.
The government has introduced the PEMERKASA stimulus package to encourage the adoption of machineries and the Workforce Recalibration Program, aimed to enable illegal immigrants to be employed as legitimate foreign workers. These moves ensure the operations of oil palm plantations run smoothly, especially the harvesting activities which can impact productivity.
The production of CPO and crude palm kernel oil (CPKO) during January – June 2021 were lower by 7.6 percent and 8.2 percent respectively as against January – June 2020 mainly due to lower FFB received by mills.
Despite being able to operate, he said the delay in technology transfer due to border closure and the delay of transportation such as inflow of overseas experts, machines and equipment have dampened productivity. Hence, the country’s production of CPO is expected to decline marginally this year-due to the decline in FFB production arising from limited labor availability from the national border closure.
“However, in the coming five to ten years, MPOB expects production of palm oil to increase gradually and steadily. Production is expected to reach 22 million tons by 2025 and will further rise to 25 million tons by 2030. The anticipated upward trend will be attributed to the expected higher matured oil palm area and higher oil palm productivity through better FFB yield and higher oil extraction rate.
“As we move forward, we do not see oil palm land area as a major barrier for Malaysia to upscale its palm oil production. With the advancement in technologies particularly in the high yielding planting materials and with the adoption of mechanization and automation in estates, we believe that we can assist plantation players to increase their productivity,” Dr Ahmad Parveez said.
In addition, he pointed out that the improvement in the quality of planting materials is also expected to enhance the oil palm yield and consequently help Malaysia to meet the rising demand for palm oil globally while preserving the existing land.
On the other hand, palm-based oleo chemicals and biodiesel sectors are not significantly affected during the COVID-19 pandemic as both sectors are allowed to operate with strict SOPs. In January – June 2021, the capacity utilization rate of the palm-based oleo chemicals and biodiesel plants was lower by 5.8 percent and 4.5 percent – to 84.3 percent and 44.2 percent respectively compared to the same period in 2020.
“The numbers recorded prove that plantation companies are capable of managing the current situation well as they have been through similar situations during the implementation of the earlier series of MCOs. Industry players in the midstream as well as downstream do not have much problem in adhering to the SOP as it has become a new norm for the industry since the first introduction of the MCO in March 2020,” he said.
He said MPOB expects the impact of the COVID-19 pandemic to be less severe in 2021 as the country is more prepared in managing the economic activities despite the pandemic.
The economic growth trajectory is projected to improve, driven by the stronger recovery in global demand and increased public and private sector expenditure amid continued support from policy measures, he added.