MARKET DEVELOPMENT
Downside to good price of palm oil
Downside to good price of palm oil
05.05.2022 (www.thesundaily.my) - PETALING JAYA: The current high price of crude palm oil (CPO), while bringing higher revenue for the country, has a downside to it.
Plantation Industries and Commodities Minister Datuk Zuraida Kamaruddin said the high price is expected to affect prices of other food products as CPO is a major ingredient in many food items.
However, she said the price is expected to go down to a more stable level as the supply of vegetable oil is recovering, adding that this would stop the price of food products from further escalating.
“The government has put measures in place to control the impact of the rising CPO price on food products by controlling the price of essential food items.
“As for the local cooking oil market, the government has set a control price for the 1kg polybag palm cooking oil at RM2.50, which is dedicated to the lower-income group.
“The government has also imposed a ceiling price for 1kg to 5kg bottled palm cooking oil to fully protect consumers from the effects of rising palm oil prices in the global market.”
She added that with the current high CPO prices in the global market, the government has to bear higher cooking oil subsidies to ensure the price of cooking oil in the local market remains at an affordable level.
“Malaysia is facing an issue with palm oil production due to labour shortage but with the borders reopened, foreign workers are coming in.
“We will be able to increase our production and productivity.”
She pointed out that Indonesia is the major producer and exporter of palm oil in the global oils and fats market.
“In 2021, Indonesia’s palm oil production and exports represented 59% and 56% of world palm oil production and exports respectively.
“Overall, Indonesia’s palm oil exports represented 30% of world oils and fats exports.”
Zuraida said Malaysia, being the second largest exporter of palm oil, exported 15.56 million tonnes of palm oil in 2021, which represents 30.5% of global palm oil trade and 16.4% of global oils and fats exports.
She said given the significance of Malaysia and Indonesia in the global palm oil and oils and fats trade, any policy change by the Indonesian government will affect Malaysia in one way or another.
She added that with Indonesia’s palm oil export ban, it is expected that the global demand for palm oil would move to Malaysia.
“Malaysia is confident that we will be able to absorb some of the excess demand, although the market size left by Indonesia is huge.”
She said in the short-term, palm oil price as well as other major vegetable oil prices are expected to further increase.
“However, it is expected that this measure by the Indonesian government would only be short-term to restore the supply-demand balance in the Indonesian market before reoffering its palm oil to the global market.”
She said for the long run, the supply and demand for palm oil and other vegetable oils are expected to rebalance, with production in Malaysia, Indonesia and South America expected to recover.