Oil palm industry stable, backed by demand

Kuala Lumpur: The Covid-19 pandemic will not have a large impact on the nation’s oil palm industry as it continues to be supported by local and international demand, commercialisation of downstream products, exploration of new markets as well as government initiatives.

Since the outbreak began in Wuhan, China, global markets have plummeted, forcing governments to reduce national expenditures and introduce stimulus programmes, while central banks have lowered the overnight policy rates (OPR) to support economic growth. The oil palm is one of the commodity sectors affected when China – one of its biggest buyers – reduced its imports of palm oil and palm oil products, causing crude palm oil (CPO) prices to plunge.

In early January, CPO price rose to a high of RM3,134 per tonne, but on March 23, it fell to RM2,330 per tonne, the lowest since the 2008 global financial crisis. Year-to-date, the plantation index on Bursa Malaysia saw a decline of 25.3 per cent.

The industry’s performance has affected close to one million smallholders whose livelihoods are dependent on the industry.

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Although no one knows just how long the situation will go on, commodity analysts remain optimistic that it would not last for very long and that the industry would continue to support the nation’s economy.

Following the Movement Control Order (MCO) period, effective March 18-31, a majority of the people have had to put a stop to their regular daily routines and remain at home to stop the spread of the Covid-19, said Primary Industries and Commodities Minister Datuk Dr Mohd Khairuddin Aman Razali. “When they are at home, they would consume more palm oil and oil palm products,” he said to Bernama.

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Palm Oil Analytics owner and co-founder Dr Sathia Varqa said the panic buying of essentials like edible oils as well as oleo-chemical products such as personal and home care hygiene products will result in a sharp increase in March’s domestic consumption.

“We expect the domestic consumption to do well again in March, after it increased by 16.29 per cent month-on-month in February,” he said. – Bernama

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