Malaysia’s palm oil industry will remain resilient in the future. The government’s continuous efforts to encourage downstream development and improve the level of sustainability in the palm oil industry promise a bright future for the industry. For the record, the Malaysian Sustainable Palm Oil Certification or MSPO programme has successfully covered around 96% of the oil palm areas.
Budget 2023 tabled recently has proposed an allocation of RM70 million to improve the level of sustainability in the palm oil industry including encouraging the recycling of palm waste materials. The government will also intensify its efforts to promote and counter anti-palm oil campaigns at a global level.
Such initiatives from the government will further strengthen the palm oil industry which has proved its resilience with significant performance even amid a pandemic-ravaged economy. The industry, in fact, continued to be one of the main contributors to the country’s gross domestic product during the COVID-19 pandemic, registering record-breaking export numbers.
Malaysia recorded RM73.25 billion in export revenue for palm oil and other palm-based products in 2020, an increase of 8.4% from RM67.55 billion in 2019. The export revenue further strengthened to RM108.52 billion in 2021, a rise of 48.0% compared to the previous year.
The higher export revenue was due to the increase in prices of palm oil products in the global market. In 2020, the price of crude palm oil (CPO) was traded higher, by 29.2% to RM2,685.50 per tonne, compared to RM2,079.00 per tonne in 2019 due to firmer prices of soyabean oil (SBO) in the global market and lower domestic stock of palm oil. The price of CPO continued to surge in 2021 with the average price rising by 64.1% to RM4,407.00/tonne, its highest in the history of the palm oil industry, compared to RM2,685.50/tonne in 2020.
The higher CPO price in 2021 was due to firmer prices of soya bean oil in the global market, supply disruptions, labour shortage in the oil palm plantations, lower domestic stock of palm oil which was below 2.0 million tonnes, firmer Brent crude oil prices in the global market and higher palm oil exports to major importing countries, especially India.
Palm oil is a versatile vegetable oil that is used as a raw material for both food and non-food industries. Most of the oil is used for food applications such as cooking oil, margarines, spreads, confectionary fats, ice cream, emulsifiers, and vanaspati.
The world’s population is expected to reach 9.8 billion by 2050 with significant growth in the least developed countries. Meanwhile, the amount of arable land per person is shrinking with a projected decline of 0.38 hectares in 1970 to 0.15 hectares per person by 2050.
The world’s consumption of vegetable oils has more than doubled in the past two decades, from 87 million tonnes in 2000/2001 to 237.5 million tonnes in 2020. The surge in consumption of vegetable oils raises the question: How can we produce sustainable vegetable oils to feed the growing world population while safeguarding the natural environment?
Palm oil tops the list of oil crops for yield as it requires less than one-eighth as much land as soy to produce the same quantity of oil. Today, palm oil accounts for six per cent of all cultivated land for vegetable oils globally but produces over one-third of the total output.
Notwithstanding that, the future of the Malaysian oil palm industry relies on technological breakthroughs and product diversification.
During the Movement Control Order period, necessitated by the COVID-19 pandemic, harvesting activities in the oil palm plantations could not be conducted effectively due to labour shortage and this had caused a fall in the production of fresh fruit bunches (FFB) and the income of oil palm growers, including the smallholders.
Labour wages for manuring and harvesting activities had also increased during the period. The price of agricultural inputs, especially fertiliser, also rose during the pandemic. The increase in the cost of inputs such as fertiliser has affected the income of oil palm growers although the price of FFB is on the uptrend.
As such, industry players are looking at the use of Artificial Intelligence (AI), improved technology, and increased mechanisation for all aspects of palm fruit harvesting in the plantations.
The Mechanisation and Automation Research Consortium of Oil Palm (MARCOP) was launched in November 2021 as a collaborative effort between the government and the industry, aimed at reducing dependency on the labour requirement for oil palm harvesting.
MARCOP explores, screens, designs and implements solutions, explicitly focusing on harvesting of FFB. The efforts are aimed at reducing dependency on the labour requirement for oil palm harvesting.
Apart from MARCOP, several other initiatives are being pursued to increase the industry's wider adoption of oil palm mechanisation in the oil palm plantations. This includes organising a bi-yearly seminar on mechanisation, establishing support programmes such as the Motorised Cutter Purchase Support Programme (SKIDIC), and a few related programmes.
A support grant has also been created to increase the participation of technology developers and other relevant research agencies in research & development (R&D) and pre-commercialisation activities. The Oil Palm Mechanisation Fund provides monetary support for eligible parties with particular terms and conditions.
The adoption of new technologies can provide solid foundation for precision agriculture to increase productivity.
Companies that have reaped profits from high CPO prices should channel some funds to increase mechanisation especially on plantation management such as pruning, pest and disease control and fertiliser application. Hence, the existing labour could be used for harvesting.
The development of high-skilled human capital which is well trained with the Internet of Thing (IoT) will improve productivity.
Industry players should move into midstream and downstream as these sectors are more resistant to crude palm oil price fluctuation.
Regional food hub
Our aspiration as a regional food hub with higher productivity and diversification in the downstream sector must be realised. We are also enhancing renewable energy utilisation by promoting palm-based biomass production.
We are also shifting from petrochemical to biochemical based on value addition of palm oil products.
The expansion and diversification of the palm oil industry as well as exploring market specific applications of palm products will increase the country’s current share of the palm oil products global market.
Promoting value-added palm products and increasing the use of palm-based phytonutrients will open new market segments for the country.
Datuk Dr Ahmad Parveez Hj Ghulam Kadir is the Director-General of the Malaysian Palm Oil Board.