Palm oil production in Malaysia is being dealt a double blow from a persistent shortage of workers to harvest the crop and torrential rains that have triggered floods in key growing areas of the world’s No. 2 supplier.
Relentless heavy rain and thunderstorms have led to flash floods in parts of Sabah, Sarawak, Johor, Pahang and Perak — the biggest palm oil-producing states in the country. While palm trees are typically water-loving and resistant to wet weather, prolonged floods could prevent harvesting — leading to overripe fruit and poor oil quality — and disrupt transport of fruit to mills.

Top palm oil producers said on Thursday that the industry is making strides towards transparency and sustainability across its supply chain despite campaigns against use of the oil.

Campaigners say that the industry is responsible for deforestation of tropical rainforests and human rights abuses and have initiated consumer boycotts of palm oil, which is found in everything from pizza to lipsticks.

However, such campaigns are hindering the industry's efforts to achieve sustainability certification and develop a market for certified sustainable palm oil (CSPO), top palm oil producers said during the Reuters Next conference.

After Malaysia’s crude palm oil (CPO) inventory declined to a three-and-a-half-year low of 1.26 million tonnes in December 2020 from 1.56 million tonnes in November, analysts believe a seasonal production uptick, coupled with weaker export demand, will help replenish stocks and consequently drive prices down.
In a note, MIDF Research projected CPO prices will continue to increase in the first quarter of 2021 (1Q21) on the back of anticipated supply tightness and higher export demand. However, it presumes CPO prices will soften in the second half of this year (2H21) due to better production levels and lower export demand.