SD Guthrie: Palm oil industry at 'crisis' point as costs rise, productivity stalls
10/02/2026 (The Edge Malaysia), Kuala Lumpur - Malaysia’s palm oil industry is facing a "crisis" point, weighed down by slowing growth, stagnating yields and declining profitability, SD Guthrie Bhd (KL:SDG) group managing director Mohd Haris Mohd Arshad warned during an industry event on Tuesday (Feb 10).
The increasing strain the industry is under may result in palm oil losing its competitive advantage as the lowest-cost vegetable oil, he told a panel discussion at the 37th Palm & Lauric Oils Price Outlook Conference (POC) 2026.
The sector's decline is largely due to ageing plantations and growing competition from other vegetable oils such as soybean oil, whose global production rate has outpaced palm oil by sixfold in recent years.
“It (the palm oil industry) is sort of stuck between a rock and a very hard place,” Mohd Haris said, as he described an industry caught between escalating domestic costs and tougher global competition.
Domestically, the average replanting rate is around 2% a year, which means many palms remain in the ground beyond their peak productive years. The optimal replanting rate should be closer to 5% to sustain long-term viability, Mohd Haris said.
He also pointed to heavy reliance on foreign labour as a significant structural risk.
To mitigate these challenges, Mohd Haris said the industry should focus on mechanisation.
By automating non-harvesting tasks, such as estate maintenance, fertiliser application and pest control, plantations can cover more land with fewer workers, thereby reducing labour costs and improving efficiency.
He added that the use of superior, fast-maturing planting material could complement mechanisation efforts and improve overall output.
Impact of EU-Indonesia trade deal
During the panel discussion, the panel also addressed the recent Comprehensive Economic Partnership Agreement (CEPA) signed between the European Union (EU) and Indonesia. While some reports suggest that the deal gives Indonesian refined palm oil a 9%-12.8% price advantage over Malaysian, Mohd Haris noted that trade agreements are only one of many factors affecting competitiveness.
He pointed out that companies such as SD Guthrie, with operations across Malaysia, Indonesia and Papua New Guinea, have the flexibility to shift shipments based on destination markets and trade arrangements.
FGV Holdings Group (KL:FGV) CEO Datuk Fakhrunniam Othman holds a more “wait-and-see” approach to any potential impact to the CEPA agreement, arguing that price is not the only consideration for buyers.
“It's really the relationship, the quality, the terms of trade and the reliability of supply. There are many other sectors that can still convince the supply chain, the current demand,” said Fakhrunniam.
Negotiations for a similar EU-Malaysia free trade agreement (FTA) are ongoing. Panel moderator and Malaysian Palm Oil Council CEO Belvinder Sron expressed optimism that a conclusion could be reached by 2027.
Other panellists in the discussion included FFM Bhd group CEO and Wilmar International Ltd chief sustainability officer Jeremy Goon and Kuala Lumpur Kepong Bhd (KL:KLK) chief operating officer Lee Jia Zhang.