Vol. 16 (1) March 2016 – OPIEJ

Examining the Long-term Relationships between the Prices of Palm Oil and Soyabean Oil, Palm Oil Production and Export: Cointegration and Causality

mpob_admin — Wed, 29 Aug 2018 00:15:59 +0000

The main objective of the article is to investigate whether there are long-run and short-run relationships among natural log of the prices of palm oil price (LPOP) and soyabean oil (LSOP), oil palm production (LPROD) and total export (LEXP). These time series data are annual data from 1988 to 2015. Augmented-Dickey Fuller (ADF) stationary test results show that the time series for LPOP, LSOP, LEXP, and LPROD are stationary at first difference. According to the Engle and Granger method, there is a cointegration relationship between the time series data. Further, the Johansen method shows at least two cointegration vectors between the variables. The Vector Error Correction Model (VECM) was used to test these two cointegration vectors for long-run cointegration relationships. The empirical evidence obtained from the study shows there is no longrun equilibrium between the variables. This is proven by the nonsignificant and positive values of the Error Correction Term (ECT) parameter. In other words, a change in oil palm price in the long-term is not influenced entirely by soyabean oil price. It may be affected by other important factors such as palm oil supply and extreme weather phenomena. However, the Granger short-run relationship test found that there is a one-way Granger causality relationship from LPROD to LPOP, and from LEXP to LPOP. Thus, it is shown that total export and production of palm oil are expected to influence palm oil price in the short-run.

Keywords: natural log of palm oil price, soyabean oil price, oil palm total export, oil palm total production

Climate Variability and its Impact on the Palm Oil Industry

mpob_admin — Wed, 29 Aug 2018 00:14:35 +0000

Located between the Indian and Pacific Oceans, Malaysia is exposed to changes in climate variability, namely, the El Niño and La Niña phenomena. These two complex weather patterns result from variations in the ocean temperatures of the equatorial Pacific. The occurrence of the so-called El Niño-Southern Oscillation (ENSO) event has a notable impact on the amount of rainfall in Malaysia. However, the magnitude of the impact depends on the intensity of the event. Additionally, the occurrence of the ENSO event also influences the production of crude palm oil (CPO) as rainfall is one of the key requirements for oil palm cultivation. This article describes the development of the ENSO event and analyses its impact on the palm oil industry in Malaysia.

Keywords: El Nino, La Nina, ENSO, FFB yield, crude palm oil

Sustainability as a Success Factor for Palm Oil Producers Supplying the European Vegetable Oil Markets

mpob_admin — Wed, 29 Aug 2018 00:13:35 +0000

In Europe, due to their voluntary commitments, the leading businesses which are active in the food, feed, detergent and chemical sectors are moving towards procurement of sustainable and deforestation-free vegetable oils for their supply chains. The amended European Union (EU) biofuel legislation also requires them to comply with specific sustainability criteria for vegetable oils in the biofuels market. Both growing requirements of private businesses and EU biofuel legislation highlight the importance of sustainability certification for palm oil suppliers. Moreover, for those markets where a substitution of palm oil is unlikely due to technological and cost reasons, the implementation of the EU Regulation 1169/11 on the Provision of Food Information to Consumers, further prompts the procurement of sustainable certified palm oil. Suppliers of sustainable palm oil could profit from these favourable circumstances only if their sustainability certification were granted through reliable and credible sustainability standards. Through the use of advanced tools granting deforestation-free supply chains, such as the Global Risk Assessment Services (GRAS), and the adoption of requirements even more stringent than the ones demanded by the European biofuel policy, the International Sustainability and Carbon Certification scheme (ISCC) emerges, among others, as a highly reputable scheme. The objectives of this article are to describe the current European regulatory framework, the impacts deriving from it and the reasons why sustainability certification, if supported by advanced tools and released by highly credible standards such as ISCC, will be the key to access the European energy, food, feed, detergent and chemical markets.

Keywords: sustainability, palm oil, ISCC, GRAS, deforestation-free supply chain, European Union

Revealed Comparative Advantage and Competitiveness of Malaysian Palm Oil Exports against Indonesia in Five Major Markets

mpob_admin — Wed, 29 Aug 2018 00:12:32 +0000

This study analysed the extent to which Malaysia had a comparative advantage over Indonesia in crude palm oil (CPO) and processed palm oil (PPO) exports to five major markets, namely, China, India, the European Union (EU), Pakistan and the USA. In addition, this study examined how Malaysia’s competitiveness and comparative advantage changed over the period 1999-2014 in major markets by adopting a widely used Revealed Comparative Advantage (RCA) index. The results suggest that Malaysia retained its comparative advantage in exporting CPO to Pakistan from 2009 to 2014 and started to gain comparative advantage in exporting CPO to India in 2014. Meanwhile, for PPO market, Malaysia sustained its comparative advantage in the USA along the study period, but gradually reduced comparative advantage onset 2012. In Pakistan, the study found that Malaysia started to lose comparative advantage for PPO to Indonesia in 2012 and 2014.

Keywords: trade, revealed comparative advantage, export competitiveness, palm oil, CPO, PPO, Malaysia, Indonesia, China, India, EU, Pakistan, USA