Labor woes depress Malaysia's palm oil supply, exports: industry head

Malaysia's palm oil production and exports in 2021 are expected to be lower than last year as a lack of labor has reduced output, according to the country's national industry body, the Malaysian Palm Oil Board.

Crude palm oil production is forecast to be around 18 million mt this year, lower than 2020, MPOB director-general Ahmad Parveez Ghulam Kadir said at the World Palm Virtual Expo and Conference 2021 on Sept. 7.

Malaysia, the second-largest producer of palm oil after Indonesia, produced 19.14 million mt of CPO in 2020, according to MPOB data.

This is partly due to the pandemic-led national border closures that have stopped entry of foreign workers who work on oil palm estates as well as less availability of fresh fruit bunches, Ahmad Parveez said.

Malaysia relies heavily on foreign workers from Bangladesh, India and Indonesia to work on oil palm estates as locals usually do not take up plantation jobs like harvesting and collecting oil palm fruit bunches.

"The labor crunch will be further exacerbated as contracts of experienced workers are not being renewed and the performance of untrained workers is much weaker," Abdul Hameed, director of sales at Pakistan-based Manzoor Trading Co., told Platts on the sidelines of the conference.

The total labor pool at plantations shrunk by 6.6% between April 2020 and June 2021, the MPOB head said during the presentation.

Malaysian production suffered most in the Sabah region, with CPO production in the first half of 2021 falling 13.3% year on year, MPOB said.

In the same period, CPO production in the Peninsular Malaysia region fell 8.5% and in the Sarawak region 4.9%.

"Production growth in the second half of 2021 is expected to be lower than in H2 2020 due to expected lower FFB production and a slight decrease in the matured area," Ahmad Parveez said.

Prices to remain high

With global demand for oils and fats staying strong, Ahmad Parveez said he expects CPO prices to average MR4,000/mt ($962.60/mt), up 49% year on year.

Global crude palm oil prices have risen sharply in 2020 and 2021 amid a surge in overall agricultural commodity prices and growing demand for biodiesel, for which palm oil is a cheaper feedstock option than other soft oils like soybean, canola and rapeseed.

Ahmad Parveez said total exports in 2021 will drop 6.3% year on year to 16.3 million mt due to tight supply and reduced production.

He also said local closing palm oil stocks are expected to increase to 1.7 million mt this year from 1.27 million mt in December 2020, due to expected higher CPO production in November and December compared to last year.

"Nevertheless, stocks are expected to remain tight in view of low vegetable oil stocks in major importing countries, which encourage palm oil demand," Ahmad Parveez said.