PRICE VOLATILITY – OPIEJ

MALAYSIAN PALM OIL PRICE PREDICTION USING ARIMA – ARCH MODEL

mpob_admin — Tue, 04 Mar 2025 05:55:33 +0000

Palm oil is one of Malaysia’s primary industries. In 2022, Malaysia was responsible for 25.14% of global palm oil production, totalling 18.55 million tonnes, and 31.65% of worldwide palm oil exports, amounting to 15.71 million tonnes (MPOB, 2024; Trend Economy, 2024). This article presents a study for Malaysian palm oil price forecasting using the traditional time series model, with three objectives, to identify the behaviour of palm oil prices in Malaysia, to determine the best model for predicting palm oil prices using the ARIMA model, and to perform a short-term forecast of the future palm oil price in Malaysia. The analysis was conducted using monthly Malaysian palm oil prices for a period of 10 years, 2013–2023. EViews software was used to run the data analysis. It is found that ARIMA (1,1,4) – ARCH (1) model is the most parsimonious model for forecasting the crude palm oil prices in Malaysia. Overall, predicting the monthly price of Malaysian palm oil provides valuable insights that support decision-making across the entire palm oil value chain, from producers and traders to
policymakers and investors.

Risk Response Strategies of Malaysian Oil Palm Estates for the Downturn in CPO Prices

mpob_admin — Tue, 04 Jan 2022 08:07:54 +0000

Being traded in the Bursa Malaysia Derivative market, the price of crude palm oil (CPO) is volatile, which brings uncertainty to the profitability of the palm oil industry players, particularly to the oil palm growers. Lower CPO prices also causes the fresh fruit bunch (FFB) price to decline. Hence, the purpose of this study is to identify the risk mitigation strategies applied by the Malaysian oil palm estates during the low CPO prices environment to remain profitable in businesses. The study aims to examine the best risk mitigation measures practiced by the estates faced with a situation of low CPO prices environment and provides some guidelines to the relevant organisation to prioritise the mitigation measures in order to minimise the risk associated with low CPO prices. Primary data were collected through an online survey to 769 plantations throughout Malaysia. A descriptive and inferential statistical analysis was conducted using the Statistical Package for Social Science (SPSS) version 20. The study also provides various responses from the experienced oil palm players on the most crucial component in mitigating the price risk arising from the downturn in CPO prices. The measures include management of business assets, business diversification and the financial management found to be significant to reduce the risk of price volatility. Meanwhile, elements under the operational business decisions were the least preferred measures to minimise the risk during low CPO prices.

Lessons Learned from Sustaining Remunerative Palm Oil Prices – The Malaysian Experience

mpob_admin — Tue, 28 Aug 2018 06:46:34 +0000

The volatility of the crude palm oil (CPO) prices over the increasing long-term trend in the past has created instability in the earnings for the country and the returns for the industry. The volatility has been caused by the fundamentals – supply and demand factors. Despite this fact, it is important for us to sustain palm oil price at high levels in order to have good returns. It was observed that prior to sustaining high prices, the market was usually bearish with high stock levels. Strategic measures are required to ensure that palm oil stocks are well managed. In this regard, certain measures are undertaken under the stock management programme by the government, including CPO burning as biofuel for power generation, biodiesel usage in the country (called Bx) and replanting programmes which are generally aimed at reducing the stock level in the country. The swift proactive action undertaken by the government should be lauded as it does provide some respite to the palm oil industry with prices firming up and sustained at high levels.

Price Volatility Spill Over in the Malaysian Palm Oil Industry

mpob_admin — Tue, 28 Aug 2018 05:20:11 +0000

This study examines volatility spill over between the domestic prices of selected palm oil products and the major causative factors of the volatility. Empirically, it was found that palm oil has moderate price volatility and a short-term effect in unidirectional and bi-directional price volatility spill over to the domestic prices of selected palm oil products. Since crude palm oil (CPO) is a price leader among the other selected palm oil products, an effort should be made to stabilize its price to minimize volatility in all the other prices. Using the major causative factors of price volatility, a model was developed to forecast domestic prices for the selected palm oil products. The prices for CPO and RBD palm olein (POL) were forecast and found to be good with error of less than 2% with all the directions for prices correct. Stabilizing the palm oil price can be done through market power by a monopolistic producer or forming a producer cartel or through international commodity agreements between buyers and sellers. It is believed that creating an alliance between Indonesia and Malaysia should boost the bargaining power of both countries in setting the CPO price and control output, thereby reducing the volatility of all palm oil products in the future.