KUALA LUMPUR: Crude palm oil (CPO) prices may correct to RM4,000 per tonne once labour shortages on the plantation fields are addressed and restored, says Plantation Industries and Commodities Minister Datuk Zuraida Kamaruddin.(pic)
“Once the labour force is replenished, we would be able to then increase CPO production and therefore the price will be a bit more normalised and may drop to an average of RM4,000 per tonne,” Zuraida said in her speech at the Palm and Lauric Oils Conference and Exhibition 2022, yesterday.
Elaborating further, she said there is a wildcard which may put some uncertainty to this price expectation, given the still developing conflict between Ukraine and Russia.
“What I said is solely based on supply and demand expectations. But the conflict may put an upward pressure on prices.
“Indonesia is also putting a quota for eight million tonnes of CPO that cannot be exported, which will go to its local consumption. This would give Malaysia an opportunity to capture the spare capacity,” Zuraida said at a briefing.
She said with the additional foreign labour that is set to enter the country, Malaysia’s CPO production is expected to increase to 20 million tonnes this year from 18.1 million tonnes last year.
“We have also spoken to many other developing countries and the demand is very high,” she noted.
Commenting on CPO prices, Malaysian Palm Oil Association chairman Datuk Lee Yeow Chor said in his presentation that CPO benchmark three-month forward prices are at RM6,500 per tonne and this is 2.5 times the past decade’s price average.
Commenting on CPO prices, Malaysian Palm Oil Association chairman Datuk Lee Yeow Chor said in his presentation that CPO benchmark three-month forward prices are at RM6,500 per tonne and this is 2.5 times the past decade’s price average.
“We have a historically high price today. From 2010 to 2020, the average CPO price was actually RM2,550 per tonne. Palm kernel (PK) is also at a historical high.
“In the past decade, the average PK price is RM1,800 per tonne but today, it is at almost RM5,000 per tonne, which is 2.5 times higher,” Lee said.
“We also know that CPO prices go up and down but when we looked at the previous highs of where there were supernormal price levels of more than RM4,000 per tonne, this used to last just about six months.
“But this time, the super-high prices have, very surprisingly, lasted for 15 months and it looks set to continue for at least another three months,” he added.
Lee said the higher prices were supported by several factors.
He said this includes a considerable slowing of new oil palm plantings over the past few years due to pressure from non-governmental organisations, which forces the industry to focus a lot more on environmental issues.
“This is also the same in Indonesia as those who are present in that country. We also know that new plantings have slowed down considerably over the last five years.
“But I have to note here that deforestation is caused by many other factors too,” said Lee, who is also IOI Corp Bhd group managing director.
Meanwhile, Zuraida said the principles of justice must be upheld when dealing with claims of labour practices or environmental matters in the palm oil industry.
“This is a rather unfair treatment as the principles of justice are not being practised when it comes to allegations against the palm oil industry.
“When they receive one complaint, they put us on their so-called blacklist straight away. But there is no verification process and this is something that must be highlighted,” Zuraida said.
She added that whatever claims that are made must be backed by a verification process.
“But there is no such process now. We, on the other hand, can also claim that rapeseed, corn or sunflower oil are the products that are causing deforestation.
“This is because an oil palm plantation can last for 25 years while replanting for other oils such as soy oil has to be done every year,” she said.