Tough time ahead for palm oil export

Harvesting cycle disrupted due to fewer workers in the field


PALM oil export is expected to remain under pressure despite government’s decision to allow the plantation sector to resume operations during the Movement Control Order (MCO) period.

MIDF Amanah Investment Bank Bhd (MIDF Research) analyst Khoo Zhen Ye said India’s halt on Malaysian palm oil imports and Covid-19 outbreak across major export economies would continue to disrupt palm oil trade.

“We also opine that the domestic consumption of palm oil might be moderated by the current low crude oil prices that make the palm oil-based biodiesel to be less attractive despite the ongoing B20 mandate.

“Nonetheless, we postulate that the lower inventory level and moderate production growth should partially support the crude palm oil (CPO) price,” he told The Malaysian Reserve (TMR).

Khoo said MIDF Research maintains its CPO target price of RM2,450 per metric tonne (MT) for 2020.

Palm oil plantations in Malaysia were expected to halt for two weeks as the government ordered non-essential businesses to shut operations due to the Covid-19 spread.

However, after deliberating the appeal from the industry and smallholders’ fraternity, government has consented to allow the plantation industry to resume operations during the MCO period.

FGV Holdings Bhd said in a statement yesterday that its plantation has resumed activities with a minimum number of workers and complied with all government guidelines to ensure the safety and health of all workers including Felda settlers and smallholders who deliver their palm fruit to the FGV mills.

It added that the logistics and support business sector also continues to support the plantation sector activities including the delivery of CPO to refineries/bulking facilities and the goods distribution.

Meanwhile, Sime Darby Plantation Bhd also said the group will adhere strictly to the National Security Council directives and guidelines.

Separately, Singapore-based Palm Oil Analytics owner and co-founder Dr Sathia Varqa expects the harvesting cycle to be disrupted due to fewer workers in the field.

“Given the general slowdown in movement of people and activities, transport services like trucking of CPO from mills to refineries and

subsequently to ports or packaging location will also be affected, leading to slower movement and lower export volume in the month.

“However, domestic consumption is expected to do well again in March after February notched 16.29% month-on-month increase,” he told TMR.

He added that panic buying essentials like edible oils, oleo-chemical products containing palm raw material for example personal and home care hygiene products, will contribute to a sharp increase in domestic consumption in March.