The Edge Malaysia (30/12/2025) - This article first appeared in The Edge Malaysia Weekly on December 22, 2025 - December 28, 2025

MALAYSIA’S future competitiveness and sustainability in palm oil increasingly hinge on the raising of yields, as stagnant production growth is beginning to constrain supply — a concern industry players have been flagging for decades.

Malaysian Palm Oil Council (MPOC) chairman Datuk Carl Bek-Nielsen says the industry has been talking about the need to lift yields for more than 30 years, yet progress has been limited and, in some cases, yields have even “regressed”. Setting “realistic” targets, rather than chasing ambitious benchmarks, is the most important sustainability criterion for the palm oil sector.

“If yields are low and commodity prices should swing south, that is a recipe for disaster. Whereas if your yields are high, you can somewhat cushion the extent if commodity prices should go lower,” he tells The Edge in an interview at MPOC’s headquarters in Petaling Jaya. He was joined by CEO Belvinder Kaur Sron.

This is his first media interview in his capacity as MPOC chairman since taking on the role in May 2023. A Danish national with permanent resident status in Malaysia, Bek-Nielsen has spent more than 30 years in the palm oil industry. He began his career at United Plantations Bhd (KL:UTDPLT) in 1993 as a cadet planter and has served as the group’s CEO since January 2013.

During the interview, he highlights that the target to lift national yields to six to seven tonnes of crude palm oil (CPO) per hectare is unrealistic, given the prevalence of ageing palms and delayed replanting, especially among smallholders. The national CPO yield stood at 3.28 tonnes/ha in 2024.

Instead, the industry should focus on incremental gains toward a more achievable target of about 4.5 tonnes/ha, which he believes Malaysia can reach by 2035. Improving yields would also support Malaysia’s case under the European Union Deforestation Regulation (EUDR), as higher productivity reduces the need to expand plantation land and addresses deforestation concerns.

“This (higher yield target) has been the talk for decades, yet we have never gotten there. It is time to move away from 3.3 tonnes/ha and gradually raise yields to about 4.5 tonnes/ha. If Malaysia could achieve this 4.5 tonnes/ha, it would be a truly marvellous achievement. I think it’s realistic, I really truly believe this is a goal we can work towards over time.”

“If you produce 4.5 tonnes of oil per hectare compared to what we are achieving now, you are using the same inputs and the same labour but getting much more, which immediately minimises the need to expand land and drive deforestation. Our job in this industry is to produce more food with less land, not more food with more land.

“If we can add 1.2 tonnes/ha, Malaysia would be producing about seven million tonnes more than it does today. Just imagine what that would mean for incomes, tax revenues and company profitability. From a sustainability perspective, producing an additional seven million tonnes of oil without expanding land means there is no need to clear more forests. That is the key sustainability issue,” he adds.

There is no single solution to raising yields. Instead, Bek-Nielsen says it requires a combination of initiatives that must be carried out across the industry and sustained over time, starting with replanting ageing palms with higher-yielding material.

“We need to make a concerted, systematic and disciplined approach. There has to be a top-down approach — this is what we are going to do, this is how we are going to do it — and then push it forward. Replanting has to start. After that, there must be better understanding and implementation of improved agronomic practices. When replanting, growers must use good, high-yielding seed material. It is futile to use inferior seeds because you will end up with the same results. It comes down to replanting with quality planting material and improving agronomic practices,” he explains.

The push to raise yields comes amid tightening global palm oil supply dynamics, as Indonesia — the world’s largest producer — diverts more output into its B40 biodiesel programme and its planned B50 rollout, while stepping up enforcement against oil palm plantations deemed illegal or lacking proper permits. If these trends persist, Bek-Nielsen warns that global supply constraints could emerge within the next six to nine months.

“Ten years ago, in 2015, Indonesia consumed about seven million tonnes of palm oil. Today, by the end of this year, Indonesia is likely to consume around 24 million tonnes. Look at that growth — the majority of it has come from biodiesel.

“In the past, what was available for the export market — palm oil, which has always been an exportable vegetable oil accounting for about 55% of all exportable oils — largely came from Indonesia and Malaysia. Now, the dynamics have changed because the volume of exportable oils is not so much there,” he says.

