Palm Oil Industry Sees Better Performance For 2023

The Malaysian oil palm industry sees a brighter performance for this year which may continue into 2023, said Director-General of Malaysian Palm Oil Board (MPOB) Datuk Dr. Ahmad Parveez Hj. Ghulam Kadir.

According to him, several factors may attribute to the expected better performance, especially a stronger demand for palm oil.

He said the ongoing Russia-Ukraine conflict has disrupted the sunflower oil supply chain globally, causing a surge in the demand for palm oil as a replacement for sunflower oil.

Rising prices of soybean oil and Brent crude oil in the world market are also contributing factors that may impact the performance of our palm oil, he said.

“As such, we expect the price of crude palm oil (CPO) to average at RM5,100 a ton for this year, 15.7 per cent higher compared to RM4,407.00 a ton in 2021,” he said.

The average price of CPO for January – November 2022 was RM5,167 a ton, an increase of 18.4 per cent compared to RM4,363 a ton for the same period in 2021.

CPO prices experience a decline beginning the third quarter of this year due to the high CPO production season, rising palm oil stocks and declining soybean oil prices.

“Hence, we foresee the price of CPO to stabilize and average at RM3,800 a ton in 2023. This is in anticipation of higher palm oil production, weather conditions which are expected to improve especially in the second half of next year and expected higher availability of supply of other major vegetable oils.

Meanwhile, soybean oil prices which are expected to be low due to the high production in Brazil and the United States of America may also impact the price of CPO. Additionally, the strengthening of the Malaysian Ringgit against the US Dollar may also affect the price of the CPO,” he explained.

Datuk Dr. Ahmad Parveez also said that Malaysia’s ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 30 September 2022 will encourage demand for palm oil products as it broadens the country’s access to new markets such as Canada, Mexico and Peru, which are not covered by any existing Free Trade Agreement (FTA).

Based on Cost Benefit Analysis on the potential impacts of the CPTPP, upon ratification and implementation of the CPTPP, tariffs for palm oil products are now reduced from a maximum of six per cent for Canada, five per cent for Mexico and nine per cent for Peru to lower tariffs based on the tariff elimination schedule.

Apart from higher palm oil exports to the markets, the elimination of tariffs improves the Malaysian palm oil competitiveness in the CPTPP member countries.

Exports of palm oil and other palm-based products for January - November 2022 increased by 1.3 per cent to 22.43 million tonnes compared to 22.14 million tonnes in the same period of 2021.

The higher price of palm oil during that period has boosted total export revenue by 31.8 per cent to RM120.43 billion from RM91.38 billion in January - November 2021.

Exports of palm oil alone rose slightly by 0.8 per cent to 14.25 million tons in January - November 2022 compared to 14.14 million tons in the previous corresponding period. As such, palm oil export revenue surged 31 per cent to RM80.22 billion from RM61.26 billion in the same period of 2021.

He also said that CPO production is expected to increase slightly by 2.1 per cent to 18.50 million tons for this year as compared to 18.12 million tons in 2021.

“We expect a slow recovery of palm oil production due to the issue of labor shortage in the oil palm plantations, especially for fresh fruit bunches (FFBs) harvesting and unloading activities.

CPO production is projected to further increase to 19 million tons for 2023 due to the expected increase in the productive areas, especially in the Peninsular Malaysia and Sarawak,” he said.

Additionally, the workforce situation may stabilize next year as foreign worker applications are being approved in stages.

CPO production for January-November 2022 stood at 16.83 million tons, an increase of one per cent compared to 16.67 million tons achieved in the same period of 2021. This was attributed to an increase of 2.8 per cent in processed FFBs to 86.51 million tons in January - November 2022 compared to 84.17 million tons in the same period last year.

“In anticipation of higher production, we expect the closing stocks of palm oil in 2022 at 1.85 million tons, up by 0.24 million tons or 14.9 per cent compared to 1.61 million tons in December 2021,” he said.

According to him, closing stocks of palm oil are projected at two million tons in 2023, higher than that in 2022 due to the expected higher supplies of other major vegetable oils including palm oil.

“Generally, we expect the performance of the Malaysian palm oil industry to be better next year than that of 2022,” he added.