by FAYYADH JAAFAR / pic by TMR FILE

MALAYSIAN palm oil businesses must grab the opportunity presented by Indonesia’s export embargo, which is scheduled to be abolished in the second half of the year.

Plantation Industries and Commodities (MPIC) Minister Datuk Zuraida Kamaruddin said while Malaysia sympathises with Indonesian palm oil players who will be impacted by a significant shift in the country’s demand-supply mechanics, now is the best time for local industry players to enhance their innovation capability while exploring the best possible strategies to meet a spike in demand from palm oil importing countries.

Read more: Malaysian palm oil reserves hit 5-month high as output climbs

She believed that the current global demand-supply dynamics will continue to benefit palm oil farmers, since prices for palm oil, soybeans, European rapeseed, and even its Canadian genetically modified organism (GMO) counterpart, canola oil, have reached historic highs in the aftermath of Indonesia’s action.

“Even common sense would dictate that Malaysia will be an instant beneficiary for being the second-largest exporter of palm oil after Indonesia, scepticism persists as to whether Malaysia is able to cope with various production challenges and constraints.

“While 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,” she said in a statement today.

Read more: Zuraida: Malaysia paving the way for palm oil to regain market share in EU

She added that the conflict between Russia and Ukraine, as well as the threat of global warming, have caused the market to tighten with palm oil prices reaching new highs, and the South Korean government expressing its plan to release its stockpile, potentially resulting in a rapid price correction.

According to Zuraida, MPIC is still confident that Malaysia has what it takes to cover the global palm oil supply deficit, based on market trend analyses and projections.

However, the ministry is aware of the industry’s challenges, particularly those faced by upstream players, which is why authorities approved the recruitment of 32,000 migrant workers for palm oil plantations, culminating in the entry of the foreign workforce into the palm oil plantation sector in mid-February this year.

“Malaysia is now expecting a new round of foreign workers to come in May and June, alleviating a labour shortage that could otherwise hamper output of palm fruits. Rest assured that the process of employing foreign workers under a special quota has already begun,” she said.

For the long term, MPIC expects palm oil output and exports to increase by 30% by the end of 2022, despite Malaysia having reopened its international borders and the country having begun transitioning to the endemic phase since April 1.

Zuraida added that while productivity was low during the peak of the Covid-19 pandemic in 2020 due to a shortage of foreign employees, things are gradually returning to normal.

“With workers coming back, production levels will rise and Malaysia is on track to meet global demand,” she concluded.