Palm Oil

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Malaysian Palm Oil Industry at Crossroads and its Future Direction Khoo Khee Ming* and D Chandramohan**
ABSTRACT Palm oil accounts for 20% and 46% of the global oil and fats production and trade respectively. Malaysia is the world’s largest producer and exporter of palm oil with a 50% share of world palm oil production and 61% of exports. This paper assesses the growth of the Malaysian palm oil industry and the limitations of land and labour on the future growth of the industry. The industry’s competitive edge will continue to be a vital factor for its future development. Thus, in order to remain competitive, the industry needs to improve on productivity, explore opportunities to diversity the income base, widen the end-use base for palm oil, explore new marketing approaches and intensify vertical integration.

PLANTED AREA GROWTH The expansion of oil palm plantings in Malaysia during the past 41 years has been phenomenal. From a mere 55 000 ha in 1960, the oil palm planted area had expanded to 3.5 million hectares by 2001, occupying 60% of the agricultural land in the country. About 60% of the planted area is in Peninsular Malaysia; 30% in Sabah and 10% in Sarawak (Figure 1). In recent years, most of the expansion has been in the East Malaysian states of Sabah and Sarawak due to the declining availability of land in Peninsula Malaysia.

PRODUCTION GROWTH The rapid expansion in oil palm cultivation resulted in a corresponding increase in palm oil production from less than 100 000 t in 1960 to 11.8 million tonnes in 2001 (Figure 2). The largest palm oil producing state in Malaysia is Sabah which accounted for 31% of total production in 2001. Palm oil is the second largest oils and fats produced after soyabean oil, accounting for 23.6 million tonnes or 20% of the world oils and fats production in 2001. Malaysia remains the largest producer of palm oil accounting for 50% of world production last year

* PPB Oil Palms Bhd. 15th Floor Wisma Jerneh, 38, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia. ** Malaysian Palm Oil Board, P. O. Box 10620, 50720 Kuala Lumpur, Malaysia.



1000 ha

2 500 2 030 2 000 1 482 1 500 1 023 1 000 500 38 0 1950 55 1960 261 1970 1980 1985 Year 1990 1995 2000 2001

Source: MPOB (2002).

Figure 1. Expansion of oil palm planted area in Malaysia.
11.8 12.0 10.0 7.8 7.2 6.1 8.4 9.1 8.3 10.6 10.8

Million tonnes

8.0 6.0 4.0 2.0 0.0 0.1 0.1 0.4 2.6

1950 1960 1970 1980 1990 1994 1995 1996 1997 1998 1999 2000 2001 Source: MPOB (2002).


Figure 2. Growth of palm oil production in Malaysia. (Figure 3). Malaysia’s ability to supply 10% of the global oils and fats production is an achievement as only 3.5 million hectares is planted with oil palm. The status of palm oil today in the world market is without doubt due to the significant contribution and commitment by the Malaysian palm oil industry. Malaysia has also become a role model for many other palm oil producing countries in their plans to spur economic development and gain foreign exchange through exports of surplus production. The oil palm is more productive than other oil-bearing crops and Malaysian oil palm currently yields an average 3.66 t/ha of oil per year, which is 7 and 2.5 times more than soyabean and rapeseed respectively (Figure 4). Owing to the high yielding trait of oil palm, producing countries on the whole utilized only 7.0 million hectares of land to produce 23.6 million tonnes of palm oil in 2001 compared to soyabean producers which required 75.8 million hectares to produce 27.8 million tonnes of soyabean oil during the same year (Table 1). This advantage makes oil palm the most productive and important source of edible oil to the growing world population - a point that cannot be overstressed as the world’s available land for food production...
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