CPO production, stocks levels to rise in another potential bumper year

The domestic CPO production is forecast to increase 4.9% this year to 19m tonnes 

By ASILA JALIL / Pic TMR

MALAYSIA’S oil palm industry will enjoy another good year with higher production levels albeit with weaker prices for crude palm oil (CPO). 

Malaysian Palm Oil Board DG Datuk Dr Ahmad Parveez Ghulam Kadir said the domestic CPO production is forecast to increase 4.9% this year to 19 million tonnes from 18.12 million tonnes last year. 

Palm oil exports and palm oil stocks are also expected to increase in 2022 by 9.3% and 23.4%, respectively, to 17 million tonnes and 1.95 million tonnes, respectively. 

Export revenue, however, is expected to decline by 10.8% this year to RM95 billion from the previous RM106.5 billion last year. 

“We do not think the CPO price, which is currently trending above RM5,000 per tonne, will maintain throughout the year realistically,” he said. 

CPO price is forecast to average at RM3,800 per tonne this year due to factors such as higher palm oil production and expected decline of other major vegetable oil prices following the recovery in production and stock levels. Palm oil closed last year at record high of RM5,072 tonne, surpassing its previous record of RM5,071 set in October. 

The rally in CPO prices has carried over into 2022. The benchmark three months forward futures CPO contract on Bursa Malaysia Derivatives Bhd close at a record high of RM5,164 a tonne, up RM124 for the day, yesterday as the edible oil market fundamentals remains favourable with strong demand amid thigh supplies. 

Yesterday’s CPO closing price is 50% higher year-on-year but the sector stocks have not gained as much due to environmental, social and governance concerns despite a jump in earnings in recent quarters. 

To ensure sustained market access for CPO and derivatives in developed markets, Malaysia needs to embark on aggressive marketing strategies to promote palm oil’s benefits and deter the negative sentiment resulting from the anti-palm initiatives by various organisations in markets like the US and the European Union (EU). 

Plantation Industries and Commodities Minister Datuk Zuraida Kamaruddin said industry players and the ministry need to devise strategies that are more firm in highlighting the many uses of palm oil and strengthen its position as the number one commodity of the country. 

“What is lacking here is a more aggressive marketing package which we have to look into to translate all our goodness of palm oil into the attacking strategy, by capitalising on our strength,” she said at the Palm Oil Economic Review and Outlook Seminar 2022 held in Putrajaya yesterday. 

In 2019, the EU has issued a Delegated Regulation which is complementary regulation parked under the EU Renewable Energy Directive II. The regulation classified palm oil as a commodity that has a high risk of indirect land-use change which contributes to deforestation as well as loss of diversity. 

The US has banned imports from the country’s palm oil giants Sime Darby Plantation Bhd and FGV Holdings Bhd over allegations of forced labour issues. 

The US Customs and Border Protection (CBP) issued a withhold release order (WRO) against Sime Darby’s production process on Dec 30, 2020, based on information that indicated it had breached all 11 of the International Labour Organisation’s forced labour indicators. 

The WRO came after the US CBP’s issuance of the WRO against FGV on Sept 30, 2020 also involving labour practices. 

“With any allegation, you need to come back to us and check if it is happening or not. Go to the plantation and check where the companies did wrong. We are willing to work together but this process is not there. It is like a one-sided game when it should be fair,” she said. 

On labour shortage at palm oil plantations, the minister said Malaysia is currently having government-to-government talks with India, Bangladesh and southern Thailand to bring more foreign workers into the sites besides those from Indonesia. 

She noted that Indonesia has approved the entry of 32,000 Indonesians by mid-February.