Indonesia and Malaysia are the top two palm oil producers in the world, producing 48.16 million tonnes and 19.34 million tonnes respectively in 2024.

Another challenge facing the palm oil industry is rising input costs, particularly higher prices for fertilisers, spare parts and logistics. Logistics costs have climbed sharply following stricter enforcement on lorries, which has reduced load capacity and forced operators to deploy more vehicles to move the same volume of goods, says Bek-Nielsen.

EUDR delay adds confusion instead of clarity

The MPOC — the agency tasked with promoting Malaysian palm oil globally — has been vocal in criticising the EUDR’s implementation, arguing that its “standard” risk classification fails to reflect Malaysia’s sustainability progress and that compliance requirements remain unclear and costly.

Bek-Nielson points out that Malaysia has already curbed deforestation, with the country’s oil palm planted area declining from 5.88 million ha in 2020 to about 5.6 million ha in 2024 — the first sustained drop in nearly two decades. The reduction, which he says is equivalent to four times the size of Singapore, contrasts sharply with the continued expansion of soybean acreage by 10 million ha in Brazil and Argentina over the same period.

This is largely because plantation land has been repurposed for infrastructure, housing, data centres and solar farms, he says. For instance, several local plantation groups have begun leveraging their extensive land banks for non-plantation use, including industrial parks and renewable energy projects. Despite this, Malaysia remains classified as “standard risk” under the EUDR.

“It’s important for people to understand that we in the industry are intent on doing things in a more sustainable way. Does that mean that we are perfect? No. We have a lot of areas we can improve upon, and in the past we’ve done things that should not have been done when you look back retrospectively. But the good thing is, do we have good aspirations going forward? I would say yes,” he stresses.

The EUDR is aimed at ensuring that certain commodities sold in or exported from the EU are not linked to deforestation or forest degradation. It covers products such as palm oil, soy, beef, cocoa, coffee, rubber and timber, as well as their derivatives. The regulation was originally slated to take effect on Dec 30, 2024, but was delayed by a year to Dec 30, 2025, with a further postponement now expected to push implementation to end-2026.

The EU is Malaysia’s third-largest palm oil export destination — after India and Kenya — with 944,567 tonnes shipped  from January to November 2025, accounting for about 6.8% of total Malaysian palm oil exports. India remained the largest market at 2.41 million tonnes (17.3% of total exports), followed by Kenya at 1.09 million tonnes (7.8% of total exports), Malaysian Palm Oil Board (MPOB) data shows.

The latest delay is “definitely not good news” for European manufacturers that have invested heavily in preparing for compliance, Bek-Nielsen says, adding that many are understandably frustrated by the lack of clarity and shifting timelines.

Among the affected commodities, palm oil is one of the most prepared for EUDR compliance, in contrast to crops such as coffee and cocoa, where production is dominated by millions of independent smallholders who face far greater challenges in meeting the regulation’s traceability and due-diligence requirements, he adds.

“Malaysia is ready. We can flood the EU with as much sustainable palm oil as they want, no problem. But I think they are not ready on their side because if they implement the EUDR, you have to ask this question: what is going to happen to the millions of independent smallholder cocoa and coffee farmers? They don’t know what a polygon is. They don’t have land titles — land has been passed down from ancestor to ancestor.

“So, you know, they are going to have problems. They are going to run out of coffee beans. There will be no café latte in Brussels or Strasbourg. That’s why they are holding back on the EUDR — they’re just not ready in Europe,” Bek-Nielsen adds.

The debate over EUDR compliance has also revived questions over which sustainability standards the EU should recognise. Bek-Nielsen argues that Malaysian Sustainable Palm Oil (MSPO) certification is ultimately more impactful than the Roundtable on Sustainable Palm Oil (RSPO), as it raises sustainability standards across the entire industry rather than among a select group of producers.

While RSPO remains important and may continue to command a price premium — buyers pay more for certified oil. Its stringent and evolving criteria mean that only about 20% of global palm oil producers can comply, he says.

