Weather, labour shortage likely to disrupt palm oil supply and demand in 2023

14/11/2022 02:42 PM

KUALA LUMPUR, Nov 14 (Bernama) -- The palm oil situation is expected to remain uncertain in 2023 as factors such as weather, labour situation and currency stability would shape the landscape of palm oil supply and demand balance.

Malaysia Palm Oil Board (MPOB) director-general Datuk Dr Ahmad Parveez Ghulam Kadir said the board is also anticipating supply disruption of crude palm oil (CPO) in the first quarter of 2023 due to tropical storms in Malaysia, where localised flooding may disrupt harvesting in oil palm plantations.

“The market price is anticipated to remain strong over concerns of bad weather affecting production in both major countries Malaysia and Indonesia,” he said during his presentation at the Palm Oil Internet Seminar (Pointers) today.

He said the labour situation in oil palm plantations has worsened since 2020 as the Malaysian government temporarily suspended the hiring of foreign workers to control the spread of COVID-19.

This decision, he said, had severely affected Malaysian CPO production and the plantations are hoping at least it to increase marginally compared to last year as the sector is highly dependent on foreign workers.

“I think the labour situation in the oil palm plantation sector is yet to recover significantly as the recruitment process will take some time as the suspension has been lifted. However, over the last two months, we have seen foreign workers beginning to come in and our production increased marginally, also mainly due to the peak season for local palm oil,” he said.

On prospects of the Malaysian palm oil, MPOB foresees the ringgit, which extended its losses against the US dollar, would continue to make palm oil prices cheaper for exports, hence encouraging demand.

The board was also looking forward to China increasing its palm oil import and that the republic would gradually relax its zero-Covid policy, which has hindered palm oil consumption and demand.

China is developing further downstream production with more investments in the palm oil sector being explored particularly in refineries, specialty fats and biodiesel.

“This is something (positive) that we are looking forward to next year,” he said.

On Indonesia’s export levy, Ahmad Parveez said since January 2022, the country has implemented various policy measures with the aim to ensure supply availability and stabilise prices.

Indonesia’s palm oil stocks are expected to fall by around five to six million tonnes by early 2023 due to lower production growth, higher exports and allocation for biodiesel.

The expected resumption of export levy in 2023 is expected to lift palm oil prices as the price discounts to soybean oil are expected to narrow.

In contrast, Malaysian palm oil stocks are expected to increase due to stiff competition from Indonesia, which offered lower prices, which causes slower demand for Malaysian palm oil.

For the global market, he said oilseeds supplies will likely experience a sizable growth in 2022 and 2023 and will be driven by stronger production growth in Brazil's soybean, Canada's canola (rapeseed) and Russia's sunflower seed.

Lower-than-expected soybean production in the United States raises the global dependence on increasing South American supplies in the 2022/23 season.

“Productions in both Brazil and Argentina are expected to increase by 16 per cent and nine per cent respectively in the 2022/23 season. In contrast, production in the US is expected to decrease by 16 per cent,” he added.

Themed “Mitigating The Next Wave Of Market Uncertainties”, the seminar features eight presentations covering topics such as palm oil’s significance in the volatile edible oils situation, palm oil industry performance, approach to overcome global palm oil challenges and palm oil hub for East Africa, among others.

The four-day seminar ends on Nov 18.




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