https://opiej.mpob.gov.my Oil Palm Industry Economic Journal Tue, 28 Aug 2018 05:05:23 +0000 en-US hourly 1 https://wordpress.org/?v=7.0 https://opiej.mpob.gov.my/the-elasticity-of-foreign-demand-for-malaysian-palm-oil/ Tue, 28 Aug 2018 05:05:23 +0000 https://opiej.mpob.gov.my/?p=206 Read more]]> The price elasticity of export demand is expected to receive considerable attention due to the current economic climate of volatile export markets and prices. The export demand elasticity is used to predict the change in demand for an export for a unit change in its price and to model the behaviour of foreign buyers. This project estimated the elasticity of foreign demand for Malaysian palm oil for the major importing countries – China P R, India, Pakistan, Egypt and South Korea. The error correction mechanism (ECM) method was used for the estimation considering its usefulness in quantifying the short-run and long-run effects of explanatory variables on the dependent variables using timeseries data. It was found that the price of palm oil plays a very significant role in its export; thus, the price needs to be stable and competitive with those of its substitutes, especially soyabean oil. From panel data research, the effect of a unit change in the soyabean oil price is greater on the exports of crude palm oil than the effect of the same change in the palm oil price. This means that both oils are highly substitutable.

]]> https://opiej.mpob.gov.my/oil-palm-the-agricultural-producer-of-food-fibre-and-fuel-for-global-economy/ Tue, 28 Aug 2018 04:58:43 +0000 https://opiej.mpob.gov.my/?p=198 Read more]]> Oil palm industry has expanded from just an agricultural producer of edible oils and fats to fibre (material) and fuel (energy) as well for the global economy. In producing food, fibre and fuel (the 3Fs), the industry has also identified the enlarged environmental consequences that will now be involved. Arising from this, the science and technology (S&T) for the 3Fs production now falls squarely on the research and development (R&D) undertaken on land-use and land-use cover changes from forestry (LULUCF) with inclusion of the two latter products. Besides the best practices implemented to enhance the economic, environmental and social requirements, any change in the land-use pattern is prioritized with the environmental consequences identified and minimized. The S&T development in itself is not enough and must be applied together with business. It is critical that sustainability and poverty reduction remain the guiding principles for efficient use of resources, harness of intellect, and channel knowledge to benefit the rural poor and marginalized. As more plantation companies develop the potential to produce the 3Fs, there will be greater realization that both the policy and infrastructure support from the government is important. This must be accompanied by higher participation in activities by all the stakeholders over the whole value supply chain that involve the companies, industry and nation at all three levels to strengthen agricultural development to realize this 3Fs objective. The benefits of this new 3Fs approach are three-fold: firstly, greater promotion of value-addition and accomplishment of accelerated growth of agro-businesses in the food, material (fibre) and energy (fuel) subsectors. Secondly, creating more jobs in the rural sector with greater security for a fair standard of living for the smallholders and their families. Thirdly, discourage migration of people to the urban areas as the rural populace is better able to face the challenges coming from the economic liberalization and globalization resulting from more job opportunities created by the plantations and emerging agro-businesses. A total of 10 recommendations for policy refinement to enhance the 3Fs objective are discussed. They are aimed at achieving food security, fibre and fuel production by focusing on developmental and environmental consequences; continuing sustainable agriculture to improve the economic, social and environmental impacts of the companies in managing the 3Fs objective thereby hastening rural development when these new agro-businesses start to benefit not only the welfare of the people living in and around the plantations but also along the whole value chain.

]]> https://opiej.mpob.gov.my/supply-response-of-malaysian-palm-oil-producers-impact-of-interest-rate-variations/ Tue, 28 Aug 2018 04:50:28 +0000 https://opiej.mpob.gov.my/?p=189 Read more]]> This paper examines the long run relationship between the supply of Malaysian palm oil and its determinants using Johansen multivariate cointegration analysis. The supply response of Malaysian oil palm producers is investigated using annual data from 1967 to 2002. An error correction model is proposed to investigate the short run response of supply to its determinants. Supply of palm oil is postulated to be a function of expected price of palm oil relative to the expected price of rubber (the substitute crop); government expenditure, a proxy for government policy; a time trend variable to represent technological change or preference and interest rate to represent the cost of borrowing. Previous studies have not included the interest rate variable. Naïve expectations model is used to model price expectations. Structural information, in particular, the gestation period for oil palms from first planting is used in the specification of the long run relationship.

