MARKET DEVELOPMENT
Impact of additional palm oil workers likely in 1Q22
Impact of additional palm oil workers likely in 1Q22
20.10.2021 (themalaysianreserve.com) - THE impact of the additional 32,000 foreign workers in the palm oil industry will be felt sometime at the end of the first quarter next year (1Q22) that will result in better crop recovery, improved harvesting cycle and higher crude palm oil (CPO) yield.
Palm Oil Analytics analyst Sathia Varqa said CPO production should see a noticeable rise from the 2Q22 onwards as the government has committed to address the severe labour shortage in the palm oil industry.
“In addition to bringing additional workers, the government will likely offer financial incentives to plantations to increase mechanisation so as to somewhat reduce labour input, as the industry will be looking for this to materialise,” he said.
The Malaysian Reserve earlier reported that CPO prices are likely to remain high for the remainder of the year on stronger demand, but exports could contract as production decline looms.
Malaysian Palm Oil Board DG Dr Ahmad Parveez Ghulam Kadir recently said that palm oil prices in 2021 are expected to average at RM4,100 per tonne, increasing by 52.7% compared to RM2,685 in 2020 due to expected lower CPO production.
He said palm oil demand is expected to be stronger in 2021 as consuming countries are expected to replenish vegetable oil stocks. However, the decline in production is expected to limit the quantum of exports.
“Thus, total exports in 2021 is expected to decline by 6.3% to 16.3 million tonnes against 2020 due to tight supply availability. For next year, we are still reconsidering as the situation this year is still not clear with many surprises,” he said.
He added that Malaysia is expected to record RM95 billion export revenue from palm oil, up by 29.7% from the RM73.25 billion recorded in 2020.
Ahmad Parveez said the Malaysian palm oil industry witnessed a weaker production performance compared to the corresponding period in 2020, which limited its capacity for export and tightened stocks for the period of Jan to Sept 2021.
He said production had declined to the lowest level since 2017.
For the first nine months this year, CPO exports fell 12% to 11.24 million tonnes from the 12.77 million tonnes recorded a year ago.
Underpinned by tight supply availability, CPO prices during that period surged to a record high and boosted export revenue, he added.
According to a report by Bloomberg on Monday, palm oil futures for December surged 1.7% to close at RM5,046 a tonne, the highest on record for a most-active contract. “The market is heavily backwardated, showing the shortage of nearby supply. Soybean oil — palm’s closest substitute for food and fuel — and Brent crude both extended gains on Monday. Stronger crude oil futures make palm more attractive,” the report stated.
https://themalaysianreserve.com/2021/10/20/impact-of-additional-palm-oil-workers-likely-in-1q22/