Malaysia palm oil production, exports expected to rise this year
But country expresses concern over impact of EU effort to combat deforestation
07/03/2023 (Nikkei Asia) - Crude palm oil production in Malaysia and exports of the commodity are both expected to increase this year, the chairman of the country's stock exchange said on Tuesday, citing an expansion of areas under cultivation and overseas demand.
Neighboring Indonesia is the world's biggest producer of the commodity, followed by Malaysia and Thailand. Palm oil, the world's most consumed edible oil, is widely used as a vegetable oil and is an ingredient in processed food and other products, including cosmetics. Indonesia imposed a temporary export ban in April last year, hoping to tame inflation and secure local supplies.
Addressing the annual Palm & Lauric Oils Conference & Exhibition, Bursa Malaysia Chairman Abdul Wahid Omar said crude palm oil production in Malaysia is expected to rise 3% to 19 million tonnes in 2023, up from 18.45 million tonnes in 2022, despite ongoing global economic uncertainty and recession fears this year. The stock exchange organizes the event.
Wahid attributed the expected growth to the expansion of mature planted areas, particularly in Sarawak on the island of Borneo as well as in Peninsular Malaysia, given favorable weather and improved labor conditions.
"In tandem with this projection, the Malaysian Palm Oil Board anticipates exports of Malaysian palm oil to increase by 3.7% to 16.30 million tonnes in 2023, up from 15.72 million tonnes in 2022, owing primarily to continued demand from importing countries," said Wahid.
But Fadillah Yusof, Malaysia's deputy prime minister and minister of plantation and commodities, warned that the European Green Deal, a European Union initiative designed to limit deforestation due to consumption of agricultural commodities and products, is expected to dent palm oil demand in the EU.
"As a result, the implementation of the EUDR (European Union Deforestation-free Regulation) is expected to significantly impact the use of palm oil in the EU and create a negative image of Malaysian palm oil, which will lead to a reduction in exports to the EU, and possibly globally," Fadillah told the conference.
In November 2021, the EU proposed the EUDR as part of the European Green Deal. The regulation lists palm oil as a commodity that drives deforestation and forest degradation through the expansion of agricultural land.
Fadillah criticized it "as nothing less than an attempt at creating another trade barrier for palm oil." He said Malaysia is working with other palm oil producing countries to counter its effects.
At the same time, the Malaysian palm oil industry should continue to support production of sustainable palm oil, in particular Malaysian Sustainable Palm Oil (MSPO), in line with world demand.
MSPO is a certification system that emulates the Roundtable on Sustainable Palm Oil (RSPO) certification system that is widely recognized and accepted in Western countries. Fadillah said that as of Jan. 31, more than 97% of oil palm cultivated areas and more than 98% of palm oil mills in Malaysia were MSPO certified.
"Malaysian palm oil meets the stringent requirements of consumer markets, and is risk-free for its buyers. Through MSPO, sustainability issues raised -- particularly biodiversity loss, land conflict, deforestation and forced labor -- are addressed," Fadillah said.
Fadillah urged the Malaysian palm oil industry to continue ensuring that palm oil production does not harm the environment. "It is important for palm oil producing nations to highlight the measures we have taken in order to achieve that goal," he said.