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Palm oil industry in Malaysia - statistics & facts

Palm oil is the world’s most used edible oil and is found in many consumer goods as well as in biofuels. In recent years, the Malaysian palm oil industry has faced increasing challenges from changing weather patterns and the growing awareness of the environmental impact of palm oil monoculture to overreliance on foreign labor in the plantations. These issues were compounded by the current COVID-19 pandemic, impacting the production, stockpile, and price of this commodity.

Malaysia’s role in the global palm oil trade

Malaysia is the second leading producer of palm oil worldwide, supplying around a third of the world’s palm oil. Palm oil is one of Malaysia’s primary industries and contributes 2.7 percent to its overall gross domestic product (GDP). Production is concentrated in Peninsular Malaysia, where more than half of all palm oil planted areas are found. The largest single export markets for Malaysian palm oil were China and India, while the countries of the European Union make up its largest import region.

Challenges to the Malaysian palm oil sector from the COVID-19 pandemic

The Malaysian palm oil sector faces several challenges, the most immediate being the ongoing COVID-19 pandemic. As the world grapples with the highly contagious Omicron variant, the much-awaited ‘return to normal’ seems to be postponed once again for many countries. This would affect the demand for Malaysian palm oil, especially from the hospitality, restaurant, and catering sector, which would probably remain low until all COVID-19 restrictions are lifted.
The COVID-19 pandemic also led to a shortage of plantation workers, as travel restrictions prevented the entry of migrant labor from Indonesia. This led to a longer harvesting window for the palm oil fruit, leading to poorer quality and increased loss of fresh fruit branches (FFB).

Long-term challenges to the Malaysian palm oil sector

The Malaysian palm oil sector is also facing a long-term decline in exports of Malaysian palm oil to the European Union, one of its largest export markets. This is a result of the EU’s Renewable Energy Directive recast, RED II, which phased out the use of palm oil as a biofuel source due to environmental concerns. Even so, global consumption of palm oil is increasing, and the decline in exports to the EU could be offset elsewhere, particularly in the Asian market.

Another long-term challenge facing the Malaysian palm oil industry would be harder to control. Changing weather patterns in recent years have impacted the production of palm oil. Heavy rains caused by the La Nina weather phenomenon, forecast to end by March 2022, contributed to decreased oil palm yields in 2020 and 2021.

Decreased production during the last two years has led to reduced stockpiles of Malaysian palm oil, pushing crude palm oil prices sky-high. This situation is however predicted to stabilize in 2022, as experts predict an end to the pandemic and more countries start to ease their COVID-19 restrictions.

Interesting statistics

In the following 6 chapters, you will quickly find the 23 most important statistics relating to "Palm oil industry in Malaysia".

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