KUALA LUMPUR: The rise in domestic consumption of crude palm oil (CPO) will not be able to offset the losses in exports, and exports are likely to shrink by between eight per cent and 15 per cent by end-March, said palm oil analysts.
Singapore-based Palm Oil Analytics owner and co-founder Dr Sathia Varqa said domestic consumption in February was 346,720 tonnes – a 13-month high, but it only accounts for 16 per cent of total annual demand.
He added that demand is expected to grow higher to 400,000 tonnes in March on panic buying among the people for essentials like edible oils and products containing oleochemicals from palm oil like home care and hygiene products during the Covid-19 pandemic.
“However, looking at the bigger picture, the smallholders will inevitably suffer due to some sort of disruption.
“They live on fresh fruit bunches (FFB) collection revenue. But against the backdrop of lower CPO prices, FFB prices paid will be lower,” he told Bernama.
CPO prices was at a record high of more than RM3,000 per tonne in January, but has since dropped to between RM2,400 and RM2,500 per tonne due to the effects from the Covid-19 pandemic.
Although there is a plethora of assistance available to the smallholders to ease their
burden amid the escalating pandemic, it is not enough, said Sathia.
While the plantation industry was allowed to continue operating during the movement control order (MCO), it would still disrupt the palm oil supply chain.
“Harvesting is a job where social distancing comes naturally, and the manpower needs for oil palm is lower compared to other tree crops. Depending on yield rates, one full-time worker can manage up to four hectares.
“But given the general slowdown in movement of people and activities, transport services like trucking of CPO from mills to refineries and subsequently to ports or packaging location will also be affected, leading to slower movement and lower export volume in the month,” Sathia said.
Meanwhile, Malaysian Palm Oil Board director-general Dr Ahmad Parveez Ghulam Kadir said during the Review and Outlook seminar held in January, the industrial regulator predicted that Malaysia’s exports for 2020 would decline by 2.5 per cent.
“However, due to the current development of Covid-19, we expect that exports of palm oil would decline further due to limited exportable caused by the pandemic.
“If the current situation is prolonged, the impact of Covid-19 on palm oil production and exports would be bigger,” he said, adding that it was still too early to estimate the losses as it would depend on the MCO period.
While palm oil exports are expected to decline due to a projected low demand from major palm oil importing countries, the pandemic is also anticipated to affect local palm oil production.
“Thus, the real problem that we might be facing this year is not lower export demand, but limited exportable supply to the world due to tight CPO production caused by Covid-19.
“Additionally, Malaysia also has to fulfil its commitment to the B20 Biodiesel programme,” said Ahmad Parveez.
The B20 programme has been implemented in stages beginning with Langkawi and Labuan in January 2020.
By May 2020, the B20 programme will take effect in Sarawak, followed by Sabah in September 2020. — Bernama