Oil Palm Industry Economic Journal Vol. 9 (2) September 2009 p. 23-30

The Challenges Facing Palm Oil in the 21st Century

James Fry
Received:    Accepted:    Available Online:


The palm oil sector is facing short-run as well as long-run challenges. The short-run challenges focus on the ability of the sector to counter the economic cycle, whereas the long-run challenges are associated with fundamental issues pertinent to the sector. Both short-run and long-run challenges are products of biological factors of the oil palm and its products, as well as the behaviour of substitute oils, vegetable and/or mineral. The Malaysian palm oil sector has little control over the economic cycle as the cyclical behaviour depends heavily on other substitutes used as vegetable oils or biofuels. The long-run challenges of the sector are the slower rate of improvement in oil palm yields than other oilseeds, low labour productivity mostly due to problems in the mechanization of the harvesting operation, functional obstacles to palm oil usage in temperate countries due to its lipid composition, and the non-tariff barriers against palm oil by the importing nations, particularly the European Union (EU) and USA. Some possible solutions are proposed.

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