]]> https://opiej.mpob.gov.my/vision-2020-the-palm-oil-phenomenon/ Tue, 28 Aug 2018 04:49:09 +0000 https://opiej.mpob.gov.my/?p=187 Read more]]> Predicting the future performance of an export oriented commodity like palm oil is no easy task. The prediction has to take into account the long run past performance, resource constraints and challenges faced by the commodity at both the domestic and international fronts. This paper attempts to overview the palm oil industry; what it was in the past, its situation today and its likely development in the future.

]]> https://opiej.mpob.gov.my/market-potential-and-challenges-for-the-malaysian-palm-oil-industry-in-facing-competition-from-other-vegetable-oils/ Tue, 28 Aug 2018 04:40:37 +0000 https://opiej.mpob.gov.my/?p=178 Read more]]> The market potential for oils and fats remains good into the future considering the increases in population, income as well as per capita consumption especially in countries with currently low income and low consumption. However, the challenges are that most of the oils are inter-substitutable and therefore in competition with each other. Thus, countries impose support measures to gain markets for their products. This paper examines the market potential and challenges of the Malaysian palm oil industry in facing competition from other vegetable oils. There exists a relationship between vegetable oil prices in the longterm and short-term because they are co-integrated. The vector error correction model (VECM) was used to distinguish the long- and shortterm relationships between the vegetable oil price variables. This test determined the oils in close competition with one another as well as established the bi-directional causality between the oils. The former means that two or more oils can influence each other. In general, it was concluded that palm olein is a price leader to certain vegetable oils and the challenge lies in making it the main price leader in the vegetable oils and fats sector. This can be achieved by palm oil producing and exporting countries having their own market intelligence to confer an advantage in preparing better competing strategies.

]]> https://opiej.mpob.gov.my/the-role-of-research-and-development-strategies-in-food-safety-and-good-agricultural-manufacturing-and-distribution-practices-in-the-malaysian-palm-oil-industry/ Tue, 28 Aug 2018 04:38:58 +0000 https://opiej.mpob.gov.my/?p=176 Read more]]> Globalization has expanded the Malaysian palm oil export market to over 140 countries. Research and development strategies carried out by Malaysian Palm Oil Board (MPOB) continue to provide information to demonstrate proactively food safety with negligible risk in its global supply chains. By examining the factors of air, water, soil, agricultural input, raw material and human used in the production, processing and manufacturing operations, the sound knowledge of science and technology from the 209 MPOB innovations, when combined with business and application of the widely accepted rigorous and systematic method of assessing and controlling hazards through the food chain, has ensured that palm oil remains an agricultural product that is healthy and safe to the customer. Throughout the food supply chain, the general principles of hazard analysis by critical control points (HACCP) have been incorporated into food safety legislation, long before they were officially introduced, to check the hygiene requirement and to use as a practical means of standardizing international food quality control and assurance practices. Every stage of preparation, processing, transport and distribution of palm oil is examined so that the final palm oil products for retailing to customers indeed are safe and nutritious. An effort is made to communicate new R&D findings to retain the credibility and trust of customers who will understand what lies behind such a food safety assurance scheme. The value-add throughout the supply chain covers good agricultural practices (GAP), good manufacturing practices (GMP) and good distribution practices (GDP). Built into a database, the information gathered allows the effectiveness of the good practices in food safety management, detection of contaminants, toxicology, novel processing, packaging and application of risk management to be evaluated. The harmonization of these good practices towards standardization provides a high level of confidence to the operational entities and the customers. The auditors and assessors when benchmarked by accredited bodies that are internationally recognized, the industry will attain integrity by their assessment. Knowledge that Malaysian palm oil products are produced to an agreed standard will further boost consumer confidence by making them even more acceptable by people the world over.

