Labor dearth set up Malaysia for 3rd year of palm oil losses
12/09/2022 (Business World Online), Kuala Lumpur - Malaysian palm oil planters are letting thousands of tons of fruits rot as the third year of a worker shortage has left companies unable to increase their harvesting during the peak production season.
Palm oil output in Malaysia, the world’s second-largest producer, is forecast to decline, or at best remain unchanged, from last year’s 18.1 million tons, according to planters and analysts.
Plantations across the Southeast Asian nation are facing their worst labor crisis since the industry began in 1917, with the arrival of migrant workers that are the core of the industry’s labor force at a “snail’s pace,” the Malaysian Palm Oil Association’s (MPOA) Chief Executive Joseph Tek, told Reuters, despite the lifting of coronavirus-related hiring restrictions.
A lack of skilled harvesters means companies cannot fully capitalize on the peak harvest season that spans from August to November, forgoing a boost of growth from recent rains.
“The plantation industry is no longer at the breaking point, it has been pushed beyond the breaking point,” Mr. Tek said.
Production shortfalls in Malaysia will support prices for benchmark crude palm oil futures, the most-traded vegetable oil in the world, which have lost half their value after hitting a record in March.
Travel restrictions enacted in 2020 to fight the COVID-19 pandemic left the Malaysian palm oil industry short of 120,000 foreign workers needed to maintain trees and harvest fruit bunches. After that, oil palm yields plummeted to near 40-year lows in the 2020/21 marketing year, adding to a broader global edible oil shortage triggered by the Russia-Ukraine war.
That pushed palm oil prices to record highs in March, inflating prices of foodstuffs, detergent and other palm oil-based products.
Since then, though palm oil prices have slid lower following the resumption of exports from rival Indonesia, the world’s biggest palm oil producer, and a rebound in world oilseed production, with estimates of all-time high soybean output in the US and Brazil.
Chicago soybean oil has fallen 25% since hitting its all-time peak in April.
Malaysia’s palm industry expected their labor woes to ease after the government lifted the COVID-19 freeze on recruitment in February, with the MPOA expecting the entry of 52,000 migrant workers.
However, only several hundred workers have arrived, largely because of slow government approvals and concerns over worker protections.
The MPOA estimates only 12% of approvals for migrant workers granted to companies across all industry sectors in Malaysia have successfully translated into boots on the ground.
Migrants, mainly from Indonesia and Bangladesh, make up around 80% of the workforce in Malaysian estates. Malaysia’s Ministry of Human Resources, which is responsible for approving the intake of foreign workers, did not immediately respond to Reuters queries for a comment on the labor crunch.
Messages sent to the Minister of Human Resources Saravanan Murugan were not replied to as well.
FGV Holdings, the world’s largest crude palm oil producing firm, said it has received 647 migrant workers this year and it has only filled 62% of its required workforce. The firm is optimistic it will receive 7,000 workers by the end of the year, FGV said in a stock exchange filing on Aug. 30.
However, only several hundred workers have arrived, largely because of slow government approvals and concerns over worker protections.
The MPOA estimates only 12% of approvals for migrant workers granted to companies across all industry sectors in Malaysia have successfully translated into boots on the ground.
Migrants, mainly from Indonesia and Bangladesh, make up around 80% of the workforce in Malaysian estates. Malaysia’s Ministry of Human Resources, which is responsible for approving the intake of foreign workers, did not immediately respond to Reuters queries for a comment on the labor crunch.
Messages sent to the Minister of Human Resources Saravanan Murugan were not replied to as well.
FGV Holdings, the world’s largest crude palm oil producing firm, said it has received 647 migrant workers this year and it has only filled 62% of its required workforce. The firm is optimistic it will receive 7,000 workers by the end of the year, FGV said in a stock exchange filing on Aug. 30.