Vol. 18 (1) March 2018 – OPIEJ https://opiej.mpob.gov.my Oil Palm Industry Economic Journal Wed, 20 Mar 2019 14:19:48 +0000 en-US hourly 1 https://wordpress.org/?v=7.0 Labour Requirements in the Independent Oil Palm Smallholder Sector in Peninsular Malaysia https://opiej.mpob.gov.my/labour-requirements-in-the-independent-oil-palm-smallholder-sector-in-peninsular-malaysia/ Wed, 29 Aug 2018 00:40:58 +0000 https://opiej.mpob.gov.my/?p=420 Read more]]> The Malaysian oil palm industry is labour-intensive, especially in the plantations. Activities such as harvesting and fresh fruit bunch (FFB) collection require more labour than the other activities. Currently, estate owners including independent smallholders report that they are facing labour shortages for those afore mentioned activities in particular. This study aims to estimate the labour requirements and shortage in the independent oil palm smallholder sector in Peninsular Malaysia, and to formulate a solution for reducing the labour shortage problem. For data collection, face-to-face interviews using close-ended questionnaires were employed, involving a total of 385 independent smallholders throughout Peninsular Malaysia who were randomly selected. The study found that, on average, the age of the respondents was 58 years and 92% of the respondents hired workers for harvesting and FFB collection. The majority of the workers (65%) were foreigners, mostly from Indonesia. Total labour and labour shortage for harvesting and FFB collection operations in the independent oil palm smallholders sector in Peninsular Malaysia are estimated at 25 014 and 3715 respectively. In order to reduce the dependency on foreign workers and labour shortage problem, graduates from ‘Kursus Operasi Mekanisasi Ladang’ organised by MPOB should be encouraged to be contractors, so that they can manage the independent smallholders, especially for harvesting and FFB collection. For that, the government can provide incentives in the form of soft loans or discounts to enable them to purchase harvesting tools and evacuation machines at a lower price.

Keywords: independent smallholders, labour requirement, labour shortage, foreign workers

]]> Impact of International Food Standards on Market Access for Palm Oil and Palm Oil Products https://opiej.mpob.gov.my/impact-of-international-food-standards-on-market-access-for-palm-oil-and-palm-oil-products/ Wed, 29 Aug 2018 00:40:01 +0000 https://opiej.mpob.gov.my/?p=418 Read more]]> Increasing global trade has led to the development of international food standards, codes of practice, guidelines and recommendations under the Joint FAO/WHO Codex Alimentarius Commission (CAC). The objectives of CAC are to develop standards, codes of practice and guidelines for foods moving in international trade in order to protect the health of consumers and to facilitate trade by ensuring fair trade practices. The standards developed by CAC have become even more important after 1st January 1995 with the implementation of the World Trade Agreement on the Application of Sanitary and Phytosanitory Measures (the SPS Agreement) and the Technical Barriers to Trade (TBT) Agreement. Both of these agreements recognise the international standards, guidelines and recommendations of Codex Alimentarius as the reference points for facilitating international trade and resolving trade disputes. In view of the fact that more and more countries are aligning their national standards with those of Codex Alimentarius, Codex standards have serious implications on exports of palm oil and palm oil products. This paper highlights the Codex system and reveals how the Codex standards impact international trade in palm oil and palm oil products.

Keywords: international food standards, Codex Alimentarius Commision, SPS agreement, TBT agreement

]]> Indonesia’s Palm Oil Market – Outlook and Future Trends https://opiej.mpob.gov.my/indonesias-palm-oil-market-outlook-and-future-trends/ Wed, 29 Aug 2018 00:39:02 +0000 https://opiej.mpob.gov.my/?p=416 Read more]]> This paper looks at the domestic market for Indonesian palm oil in the light of Indonesia’s position as the biggest producer of palm oil in the world as well as being the most populous country in Southeast Asia with 260 million people. In Indonesia, domestic consumption of palm oil is rising steadiliy. This paper examines the current consumption of palm oil in Indonesia and addresses the key factors pertaining to domestic consumption. It is the culmination of a study using primary and secondary data, which is explanatory in nature and adopts a content analysis approach. The findings aim to help the palm oil industry in Indonesia to further penetrate her domestic market and to expand in the country. The study found that population expansion, economic improvement and government policy have triggered a rise in the domestic consumption of palm oil. The study also provides an inside marketing perspective of Indonesia’s consumer demographics.

