Malaysia’s palm oil industry to focus on replanting and sustainability
21/10/2024 (Oils & Fats International) - The palm oil sector in Malaysia is set to focus on challenges including ageing oil palm trees and stagnant yields while increasing its commitment to global sustainability standards, according to industry leaders quoted in a report by The Malaysian Reserve.
The government had prioritised replanting efforts as a key strategy to boost productivity without expanding land use, the 8 October report said.
Plantation and Commodities Minister Johari Abdul Ghani was quoted as saying there were approximately 450,000ha of oil palm trees aged over 25 years in the country.
In 2023, Malaysia made significant progress by replanting 132,000ha, representing 2.3% of the total planted area, an increase compared to the previous year’s 97,130ha (1.7%), The Malaysian Reserve wrote.
In its bid to boost productivity, particularly among smallholders, the government is focusing on initiatives that include promoting the use of quality planting materials, adopting Good Agricultural Practices (GAP) and providing financial assistance for replanting, according to the report.
“Smallholders, who manage 1.5M ha of palm oil plantations, have faced lower replanting rates, with organised smallholders replanting at just 0.9% annually and independent smallholders at 0.2%,” Johari was quoted as saying in his opening remarks at the Malaysian Palm Oil Forum 2024 (MPOC 2024) on 8 October.
“Increasing the annual replanting rate to 4% could significantly raise yields, potentially adding 1.5M tonnes tonnes of crude palm oil (CPO) production annually without the need for more land.”
On the sustainability front, Johari said Malaysia was preparing to meet global environmental goals, particularly regarding the European Union Deforestation Regulation (EUDR).
The European Commission has proposed postponing the enforcement of the EUDR from its original date of 30 December 2024 to 30 December 2025 to allow producer countries additional time to comply.
Johari said Malaysia, which had committed to several international sustainability targets, including achieving net-zero greenhouse gas emissions by 2050 and reducing carbon intensity by 45% by 2030, saw this delay as an opportunity to align its policies further with global standards.
“The government is also taking steps to help smallholders comply with the EUDR. Efforts include enforcing a no-deforestation policy, maintaining production while adhering to sustainable practices, ensuring transparency in land ownership and aligning smallholders’ business practices with international regulations,” he added.
According to a report by the Malaysian Palm Oil Council (MPOC), palm oil production in the country reached its peak in August this year, two months earlier than in the past three years, which peaked in October.
Palm oil production in September dropped 3.8% to 1.82M tonnes, with further seasonal reductions expected until the end of the year.
Despite the drop in production, Malaysian palm oil exports remained robust, posting a modest increase of 0.9% to 1.54M tonnes, while year-on-year September exports surged by 27.3%, the 15 October report said.
From January to September 2024, Malaysian palm oil production increased by 1.15M tonnes (8.7%), while exports increased by 1.41M tonnes (12.9%).
The growth in exports outpaced production by 260,000 tonnes in the first nine months of 2024, resulting in a year-on-year decline in the country’s palm oil inventory, which stood at 2.01M tonnes as of September 2024.
“The strong export performance and early peak in production in Malaysia have contributed to a favourable price dynamic for palm oil, reaching as high as RM4,400/tonne (US$1,020/tonne) in October,” MPOC said.
“Despite ongoing market fluctuations, prices are expected to remain stable above RM4,000 (US$928) /tonne in October.”
Heading into the final quarter of this year, key factors influencing palm oil’s supply and demand included India’s palm oil inventory levels, Indonesia’s B40 biodiesel policy and global production and consumption trends for the four major vegetable oils in 2025, the association said.