]]> https://opiej.mpob.gov.my/palm-oil-products-exports-prices-and-export-duties-malaysia-and-indonesia-compared/ Tue, 28 Aug 2018 01:25:57 +0000 https://opiej.mpob.gov.my/?p=152 Read more]]> Malaysia and Indonesia are the largest and second largest producers and exporters of palm oil products in the world where together they contribute 83.5% of production and 89.6% of palm oil trade in the world. Both countries export crude palm oil (CPO) and processed palm oil(PPO). The trend in exports indicates Malaysia exporting increasing quantities of CPO in the new millennium when exports of CPO increased from 0.4 million tonnes to 1.3 million tonnes in 2000 and 2001, respectively, while exports of Indonesian CPO increased from 1.8 to 2.0 million tonnes. PPO contributed to the larger share of palm products exports of both countries. Monthly FOB prices for Malaysian CPO and PPO in 2001 and 2002 were lower than those of Indonesia but prices for the latter were lower in the international market indicating price competition. Tariffs are imposed on exports of palm products by both countries with the objective initially of raising revenue. In the case of Malaysia, the objective later shifted to that of encouraging downstream processing while for Indonesia, it reflected a goal of keeping cooking oil prices to consumers down during periods of high oils and fats prices. An evaluation of taxes imposed on exports of both countries indicated that there is a difference in the way the export duty payable in the two countries computed. The different manners of computing led to high duty payable in the case of CPO exports by Malaysia when compared to that of Indonesia. There is no duty on exports of PPO from Malaysia while Indonesian duty is very low.

]]> https://opiej.mpob.gov.my/short-term-and-long-term-projection-of-malaysian-palm-oil-production/ Mon, 27 Aug 2018 08:43:31 +0000 http://palmoilis.mpob.gov.my/prototype/opiej/?p=123 Read more]]> Forecasting is of fundamental importance in all of the sciences, including economics. As such, its accuracy is of obvious importance as the forecasts generated are normally being used as inputs to a decision-making process. Knowing this fact, most forecasters have been hard pressed to prepare the most realistic and accurate projections utilizing a variety of quantitative and subjective methodologies. Besides this concern and although it is extremely important to do their best to improve forecast accuracy, we must learn to accept the fact that forecast error is an unavoidable occurrence. Faced with this reality, the forecasters need to effectively capture, measure, report and utilize forecast error to its benefit. They will also keep on reviewing their models from which the forecasts are based on due to the ever changing environment and improving forecast accuracy through a variety of qualitative and quantitative techniques.

]]> https://opiej.mpob.gov.my/an-economic-perspective-of-oil-extraction-rate-in-the-oil-palm-industry-of-malaysia/ Mon, 27 Aug 2018 08:41:52 +0000 http://palmoilis.mpob.gov.my/prototype/opiej/?p=121 Read more]]> The national average oil extraction rates (OER) in Malaysia since 1980 until 2002, have fluctuated from a low of 18.48% in 1982 to a high of 19.87% in 1987/1988, although many individual mills have obtained more than 20% OER. In times of low prices of crude palm oil (CPO) as seen in the recent period of 2000/2001 and low yield productivity, producers are challenged to improve the performance of OER as this measurement is a management tool in assessing the profitability of a plantation enterprise. Historical OERs for the past 10 years are used to estimate at the macro level, the quantity and value of CPO loss or gain, arising from the annual change of OER. The differentials of the annual OERs and the 20% benchmark OER are also used to estimate the loss in revenue, since until now, the benchmark OER of 20% has not been attained. The highest loss of CPO revenue amounted to about RM 255 million in 1999 arising from an annual change of minus 0.31% OER, whilst that arising from the differential of the OER in 1999 and the benchmark 20% OER, or a drop of 1.4%, amounted to an astounding RM 1.15 billion in a single year based on an average CPO price of RM 1449.50 in 1999. If CPO is considered in the downstream processing, value adding that could have been achieved ranged from RM 21.53 to RM 54.66/t in the five-year period of 1997-2001.

]]> https://opiej.mpob.gov.my/strategic-thrust-in-addressing-current-challenges-the-plantation-perspective/ Mon, 27 Aug 2018 01:06:16 +0000 http://palmoilis.mpob.gov.my/prototype/opiej/?p=41 Read more]]> The paper briefly analyses the problems currently faced by the plantation companies and explains why the price of crude palm oil (CPO) has fallen month by month through 2000, with sharper falls since January 2001 and why the price has not recovered. Some fundamental strategies to help the palm oil industry sustain through these difficult times and to strengthen and transform it overtime are suggested, covering stock reduction and management, marketing and sales, shipping, port improvements, improving storage capacities in mills and refineries, replanting and revamping the organization structure of estate management. The intention is to trigger further thinking and discussion which hopefully will lead to positive actions.

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