Vol. 13 (2) September 2013 – OPIEJ

The Impact of La Niña and El Niño Events on Crude Palm Oil Prices: An Econometric Analysis

mpob_admin — Tue, 28 Aug 2018 14:34:53 +0000

Both the La Niña and El Niño events are deemed as being strong market sentiments issues that supported crude palm oil (CPO) prices in an upward trend. An analysis carried out was shown that both events have a positive relationship with CPO price movements in the market. This study also reveals that the effect of the La Niña event on CPO prices is greater than that of the El Niño event. Production will normally decline as heavy rainfall usually brings floods that could disrupt harvesting and the collection of fruits in low lying oil palm areas. Palm oil stock levels could also decline due to lower supply availability. In contrast, the effect of the El Niño event is seen on a long-term basis. Hot weather conditions during El Niño could result in less rainfall and have a stress effect on oil palm. This could bring down the yield of fresh fruit bunch (FFB) production in the future. The study revealed that past El Niño events (at lagged 8 to 22 months) can also affect current CPO production. With the incorporation of these two phenomena into the model (La Niña and El Niño events) developed for this study, it was found that the CPO price can be forecast more accurately. By using the model, the direct and indirect impact of La Niña and El Niño events on CPO prices can be determined. The results also showed that when La Niña and El Niño events occur, CPO production in a year will decline by 3.37%, palm oil stock level will decline by 2.5%, while the CPO price is likely to be higher by 10.2% as compared to a situation when the phenomenon did not occur.

Technical Efficiency of Independent Oil Palm Smallholders (ISH) in Peninsular Malaysia with Respect to Fertiliser and Land Size

mpob_admin — Tue, 28 Aug 2018 14:33:40 +0000

Productivity of independent smallholders (ISH) is said to be low. This is partly due to, among others, their lower efficiency level compared to the estates. Although this is a known fact, there is no literature available which measures their efficiency level in producing their fresh fruit bunch (FFB). Hence, this study was carried out on the ISH to assess and determine their technical efficiency (TE) level by considering their effectiveness on using inputs, such as fertilisers and size of their holdings. The results of the study can be used to fill up the missing information pertaining to their level of efficiency. The study used Stochastic Frontier Analysis approach to see the effects of the two inputs. The ISH from Pahang, Perak and Johor were included in this study to represent Peninsular Malaysia region. The two variables, i.e. fertiliser application and size of their holdings had a positive relationship with FFB yield. The study revealed that the estimated average level of TE for the ISH is 0.70 while the maximum and minimum TE are 0.94 and 0.23, respectively. This indicates that the ISH in Peninsular Malaysia are generally inefficient and supports the claim to statement made by various authors on the level of their efficiency. The big difference in TE among ISH in the sample suggests that there is a potential to increase their output or yield by using inputs more efficiently. This can also be inferred that there is an opportunity to improve the ISH productivity, especially the Malays and Indian ethnic groups whose efficiency levels are lower than the Chinese ethnic group.

The Effect of Labour Shortage in the Supply and Demand of Palm Oil in Malaysia

mpob_admin — Tue, 28 Aug 2018 14:32:28 +0000

The Malaysian palm oil industry plays an important role in the agricultural development of the country and contributes significantly to the country’s Gross Domestic Product (GDP), foreign exchange and creation of employment opportunities. On average, the industry contributes 5% to 7% of GDP and for the last five years the industry has contributed on average about RM 65.3 billion per year to export revenue. The Malaysian palm oil industry, especially the oil palm plantation sector offers various job opportunities as the sector is highly dependent on manual labour. However, a minimal involvement of the locals (due to the 3D perception – dangerous, dirty and difficult) has provided avenues for foreign workers to work in the plantation sector. In 2012, it was estimated that there were 505 972 employees in the oil palm plantation sector. Out of the total, 386 913 or 76.5% were foreigners. Foreign workers were employed mainly in high labour demand operations such as harvesting, field work and other general work. These days, the main issue in oil palm plantation sector is labour shortage problem especially for fresh fruit bunch (FFB) harvesting and collection. The difficulty of employing local as well as foreign workers especially from Indonesia has caused the oil palm plantation sector to face a labour shortage particularly for FFB harvesting and collection. This situation has affected the supply of palm oil in the domestic as well as world markets.

An Analysis on Trends of Vegetable Oil Prices and Some Factors Affecting CPO Price

mpob_admin — Tue, 28 Aug 2018 14:31:35 +0000

Price is determined by market forces of supply and demand, interacting together to produce an equilibrium price. Mismatch of these forces can cause price to change. Frequent and continuous changes in price will lead to volatility which appears to be increasing over time, especially in the oils and fats sector. This gives an indication that the sector has become complicated over time. Not only the volatility increased over time, the prices themselves had up-trended and exhibited the presence of trend factor. Other factors, such as seasonal and cyclical factors were not transparent. This article analyses trends for prices of selected oils and fats, including that of crude oil. It also describes the strategies of the Malaysian government to narrow down the widening gap between soyabean oil and palm oil prices.