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Malaysia’s palm oil industry faces new challenges

Malaysia’s palm oil industry faces new challenges

KUALA LUMPUR: The rapid growth of the palm oil industry has brought about many new challenges for this sector.

For Malaysia, making inroads into new markets is always crucial for the 20 million tonnes of crude palm oil (CPO) that is produced each year. But Indonesia, the world’s largest palm oil producer, and the commodity’s closest substitute, soybean oil, offers stiff competition to the golden crop.

The scenario today is one of low prices for the commodity, which is exported to about 150 countries which depend on palm oil for cooking, frying, making margarine and bakery fats.

Phillip Futures Sdn Bhd Derivatives Product Specialist David Ng said lower prices would mean higher offtake as more countries, especially the poor ones, would be able to purchase the edible oil for their consumption.

However, low CPO prices will usually affect plantation margins which then require companies to embark on cost reduction practices.

To top it off, increasing competition from Indonesian plantation companies are pressuring local companies,” he told Bernama.Ng said the decision to extend zero export tax on CPO might deem as a good move but Indonesia will soon follow suit.