Malaysia Palm Oil Industry Eyes Stability, Market Growth Amid Challenges

Welcome to Globoil Post, the go-to source for insights in the global edible oil and agri-trade sectors. In this edition, Belvinder Sron, CEO of the Malaysian Palm Oil Council (MPOC), leverages nearly 30 years of expertise in global marketing and public affairs to analyze Malaysia’s approach to recent crude palm oil price fluctuations, EU regulatory pressures, and the pursuit of new markets. Sron’s insights shed light on the key trends and strategies that will influence the industry’s direction through 2024 and beyond.

‍How do you foresee the recent fluctuations in crude palm oil (CPO) prices, influenced by both production conditions and global market demand, impacting the Malaysian palm oil industry through the remainder of 2024?‍

In the first seven months of 2024, Malaysian palm oil exports have demonstrated remarkable resilience and growth, achieving a 9% increase (770,000 tonnes) despite global economic uncertainties and volatile market conditions. Although palm oil production in Malaysia rebounded significantly by 11% (1.02 million tonnes) from January to July 2024, inventory levels remained unchanged at 1.73 million tonnes, as the surge in demand has outpaced the increase in supply.

‍In July 2024, Malaysian palm oil exports surged by 40% to 1.69 million tonnes, reaching the highest monthly export volume since July 2020. Similarly, India’s edible oil imports hit a record level of 1.85 million tonnes in July 2024, with palm oil imports increasing sharply by 39% to 1.09 million tonnes, the highest level since August 2023.

‍Global dependence on palm oil is expected to remain high as palm oil is the most efficient vegetable oil in the world. However, production growth in both Malaysia and Indonesia has been slow. Data from GAPKI shows that Indonesian palm oil production dropped by 1.38 million tonnes (6%) from January to May 2024. Furthermore, Indonesia plans to increase its biodiesel blending rate to B40 in 2025, which is likely to tighten palm oil supply further within the country.

The tightening supply of palm oil from Malaysia and Indonesia will continue to support prices in the near term. As such, palm oil prices are anticipated to remain stable above RM3,700 for the remainder of 2024.

‍Given the increasing regulatory scrutiny from the European Union with the EUDR and the global push for sustainable practices, what strategies is Malaysia implementing to maintain and expand its market share in the EU?

‍The MSPO standard is mandatory and legally required for the Malaysian palm oil industry, making it more inclusive than other certification schemes. It aligns with local laws and regulations, which supports compliance with the EUDR’s legality requirements. Additionally, the MSPO certification is designed to be affordable, enabling many smallholders to meet sustainability standards without significant financial burden. This accessibility helps smallholders, who rely on oil palm cultivation for their livelihood, to improve their standard of living. As of June 30, 2024, 85% of the Malaysian oil palm planted area is MSPO certified , and the goal is to achieve full traceability for the entire sector to meet both EUDR and sustainability sourced Malaysian palm oil requirements in future.

‍Given the comprehensive framework of the MSPO, Malaysia is well-prepared to cater to the requirements of EU buyers. The demand for palm oil in the EU, both from food and non-food industries, is anticipated to maintain its current levels. Malaysia’s proactive approach in enhancing the MSPO certification and ensuring full traceability positions the country to effectively meet this demand, offering the EU market a reliable supply of high-quality, sustainably produced palm oil.

‍How is MPOC planning to expand Malaysia's palm oil export markets beyond traditional regions in the coming years, and what strategies are in place to achieve this?

‍Malaysia is the world’s second-largest producer and exporter of palm oil. In 2023, the country produced 18.55 million tonnes of palm oil, with 82% of this volume exported to over 160 countries. The top three buyers of Malaysian palm oil were India, China, and the European Union, collectively accounting for 35% of the export volume in 2023. India and China will remain the focus due to their large and growing populations, rising per capita incomes, expanding demand for edible oils, and the strategic importance of maintaining strong trade relationships in these high-growth markets.

‍While these traditional markets remain crucial, the MPOC is actively working to broaden the export base by tapping into markets with strong growth potential. This includes not only increasing consumption but also expanding the application of palm oil in both food and non-food products. Key target regions for this expansion include ASEAN, the Middle East, and Africa, where demand is rising and there is considerable opportunity for market penetration.

‍Changes in lifestyle and dietary preferences in these emerging markets have created significant opportunities for palm oil. Our strategy also focuses on enhancing the value proposition of Malaysian palm oil by promoting its versatility, sustainability, and quality, particularly in regions where the consumption of palm oil is growing rapidly. By aligning with local needs and preferences, we aim to establish a stronger foothold and foster long-term partnerships in these high-potential markets.

‍Changing lifestyles, urbanisation, and increasing urban migration are driving higher consumption in the food and food service sectors within these regions. It is crucial to capitalise on these trends by ensuring that palm oil and its value-added products are well integrated into both the food and non-food sectors in these emerging markets.

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