Risk Response Strategies of Malaysian Oil Palm Estates for the Downturn in CPO Prices

Article history:
Received: 16 August 2021
Accepted: 30 November 2021

Available online: 3 January 2022

Page number: 11-20

Author: Nur Nadia Kamil1 and Nur Ain Mohd Hassan1

Being traded in the Bursa Malaysia Derivative market, the price of crude palm oil (CPO) is volatile, which brings uncertainty to the profitability of the palm oil industry players, particularly to the oil palm growers. Lower CPO prices also causes the fresh fruit bunch (FFB) price to decline. Hence, the purpose of this study is to identify the risk mitigation strategies applied by the Malaysian oil palm estates during the low CPO prices environment to remain profitable in businesses. The study aims to examine the best risk mitigation measures practiced by the estates faced with a situation of low CPO prices environment and provides some guidelines to the relevant organisation to prioritise the mitigation measures in order to minimise the risk associated with low CPO prices. Primary data were collected through an online survey to 769 plantations throughout Malaysia. A descriptive and inferential statistical analysis was conducted using the Statistical Package for Social Science (SPSS) version 20. The study also provides various responses from the experienced oil palm players on the most crucial component in mitigating the price risk arising from the downturn in CPO prices. The measures include management of business assets, business diversification and the financial management found to be significant to reduce the risk of price volatility. Meanwhile, elements under the operational business decisions were the least preferred measures to minimise the risk during low CPO prices.

1 Malaysian Palm Oil Board,
6, Persiaran Institusi,
Bandar Baru Bangi,
43000 Kajang, Selangor, Malaysia.
E-mail: nadiakamil@mpob.gov.my