MPIC: Palm oil players should benefit from Indonesian ban
Even as common sense would dictate that Malaysia will be an instant beneficiary by virtue of being the second largest exporter of palm oil after Indonesia, scepticism persists on whether Malaysia is able to cope with various production challenges and constraints.
Datuk Zuraida Kamaruddin
KUALA LUMPUR: Both upstream oil palm growers and downstream oil producers in the country should join hands to reap the benefit of the void following neighbouring Indonesia’s decision to halt its palm oil exports, Minister of Plantation Industries and Commodities Datuk Zuraida Kamaruddin said.
She said in a statement yesterday that while Malaysia sympathises with Indonesian palm oil players who will be impacted by a significant shift in the demand-supply mechanics in the country, this is nonetheless the best time for Malaysian palm oil players to enhance their innovation capability while exploring the best possible strategies to meet a spike in demand by palm oil importing countries.
The world’s largest producer of palm oil has imposed the ban to lower commodity prices and further address its domestic supply shortages.
India is currently the biggest consumer of Indonesian palm oil – importing 13.0 million to 13.5 million tonnes of edible oil – of which palm oil makes up 8.0 million to 8.5 million tonnes (63 per cent).
Almost 45 per cent of the quantity is expected to come from Indonesia while the remainder is sourced from Malaysia which is the world’s second biggest palm oil producer.
This has led to further tightening of a market already on the edge due to Russia’s invasion of Ukraine and global warming.
The prices of palm, soybean, European rapeseed and even its Canadian GMO counterpart, canola oil, have since reached historic highs following Indonesia’s action.
“Even as common sense would dictate that Malaysia will be an instant beneficiary by virtue of being the second largest exporter of palm oil after Indonesia, scepticism persists on whether Malaysia is able to cope with various production challenges and constraints,” she said.
Nevertheless, she said, daunting as it is to meet rising global demand amid labour shortage, the Ministry of Plantation Industries and Commodities (MPIC) remains optimistic that Malaysia has what it takes to fill the gap in global palm oil supply based on its market trend analytics and projection.
“As palm oil prices will stay elevated supported by low inventory levels at both origins and destinations amid heightened price volatility, it is our hope that both the Malaysian upstream and downstream players seize the opportunity from Indonesia’s absence to maximise their revenue stream, hence earnings.
“After all, such an opportunity only presents itself for a short term given Indonesia will certainly relook into its ban policy once both its domestic supply and pricing structure have stabilised and it goes without saying that Indonesia relies on export taxes to fund its biodiesel programme.”
As market analysts expect the export ban to be lifted by the end of the second quarter of 2022, there is a likelihood that Indonesia will flood the global market with its inventory accumulated during the ban, the minister said.
Zuraida said given that the industry enters into its seasonal peak output period during this time of the year, coupled with the prospect of South Korea, which is one of the fastest growing palm oil markets, releasing its stockpile, this could trigger a sharp price correction.
The prospect of both Russia and Ukraine releasing their rapeseed/sunflower oil stockpiles, if any, once their conflict has subsided or settled must also be looked into.
Based on these possible risks, it is only logical that both Malaysian oil palm planters and downstream industry players go all out to take advantage of the current situation rather than to let such an opportunity slip away.
“We want to assure industry players that MPIC is doing its utmost best to meet demand for migrant workforce especially from upstream players,” she said, adding that Malaysia is now anticipating a new batch of foreign workers to arrive in May and June, hence overcoming further manpower crunch to harvest palm fruits which otherwise could cap production.