The Star Online (28/12/2020) - PETALING JAYA: The Malaysian Palm Oil Board (MPOB) expects the current high prices of crude palm oil (CPO) trading above RM3,000 per tonne mark will continue until the first quarter of 2021, given the tight supply situation.

According to MPOB chairman Datuk Ahmad Jazlan Yaakub, the monsoon season which brings about floods in many parts of oil palm areas could also affect palm oil production this month up until early next year.

“This will lead to further palm oil supply tightness that will result in firmer CPO prices going into 2021, ” he added.

The CPO spot price was traded at RM3,701 per tonne on Dec 23 while the third-month benchmark CPO futures settled at RM3,854 per tonne, which is a 25-year high.

With the higher CPO prices, Ahmad Jazlan told StarBiz via e-mail that the prices of other palm oil-related products would also be going up.

“This includes the price of fresh fruit bunches (FFB), processed palm oil and other downstream products.”

He also expects industry players such as smallholders, estates, refiners and downstream operators to benefit from the higher CPO prices in the near term.

MPOB’s latest statistics showed that palm oil stocks in November slumped to 1.56 million tonnes, which is the lowest since June 2017.

CPO production for the same period under review also dropped to 1.49 million tonnes, the lowest since March.

“If the underlying fundamental factors and market sentiment continues to stay positive, this will be reflected by the increase in CPO prices in the market, ” opined Ahmad Jazlan.

As the local palm oil custodian, MPOB viewed that stagnation in yield per hectare in the estates and labour shortages as among major challenges faced by the oil palm sector.

He noted that the local estates’ FFB yield have been hovering around 18 to 19 tonnes per ha, the oil extraction rate (OER) around 20% and the palm oil yield has been stagnant at around 3.5 tonnes per ha.

Ahmad Jazlan pointed out that the national average oil yield should be around five tonnes to six tonnes per ha per year compared with less than four tonnes per ha per year now.

“The OER on average should be at least 22%.”

However, the current yield per ha per year and the OER have not been achieved as “the adoption of technology to ensure correct planting material such as Sure Sawit Shell and good agricultural practices (GAP) are not being implemented.”

Furthermore, the industry does not seem to adapt well to the climate changes, which can affect yield.

Milling practices also need to be improved, apart from planting materials and labour shortage to realise the ideal OER.

Ahmad Jazlan said smallholders’ replanting rate have been much lower than expected – hardly 4% per year.

On the other hand, big plantations are planting the best materials available during their replanting programmes.

“However, the adoption of technology such as mechanisation in the estates, although improving, has not been applied on a wider scale. That is why heavy dependency on foreign labour still exists, ” he added.

Therefore, MPOB opined that all planters will need to look at soil health and ensure that GAP is being implemented.

“To further ensure quality planting materials reach the oil palm growers, we hope to implement genomics and epigenetics guided technologies and put it into our practice.

“However, all these will have an impact on the cost of planting materials. And the market cannot continue to survive on subsidies and grants as those are not sustainable.”

Hence, to effect changes to impact productivity, MPOB believed that industry players will need to make controversial decisions.

“Just like our efforts to introduce clones, if we do not change the mindset of millers, then the clonal FFB sourced from smallholders will not benefit them.

“While millers enjoy the additional OER percentage increase, the growers have to pay a higher cost of the planting materials.

“Therefore, we believe that the cost must be shared across the board – only then this will be fair and just profits can be felt by all in the supply chain, ” said Ahmad Jazlan.

On labour shortage, the oil palm plantation sector was reported to be short of 37,175 manpower, especially for the harvesting and collection of oil palm fruits as of May this year.

Towards this, the government has introduced the Workforce Recalibration Programme from Nov 16,2020 to June 30,2021.

In addition, the adaptation of mechanisation is increasing progressively especially since the Covid-19 pandemic started.

This is well reflected by the Oil Palm Industry Mechanisation Incentives Scheme fund under the 11th Malaysia Plan.

Ahmad Jazlan said the seriousness of the labour shortage situation also saw the government forking out a matching fund of RM30mil for mechanisation in the recent Budget 2021.

Read more at https://www.thestar.com.my/business/business-news/2020/12/28/high-cpo-prices-to-stay-until-q1-2021