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World's Most Widely Used Edible Oil Is Experiencing a Supply Shortage

Palm oil, the most widely used edible oil, has been a major contributor to this year's spectacular rise in global vegetable oil markets.

Chintu Das
Palm Oil
Palm Oil

Malaysian palm oil output is on track to have its worst year in five years as planters battle with the worst-ever manpower shortage in the world's second-largest producer & poor yields are expected to linger until March.

According to Nageeb Wahab, chief executive of the Malaysian Palm Oil Association, which represents 40% of the country's palm plantations by area, the country's output might fall below 18 million tons this year. This is a decline of at least 6% from the previous year, and it's the lowest yearly volume since 2016.

As per Nageeb, yields will taper down near the end of the year and will likely to stay weak in the first quarter of 2022. Production may improve in the second quarter, but only if the harvesters are permitted to enter the country, including 32,000 foreign labourers the government had approved.

Furthermore, a scarcity of competent harvesters on estates has resulted in fresh fruit bunches decaying on trees, preventing farmers from profiting from the palm's historic rise. It also means that they've "missed the boat" on the crop's peak production months, which are typically August through October, according to Nageeb.

"Because of the massive crop losses this year, we never got that peak output," He added. This year, the industry will lose 20% to 30% of its potential production, resulting in a revenue loss of about 20 billion ringgit ($4.8 billion), or roughly double the amount lost last year.

Malaysian Prime Minister Ismail Sabri Yaakob gave some relief from the labor shortfall, by saying that the government will accept fully-vaccinated migrant workers into the plantation business on a case-by-case basis, though no quotas or arrival dates have been set.

The industry is experiencing unprecedented times due to a volatile mix of production challenges, whether it is due to climatic conditions or coronavirus limitations, and rebounding worldwide demand. Marcello Cultrera, an institutional sales manager and broker at Phillip Futures in Kuala Lumpur, said that, "We're in new seas because of prior high prices & price volatility."

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