MEDIA RELEASE
MALAYSIA WILL NOT LOSE COMPETITIVE EDGE AS INDONESIA RESUMES
PALM OIL EXPORT

With regard to the latest move by our neighbour Indonesia who is also the world’s largest palm oil producer to lift the ban on palm oil exports effective May 23, the Ministry of Plantation Industries and Commodities (MPIC) wishes to urge all Malaysian oil palm growers – both plantation firms and smallholders alike – not to be unduly concerned with the recent development.

While a knee jerk correction in palm oil price is inevitable given such a move will somehow ease concerns over vegetable oil supply, MPIC does not expect a big downward adjustment to CPO prices as the market is well aware that this ban was always going to be temporary.

Moreover, the recent weakening of crude palm oil (CPO) prices could have already factored in this possibility. Market analysts expect Malaysian planters to be the largest winners on the long run as they are able to sell their CPO at high spot prices which should translate into higher profit margin in 2Q 2022 coupled with higher production year-on-year (y-o-y) and quarter-on-quarter (q-o-q).

While the export ban lifting is a big relief to Indonesia planters, they have certainly missed out on the high CPO price period (February-April 2022) when Indonesia palm oil prices were trading at a larger discount to Malaysia with all the export control policies put in place since late-January 2022.

BIG ADVANTAGE

Indonesia’s policies could well work to Malaysia’s advantage as the world’s second largest palm oil producer, given this would enable it to emerge a dominant supplier to India which is the world’s top buyer of the edible oil. The combination of Malaysia’s lower export taxes and the Indonesian ban may mean Indonesia’s share of palm oil exports to India will fall to 35% in the current marketing year ending on Oct 31 from more than 75% a decade ago, according to an estimate from the Solvent Extractors' Association of India (SEA), a vegetable oil trade body.

In the first five months of the 2021/22 marketing year, India bought 1.47 million tonnes of Malaysian palm oil compared to 982,123 tonnes from Indonesia, data compiled by SEA showed. Trader estimates for May show India imported around 570,000 tonnes of palm oil with 290,000 from Malaysia and 240,000 from Indonesia.

Above all else, MPIC believes that CPO prices will remain at elevated levels going forward given the output uncertainties on major oilseeds (such as soybean, corn, rapeseed and sunflower seed) either due to geopolitical tensions or unfavourable weather.

Lastly, even as Indonesia would resume its palm oil exports on May 23 (Monday) – barely a month after imposing the ban on April 28 – it may not end there given palm oil prices in its domestic market have yet to come down to the desired level (in fact, lifting of the ban could result in a recurrence of domestic shortage in the country).

Given that the medium- to long-term outlook of the Malaysian palm oil industry remains bright, MPIC wishes to call on all Malaysian oil palm growers to join hands in helping to make the Malaysian Palm Oil Full of Goodness campaign which seeks to counter various misperceptions with regard to Malaysian palm oil a global success.

YB DATUK HAJAH ZURAIDA KAMARUDDIN
MINISTER OF PLANTATION INDUSTRIES AND COMMODITIES
22 MAY 2022