Rats, drought and labour shortages eat into global edible oil recovery

Perak, Malaysia Singapore

In a sprawling oil palm plantation in the Malaysian state of Perak, watermelon seedlings are sprouting from freshly ploughed earth between palm saplings while rented cows graze in overgrown areas of the estate.

A coronavirus pandemic-induced labour crunch has forced managers of the 2,000-hectare estate in Slim River to find creative ways to upkeep their fields, even as prices of the world’s most consumed edible oil are near record highs.

“It is easier to pull out your own teeth than to get new workers now,” said estate manager Ravi, who gave his first name only. “I can’t find the workers to maintain the fields.”

Malaysia, the world’s second-largest producer of palm oil, is facing a perfect storm of production headwinds that will likely drag global stocks to their lowest level in five years.

The Southeast Asian country is a microcosm of the difficulties facing producers of various edible oils across several continents, from Canadian canola farmers to Ukranian sunflower growers, as they struggle to meet strong demand.

Global food prices have scaled 10-year highs this year – the Food and Agriculture Organization’s (FAO) price index is up more than a third since last summer – due in large part to a surge in the price of vegoils that are vital for both food preparation and as fat in numerous daily staples.

Graphic: An 80% climb in vegetable oils since mid-2020 has lifted global food prices to multi-year highs – The FAO’s global edible oils index is up 91% since last June, and is expected to climb further as economies reopen following COVID-19 lockdowns, boosting food and fuel consumption of edible oils.

But producers have been battling a range of impediments, including labour shortages, heatwaves and vermin infestation, that is driving collective stocks of the world’s most consumed edible oils – palm, soybean, canola (rapeseed) and sunflowerseed – to their lowest levels in a decade.

In Malaysia, which accounts for around 33% of global palm oil exports, the average yield of palm fruit bunches in Jan-June fell to 7.15 tonnes per hectare from 7.85 a year ago. Malaysian Palm Oil Board data shows a drop in average crude palm oil yields to 1.41 tonnes per hectare, from 1.56 tonnes over the same period last year.—Reuters

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