“Don’t forget, I sat as co-chair of RSPO for 10 years, so I’m telling you RSPO is good — but it’s an elitist club. You will never get more than 20% of global palm oil producers to comply because the standards are extremely strict and the goalposts keep changing. What kind of sustainability impact does that have if only 20% can comply? What about the other 80%? To me, that is not impactful. With MSPO, the Malaysian government has taken a strong top-down approach. It may not fully match RSPO, but it is very close. And if you can get 95% of producers in Malaysia to comply, it is like a rising tide lifting both small sampans and big yachts at the same time. The impact is tremendous. It delivers a far greater sustainability impact than RSPO because it raises both the floor and the ceiling simultaneously.

“RSPO can still command a premium. But MSPO, at scale, will have a disproportionately larger positive environmental impact simply because almost everyone complies,” he adds.

Africa ‘can’t get enough’ of palm oil

Against a backdrop of softer demand and negative sentiment in the EU, Malaysia has been diversifying its palm oil export markets, redirecting volumes to other regions. Africa is expected to emerge as a key growth market, supported by rapid population growth and rising consumption, says Bek-Nielsen.

Africa is already a net importer of palm oil and “can’t get enough” of the commodity as its population continues to expand. Bek-Nielsen points to projections showing Africa’s population rising from about 1.4 billion today to roughly 4 billion by 2100, by which time nearly 80% of the world’s population is expected to live in Africa or Asia.

He sees opportunity in the gap between Africa’s and the developed world’s oils and fats consumption per capita of 12kg-13kg and 70kg-80kg. “There is going to be huge demand coming from Africa, and that is one of the areas MPOC is focusing on, as we divert our attention to some of these emerging markets.

“The great thing about Africa is that negative perceptions of palm oil do not exist, as it is part of daily household consumption. They welcome palm oil, but they do not have enough of it. Africa is a major net importer of palm oil today, and demand continues to grow as the population expands and the middle class booms,” Bek-Nielsen adds.

In fact, Africa’s rapid population growth and the potential for stronger palm oil demand have led to MPOC relocating its African office from Johannesburg in South Africa to Nairobi in Kenya while adding a branch office in Lagos, Nigeria, says Belvinder.

“Because it has become our most important market, we feel we should be there. We need at least two offices to manage our marketing and promotional activities in the region,” she adds.

CPO output seen at 20.3 mil tonnes for 2025

In the first nine months of 2025, nearly 50% of Malaysia’s palm oil exports went to sub-Saharan Africa, Asean and the Middle East, according to Belvinder. She notes that demand has softened in traditional markets such as India and China, as palm oil has lost its price discount to rival oils, prompting buyers to switch to soybean and sunflower oil.

“But as long as prices move to a level where palm oil becomes attractive again, we may see them return to the market. It is largely about price in these markets. They will still remain big buyers,” she adds.

Malaysia’s total CPO production in 2025 is expected to come in at 20.0 million to 20.3 million tonnes, supported by favourable weather conditions and improved labour availability, says Bek-Nielsen. 

This would exceed the MPOB’s original full-year target of 19.5 million tonnes, which was revised to 20 million to 20.5 million tonnes recently. This followed November’s production data of 1.94 million tonnes — the highest since 2017 for the month, bringing CPO production for the 11 months in 2025 to 18.45 million tonnes. 

In 2015, Malaysian recorded CPO production of 19.96 million tonnes, the highest level so far.

One of the main reasons for higher total production this year has been favourable climatic conditions. 

“Also, for the first time in 15 to 20 years, the plantation industry has found itself in a situation that is no longer marked by acute labour shortages, but rather one with adequate or manageable labour,” he says, crediting former plantation and commodity minister Datuk Seri Johari Abdul Ghani for addressing the problem during his tenure. 

(In the cabinet reshuffle last week, Datuk Seri Dr Noraini Ahmad was appointed to lead the Ministry of Plantation and Commodities while Johari was made Minister of Investment, Trade and Industry.)

Bek-Nielsen adds that the palms are not producing at their optimal capacity; instead, higher output reflects estates extracting more from their existing age profile of trees.

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