Oil Palm Industry Economic Journal Vol. 3 (1) March 2003 p. 25 - 31

An Economic Perspective of Oil Extraction Rate in the Oil Palm Industry of Malaysia

Chang, L C; Abdul Rahim Abdullah Sani and Zainon Basran
Received:    Accepted:    Available Online:


The national average oil extraction rates (OER) in Malaysia since 1980 until 2002, have fluctuated from a low of 18.48% in 1982 to a high of 19.87% in 1987/1988, although many individual mills have obtained more than 20% OER. In times of low prices of crude palm oil (CPO) as seen in the recent period of 2000/2001 and low yield productivity, producers are challenged to improve the performance of OER as this measurement is a management tool in assessing the profitability of a plantation enterprise. Historical OERs for the past 10 years are used to estimate at the macro level, the quantity and value of CPO loss or gain, arising from the annual change of OER. The differentials of the annual OERs and the 20% benchmark OER are also used to estimate the loss in revenue, since until now, the benchmark OER of 20% has not been attained. The highest loss of CPO revenue amounted to about RM 255 million in 1999 arising from an annual change of minus 0.31% OER, whilst that arising from the differential of the OER in 1999 and the benchmark 20% OER, or a drop of 1.4%, amounted to an astounding RM 1.15 billion in a single year based on an average CPO price of RM 1449.50 in 1999. If CPO is considered in the downstream processing, value adding that could have been achieved ranged from RM 21.53 to RM 54.66/t in the five-year period of 1997-2001.

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