The post-pandemic outlook for the palm oil industry in Malaysia remains bright, backed by the balanced supply and demand as well as expected recovery from labor shortages next year.
Council of Palm Oil Producing Countries (CPOPC) executive director Yusof Basiron said palm oil prices had been 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.
He said consumers, on the other hand, were affected by the high prices of oils and fats, since lower supply of rapeseed and sunflower oil and strong demand for soybean and its oil had led to the current high prices of soybean oil.
However, Yusof said, the 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 pandemic.
“The current trend of long periods 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,” he said in his keynote address at the second edition of the World Palm virtual exhibition and conference today.
“While demand for oils and fats has continued to grow according to past trends due to expanding population, the supply of palm oil may not be increasing at a high rate as in the past.”
Yusof 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 had 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 the next major crop, like soy production, would grow at a “super high rate” to compensate for the lack of rapid expansion in palm oil production as in the past.
Hence, the future supply of oils and fats had to experience a slowing growth relative to demand, and prices had to rise to reflect this new supply and demand balance.
“If this outlook holds true, palm oil producers will continue to enjoy remunerative prices for their palm oil, and maximizing the production of palm oil will be done by improving yield through better agronomic practices,” he said.
Yusof also said yield improvement for the palm oil industry had not happened unlike other oilseed crops where 50% increase in yield has been achieved in the last few decades.
“If the palm oil industry can seize the opportunity to improve its yield by 50% like the other oilseed crops, over 35 million tons 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 in the near future,” he said.
Faye Loo, an analyst at global agricultural commodity and agribusiness economic consulting firm LMC International, said the rising Covid-19 cases had caused experienced foreign workers from Indonesia and Bangladesh to leave as their permits were not renewed.
On top of that, there were also no new arrivals of workers due to the border closure.
She expressed hope that the situation would change in 2022, thus increasing production and yield.
Loo said an estimated 75,000 additional workers were 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, leading to the palm fruits trees being left unpruned,” she said.
For 2022, LMC expected Malaysian palm oil production output to slightly rebound to 18.4 million tons, and Indonesia’s to be up by two million tons to 47.2 million tons in 2022.
This year, she said, Malaysia’s output was expected to be similar to that of 2020 at 18.1 million tons, while for Indonesia, the volume was expected to be 45.5 million tons.