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Malaysia, Indonesia need to back one another as palm oil may become scarce: Industry specialists

KUALA LUMPUR: The palm oil-producing nations, Malaysia and Indonesia, must come together to support each other as palm oil may become scarce in the future, industry specialists said.

This will be due to lower production, reduced yield and decreased purchases from India, the world's largest importer of vegetable oil.

Indonesia's palm oil production for 2024 is projected to be at least one million tonnes lower than in 2023, while Malaysia's production is expected to remain unchanged.

Dorab Mistry, an analyst at Godrej International, highlighted several concerning factors.

This includes the unfeasibility of further expanding acreage, adverse tree age profiles, declining yields and slow technological advancements in the palm oil industry compared to the global scene.

Deputy secretary-general of the Council of Palm Oil Producing Countries (CPOPC) Datuk Nageeb Wahab, said Indonesia's production is not growing fast enough, and Malaysia's production has plateaued. 

Despite this, global demand for palm oil is increasing by 3.5 per cent annually, potentially leading to higher prices in the future.

"There isn't any more land available for growing palm oil trees. Therefore, there is a need to explore methods of extracting more oil from existing land by increasing the frequency of tree replanting.

"Unfortunately, there is a lack of sufficient investment in replanting trees, resulting in our oil production not reaching its full potential," Nageeb told Business Times on the sidelines of the 35th Palm and Lauric Oil Price Outlook Conference and Exhibition.

During the presentation, Westbury Group chief executive Abdul Rasheed JanMohammad highlighted that Pakistan, which used to import 95 per cent of its palm oil from Malaysia, now opts for Indonesia due to cheaper prices.

"Malaysia lost its market share to Indonesia because of cheaper prices," he pointed out.

He further noted that India is expected to increase purchases of soyoil in 2024 while palm oil purchases may decline, potentially keeping inventories high in Indonesia and Malaysia and impacting benchmark futures.

Therefore, Nageeb suggested that instead of competing, palm oil-producing countries should collaborate.

"When there's not enough palm oil to go around, we can help each other out," said Nageeb.

Earlier today, during a session on "World Supply, Demand & Price Outlook of Palm Oil and Other Vegetable Oils", executive director of ISTA Mielke GmbH (Oil World) Thomas Mielke urged Malaysia to speed up its replanting efforts to address the aging oil palm structure, warning of the market turning to alternatives if not reversed.

"If the situation is not reversed, it will be reflected in comparatively higher prices because the world needs rising quantities of oil. 

"There are over 1.7 million hectares of oil palms aged 19 years or older, but the rate of replanting in the country remains low," Mielke pointed out.

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