Keywords: Indonesian domestic consumption, palm oil, key consumption drivers

]]> Managing Exchange Rate Risk: Practices of Malaysian Exporters of Palm Products https://opiej.mpob.gov.my/managing-exchange-rate-risk-practices-of-malaysian-exporters-of-palm-products/ Wed, 29 Aug 2018 00:37:56 +0000 https://opiej.mpob.gov.my/?p=414 Read more]]> This paper investigates the practices of Malaysian exporters of palm products in managing their exposure towards fluctuations in exchange rates and the level of awareness towards this exposure. The study was conducted on the 261 companies that were registered with the Malaysian Palm Oil Board for exporting palm products. Data related to exchange rate risk exposure and the risk mitigation strategies were collected by distributing a survey form via e-mail and facsimile as well as through random telephone interviews. The results show that the Malaysian exporters of palm products are commendably aware on their exposure towards exchange rate risk. However, not all of them manage their exchange rate risk by using the available hedging instruments. The Malaysian exporters of palm products are found to favour the use of forward contracts over the options contracts to minimise their risk.

Keywords: exchange rate risk, risk mitigation, forward contract, palm products

]]> Demand for Palm Oil in Turkey https://opiej.mpob.gov.my/demand-for-palm-oil-in-turkey/ Wed, 29 Aug 2018 00:36:44 +0000 https://opiej.mpob.gov.my/?p=412 Read more]]> This study attempts to examine the short- and long-run relationships between Turkey’s palm oil imports, palm oil prices, sunflower oil prices and domestic income, using the Autoregressive Distributed Lag (ARDL) method with data collected for the period 1980 to 2015. The bound test indicates that there is a long-run relationship between the studied variables. The empirical results show that domestic income, measured by the Gross Domestic Product (GDP), and sunflower oil prices have positive significant relationships with palm oil demand in Turkey in the long run. At the same time, palm oil prices show a significant negative relationship with palm oil demand in Turkey.

Keywords: palm oil, Turkey, ARDL, GDP, unit root test, error correction models

]]> Relationship Between Severe El Niño Phenomena and Malaysia’s Palm Oil Production – A VECM Approach https://opiej.mpob.gov.my/relationship-between-severe-el-nino-phenomena-and-malaysias-palm-oil-production-a-vecm-approach/ Wed, 29 Aug 2018 00:35:47 +0000 https://opiej.mpob.gov.my/?p=410 Read more]]> The palm oil sector has faced various challenges throughout the past decade. Climate variability is one of the major challenges to the Malaysian oil palm industry. In order to achieve higher production, oil palm needs an average maximum temperature of 29oC-33oC and an average minimum temperature of 22oC-24oC. Variability in climate leading to the development of El Niño and La Niña events, thus, affects the production of palm oil. This study focuses only on the prolonged dry and hot weather phenomenon known as El Niño. So, the following question was considered: What is the relationship between the El Niño phenomenon and Malaysia’s palm oil production? Variations in crude palm oil (CPO) production, fresh fruit bunch (FFB) yield and Ocean Niño Index (ONI) from January 2007 to December 2016 (n= 120) were analysed, based on a multivariate co-integration approach called the Vector Error Correction Model (VECM). The study found that in a long run, FFB yield and ONI influenced total palm oil production. A significant error correction term (ECT) and negative coefficient value (-0.233) show that an adjustment is needed in a short-run disequilibrium towards achieving a long-run equilibrium. The higher the value, the quicker is the adjustment needed towards a long-run equilibrium. The value of ECT showed that an adjustment of 23.3% is needed each month towards achieving a long-run equilibrium. It can be concluded that in order to gain higher CPO production, a longer time is needed because it is influenced by FFB yield and ONI. Hence, the results from this study will be able to help policymakers be aware that owing to extreme weather and its implications on palm oil production. A better irrigation system or in-depth R&D on the advance technologies need to be implemented to offset the negative effects of this phenomenon.

Keywords: El Nino, CPO production, FFB yield, Ocean Nino Index (ONI), error correction term (ECT)

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