In the recent Pointers palm oil seminar hosted by the Malaysian Palm Oil Council (MPOC), CEO Wan Aishah binti Wan Hamid highlighted how these factors were hitting the sector.
This is especially so in terms of palm oil production, where the country has been hit hard by labour shortages ever since the COVID-19 pandemic onset in 2020, which has been compounded further by uncontrollable factors including weather changes.
“The acute labour shortage in Malaysia has led to lower palm oil production, made worse by the impacts of climate changes particularly excessive bad weather,” Wan Aishah said.
“This year, Malaysia estimates that we will see a third consecutive year of palm oil production decline to 18.08 million MT, from 18.1 million MT in 2021 and 19.1 milllion MT in 2020.
“The La Nina rainy weather has already created challenges in production over the past three years and moving forward into 2023 the National Oceanic and Atmospheric Administration Climate Prediction Centre has already predicted a 91% chance of La Nina from December this year to February 2023.
“This will again see wet weather conditions in multiple countries across ASEAN including Malaysia that can result in extreme rain that could harm palm oil quality and raises flooding concerns.”
From a palm oil pricing angle, economic challenges have badly affected the strength of Malaysian currency, which is expected to drive prices upwards and could potentially reduce export favourability.
“The exchange rate of the Malaysian Ringgit vis-à-vis the US Dollar has declined by about 8% since June 2022,” she said.
“The weaker Malaysian Ringgit and also supply worries due to floods are expected to put palm oil prices on an upward trend.
“Globally, food prices have surged 65% since the start of the COVID-19 pandemic and by 12% this year alone since Russia invaded Ukraine.”
Malaysia also faces stiff competition in the form of the world’s largest palm oil producer Indonesia – although both countries co-operate when the palm oil sector in general is threatened, there is no doubt that any moves made by Indonesia to lower its prices or increase its exports ca have severe impacts on Malaysian palm oil exports.
“In January 2022 Indonesia mandated its local palm oil producers to set aside 20% of their palm o
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