MPOC urges EU to recognise Malaysia as 'low risk' under deforestation regulation
18/11/2024 (The Edge Malaysia), Kuala Lumpur - The Malaysian Palm Oil Council (MPOC) has called on the European Union (EU) to classify Malaysia as a “low risk” country under the EU’s new Deforestation-free Products Regulation (EUDR).
MPOC said in a statement on Monday after the EU's decision to postpone the legislation by 12 months.
MPOC CEO, Belvinder Sron welcomed the delay but emphasised the importance of ensuring that smallholder farmers are not excluded from international supply chains.
The EUDR, which was initially scheduled to be enforced on December 30, 2024, mandates that companies ensure their products do not come from deforested or degraded areas.
With the EU now implementing a four-tier classification system, Malaysia has called for recognition as a low-risk country, showing its commitment to sustainable palm oil production, particularly through the Malaysian Sustainable Palm Oil (MSPO) certification scheme.
Meanwhile, Crude palm oil (CPO) prices are expected to remain above RM4,750 per tonne in November, with export supply uncertainties and rising soft oil prices, according to the Malaysian Palm Oil Council (MPOC).
The council on Monday noted that Malaysian palm oil production fell to 1.79 million tonnes in October, marking a 1.35% decline month-on-month and a 7.2% drop year-on-year.
Meanwhile, exports soared to a four-year high of 1.73 million tonnes, nearing the July 2020 record of 1.78 million tonnes. Combined with domestic consumption, total demand hit 1.94 million tonnes, creating a supply deficit of 210,000 tonnes.
Reflecting the tight supply, CPO prices have surged past the RM5,000 mark, with the Bursa Malaysia Plantation Index showing CPO currently trading at RM5,255 per tonne.
“In November, palm oil demand is anticipated to remain stable despite rising prices, driven by the forthcoming Chinese New Year and Ramadan celebrations,” MPOC said.
Adding to the supply squeeze, Thailand has imposed a crude palm oil export ban effective until 2025.
“In 2023, India imported approximately 800,000 tonnes of crude palm oil from Thailand and will now need to source these imports from Malaysia and Indonesia for the remainder of 2024,” the council noted.
European vegetable oil prices surged in October, with sunflower oil prices jumping 12%, palm oil 9% and rapeseed oil 7%.
“This trend has narrowed palm oil price premium over sunflower oil,” MPOC added, pointing to sunflower oil’s 22-month high as a sign of tightening supply.
Looking ahead, both Malaysia and Indonesia are expected to face low stock levels by the end of 2024.
“Production is expected to remain stagnant in 2025,” MPOC warned, further supporting increased prices.
The council also noted that major importers are ramping up purchases ahead of Indonesia’s B40 biodiesel mandate, which will require a 40% blend of palm oil in biodiesel starting January 2025.
However, MPOC flagged potential risks to the price rally.
“Weak energy markets, improving soybean planting conditions in South America and uncertainty over US biofuel policy under the Trump administration could create bearish sentiment for soybeans and soybean oil, potentially tempering the price rally,” it added.