In 2019, the palm oil industry contributed 4.67 per cent to the country's gross domestic products (GDP) and 37.9 per cent to the agricultural GDP. Total exports of oil palm products were 27.88 million tonnes in 2019, with export revenue of RM64.84 billion. Palm oil export earnings alone was RM38.03 billion.
Currently, Malaysia accounts for 39 per cent of world palm oil production and 44 per cent of world exports. In terms of edible oils and fats, Malaysian palm oil accounts for 11 per cent of the world's production and 27 per cent of export trade.
The global palm oil market is expected to grow with the rising global population, increasing biofuels production, accelerating economic growth and growing application in various markets.
Despite its impressive performance, the palm oil industry is facing challenges at the global level that are affecting its market position. These, among others, are market penetration and restrictions due to health concerns, environmental issues, climate change and tariff and non-tariff trade barriers.
Over the years, the palm oil industry has also been subjected to constant public relations attacks, resulting in bad publicity in the global perspective, which led to negative sentiments, leading to the decrease in demand for palm oil-based products.
The negative campaigns on social media about palm oil has been focused on, in order of importance, the environment, health (based on a misunderstanding of palm oil products) and human rights. Sentiments on the environment can run high. Examples are the ban by the United States on FGV palm oil and the labelling of palm oil diesel as unsustainable by the European Union.
Added to the above challenges is agricultural commodity price volatility and instability. Slight changes in supply and demand have a large impact on prices. Although the price of crude palm oil in December last year was RM3,651 per tonne (local delivered in the central region), the average price had plunged to RM1,794.50 per tonne in December 2018, reaching its lowest level since August 2006.
Since Malaysia is heavily reliant on palm oil exports, these challenges have negative impacts on producers and export earnings, as well as on the livelihood of almost 650,000 smallholders.
Based on research findings in terms of health issues, there exists a gap between consumers' awareness and perception with scientific evidence. Palm oil actually has a long shelf-life (stable, easy to digest, resistant to oxidation and has a high smoking point) and been proven to have neuroprotective properties.
As for environmental issues, although there is significant land use cover changes and CO2 emissions, most of the palm oil industry supply chain are certified under the Roundtable on Sustainable Palm Oil (RSPO) and Malaysian Sustainable Palm Oil (MSPO). For instance, 75.1 per cent of 5.9 million hectares of plantations are RSPO-certified, while 88.1 per cent are MSPO-certified. For mills, 431 of 452 are MSPO-certified.
These certification schemes should have contributed to greater transparency in the value chain and help strengthen the dialogue on sustainable palm oil.
A study conducted by Universiti Putra Malaysia on the perception audit of palm oil in the EU found that different communication campaigns resulted in negative perceptions in different layers of society. There has been blind trust by consumers on their local media credibility and consumer ethnocentrism.
To address the negative perceptions and campaigns in the international community, the country needs to identify and formulate advocacy and communication strategies for different layers of the society (individual, family, peer-network, community and organisations).
The strategies should cover health, the environment and human right concerns and have to focus on sentiments and contextual measures to counter attacks. Social media and video campaigns can be an effective tool in educating and creating awareness. We need to institutionalise media monitoring, focusing on social media to counter negative sentiments as an early warning system.
At the domestic front, past growth of palm oil production was achieved by expanding onto land formerly used to cultivate other crops, such as rubber, cacao and coconut, or onto degraded land or secondary forests. With a scarcity of suitable land banks, the only way forward is to increase yields significantly. A safety net programme for producers, especially smallholders, also has to be formulated due to palm oil price instability.
The writer is a Professor at Faculty of Agriculture, Universiti Putra Malaysia. This article is based on research findings funded by the Translational Research Grant Scheme, Higher Education Ministry
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times