EU banning palm oil? There are other markets, local palm oil producers say

KUALA LUMPUR, Jan 26 ― The Malaysian Palm Oil Association (MPOA) has dismissed any heavy impact of the European Union’s (EU) ban on local producers, saying there are still other markets available.

Speaking to Malay Mail, MPOA chief executive Datuk Nageeb Wahab said MPOA and its members are instead feeling upbeat over the increased demand for palm oil in the domestic market for both Malaysia and Indonesia.

“The concerns of EU not buying palm oil from Malaysia has all been addressed by the increased of local consumption. We are not unduly worried it as this is a zero-sum game,” he told Malay Mail.

“To put it simply, if they do not want to buy from us, we can supply other markets with our palm oil. Perhaps they will use other vegetable oils as an alternative however they still need our palm oil to supplement other products.

“Moreover, there is always growth in palm oil utilisation in food products which is always in demand as it relates to the needs of a growing population,” he added.

Nageeb said that both countries are engaging in comprehensive national policies, respectively to increased palm oil utilisation in biofuels.

He also expects to see a growth in demand for palm oil to be utilised in food products, among other goods.

In terms of national policies, Nageeb was referring to Indonesia’s B30 mandate where it launched last year, a biodiesel mix which contains 30 per cent of palm-based fuel and Malaysia’s intention of releasing its own mix of B20 biodiesel fuel, reported to be released by this year.

Indonesia’s B30 mandates had led to crude palm oil (CPO) stock levels to plummet where some 10 million tonnes were utilised in their domestic markets and led to CPO prices skyrocketing to over RM3,000 per metric tonne in early January 2020, said Nageeb.

He contrasted this to a year ago, when Malaysia was seeing record levels of CPO inventory in the past two years due to weak demand for palm oil.

According to the statistics by the Malaysian Palm Oil Board (MPOB), CPO prices were at RM2,037 per metric tonne in January 2019 while CPO stock was at 3 million metric tonnes compared to 2 million metric tonnes in December of 2019.

“Now with Indonesia diverting its supply to meet demand domestically due to the B30 mandate, it has less palm oil to export which also helps Malaysia as it tends to the void in the market,” said Nageeb, stating that credit should and must be given to Indonesia for executing a progressive palm oil policy.

Malaysia produces some 19 million tonne metric of CPO on average annually, while Indonesia produces twice as many, he pointed out.

“For Indonesia, even if they increased 10 per cent of CPO consumption, that’s some four million metric tonnes while Malaysia can only equate to 500,000 metric tonnes. In this case, even if certain economies said they won’t buy from us, that is alright as we can use it ourselves,” he said.

Nageeb is also optimistic that the high price of CPO would maintain for the year as Malaysian Palm oil producers are expecting a shortfall in production this year.

“It's quite hard to see Malaysia break the 20 million tonnes annual production and it is unlikely it would surpass that for this year as well.

“This is due to the dry spell that the country is facing and the lower use of fertiliser on plantations that led to lower yield. We are expecting a shortfall in production this year or at best, stagnation of production levels.

“With all these factors, I'm optimistic that the prices of the crude palm oil would remain stable for the year and perhaps into next year,” he said.