This report profiles Malaysia’s palm oil industry, discussing market trends through 2013 and outlook for 2014 and beyond. The report also highlights leading players in the sector including Sime Darby Berhad, IOI Corporation Berhad and Kuala Lumpur Kepong Berhad.

Following rapid growth in the past few years, the Malaysian palm oil industry went through unprecedented times in 2012 with lower crude palm oil (CPO) production, as well as lower palm oil prices and exports. In 2013, CPO production and exports recovered whereas imports were low all year round. The average CPO price for the year slipped 14.2% to MYR 2,371 per tonne from MYR 2,764 per tonne in 2012, while export revenue of palm products declined 14.1% to MYR 61.36bn.

CPO production in 2013 improved to 19.22mn tonnes, up 2.3% from 18.79mn tonnes in 2012. The improvement was attributed to higher fresh fruit bunch (FFB) yield and increase in production from new matured areas especially in Sarawak. Palm oil stocks in 2013 declined 24.4% to 1.99mn tonnes, from a record-high 2.63mn tonnes in the previous year. Higher exports as well as significant decline in imports had contributed to the lower closing stock for the year.

Effective January 1, 2013, Malaysia lowered its CPO export tax rates to create a level playing field vis-à-vis its Indonesian peers and provide an export outlet for the huge stockpiles. The government has also shown keen interest in subsiding oil palm replanting scheme and raising domestic demand for palm biodiesel to prevent escalating stockpile. Globally, the weather forecast models are predicting a possible return of a weak-to-moderate El Nino by the end of this year. Nevertheless, CPO production is expected to increase in 2014, attributable to recovery in FFB yield performance as well as increase in new mature area coming into production.

Key Points:

• The oil palm planted area increased 3.0% year-on-year, from 5.08mn hectares in 2012 to 5.23mn hectares in 2013.

• The production of crude palm kernel oil (CPKO) surged 4.9% to 2.27mn tonnes in 2013.

• The average FFB yield increased 0.7% to 19.02 tonnes per hectare in 2013. Sabah accounted for the highest FFB yield, recording an improvement of 2.4% yoy to 20.88 tonnes per hectare.