Ahmad Najmi Ariffin

Ahmad Najmi Ariffin

Statistician/Data Scientist

Malaysian Palm Oil Industry Analysis (2016–2024)

5 minute read

Published:

Malaysia’s palm oil industry remains a cornerstone of the national economy, despite facing significant challenges from labor shortages, weather disruptions, and volatile global markets. Recent data shows signs of recovery, with 2024 CPO production increasing 4.2% to 19.34 million tonnes, primarily driven by improved labor availability.

Malaysian Palm Oil Industry Analysis: Production, Yield, and Market Dynamics (2016–2024)

A comprehensive analysis of Malaysia’s position as the world’s second-largest palm oil producer

📊 Download Latest CPO Production & Market Data Stay ahead with up-to-date figures from MPOB and explore raw datasets for deeper insights (daily update - 1 day lag).

🔔 Coming Soon: Detailed dashboards on Fresh Fruit Bunch (FFB) Yield Performance and Oil Extraction Rate (OER) Trends for enhanced field-to-mill performance tracking.

Key Industry Metrics at a Glance

Metric 2023 2024 Change
CPO Production 18.55M tonnes 19.34M tonnes +4.2%
FFB Yield 15.79 t/ha 16.70 t/ha +5.8%
Oil Extraction Rate 19.86% 19.67% -1.0%
Average CPO Price RM 3,809.50/tonne RM 4,179.50/tonne +9.7%

Production Trends: A Story of Recovery

CPO Production Recovery (2016–2024)

Year    Production (Million Tonnes)    Change
2016         17.32                    -13.2%
2017         19.92                    +15.0%
2018         19.52                     -2.0%
2019         19.86                     +1.8%
2020         19.14                     -3.6%
2021         18.12                     -5.4%
2022         18.45                     +1.9%
2023         18.55                     +0.5%
2024         19.34                     +4.2%

The industry experienced significant volatility, with the El Niño phenomenon causing a sharp 13.2% decline in 2016, followed by a strong recovery in 2017. The 2020–2021 period saw consecutive declines primarily due to labor shortages, with a critical shortage of 75,000 harvesters leading to 20–30% drops in potential FFB production.

The Labor Challenge: Industry’s Achilles’ Heel

Labor availability has emerged as the single most critical factor affecting production:

  • 2021 Crisis: 75,000 harvester shortage led to 5.4% production decline
  • 2023–2024 Recovery: Improved labor supply drove consecutive production increases
  • Current Status: FFB yield at 16.70 t/ha still below pre-pandemic standard of 20.0 t/ha

The industry’s heavy reliance on manual harvesting makes it particularly vulnerable to labor market disruptions, highlighting the urgent need for mechanization and workforce development initiatives.

Weather Impact: Climate as a Production Wildcard

Weather conditions significantly influence both production volume and quality:

Oil Extraction Rate (OER) Variations

  • 2022: 19.70% (lowest in two decades due to poor FFB quality)
  • 2023: 19.86% (+0.8% improvement)
  • 2024: 19.67% (−1.0% decline due to heavy rainfall and flooding)

Adverse weather affects the proportion of ripe, high-quality FFB processed, with impacts potentially delayed by up to 12 months, complicating market forecasting.

Price Dynamics: Global Markets Drive Local Fortunes

CPO Price Volatility (2022–2025)

Malaysian CPO prices demonstrate high sensitivity to global market conditions:

  • 2022: Record high annual average of RM 5,087.50/tonne
  • 2023: Sharp 25.1% decline to RM 3,809.50/tonne
  • 2024: Partial recovery to RM 4,179.50/tonne
  • 2025 (Jan–July): Fluctuating between RM 3,880–4,759/tonne

Key Price Drivers:

  1. Global Competition: Soybean and sunflower oil price relationships
  2. Geopolitical Events: Russia–Ukraine war impact and Indonesia’s export policies
  3. Import Policies: Major buyers like India and China adjusting procurement
  4. Inventory Levels: 18-month high stocks in June 2024 pressured prices
  5. Government Policies: Export duty adjustments (currently 9% for August 2025)

FFB–CPO Price Correlation: Upstream–Downstream Linkage

FFB prices closely mirror CPO market movements, with the 2023 experience illustrating this strong correlation:

  • CPO prices: −25.1% decline
  • FFB (Mill Gate) prices: −28.4% decline

This tight relationship means global market volatility directly impacts smallholder farmers’ incomes, emphasizing the need for price stabilization mechanisms.

Market Structure: Price-Taker in Global Commodity Complex

Malaysia operates as a price-taker in the global vegetable oils market, where external factors often override domestic supply–demand dynamics:

External Influence Hierarchy:

  1. Global vegetable oil supply–demand balance
  2. Competing oil prices (soybean, sunflower)
  3. Major producer policies (Indonesia’s export bans)
  4. Geopolitical events and trade tensions
  5. Biodiesel mandates and renewable energy policies

Future Outlook: Cautious Optimism with Strategic Shifts

Production Forecast

  • 2025 Projection: 19.5 million tonnes (+1.0% from 2024)
  • Key Assumption: Continued improvement in labor supply

Strategic Initiatives

  1. Sustainability Focus: MSPO certification expansion
  2. EU Market Adaptation: Preparing for EUDR compliance
  3. Value Addition: R\&D in high-value palm-based products
  4. Climate Resilience: Infrastructure and adaptive farming techniques

Recent Challenges (Late 2024 / Early 2025)

  • Flooding Impact: January 2025 production dropped 16.8% to 1.24 million tonnes
  • Seasonal Patterns: November–December 2024 showed typical end-year decline
  • Weather Volatility: Continued impact on harvesting and transportation

Key Takeaways for Stakeholders

For Investors:

  • Industry shows recovery momentum but remains highly sensitive to external shocks
  • Long-term growth requires addressing structural labor and climate challenges
  • Value-added product development offers diversification opportunities

For Policy Makers:

  • Labor market interventions critical for production stability
  • Climate adaptation infrastructure investment needed
  • Export policy flexibility important for maintaining competitiveness

For Growers:

  • FFB quality management crucial for maximizing extraction rates
  • Diversification strategies needed to manage price volatility
  • Sustainable certification becoming market necessity

Conclusion

Malaysia’s palm oil industry stands at a crossroads, showing resilience through recent recovery while facing persistent structural challenges. The path forward requires balanced attention to immediate concerns—labor availability and weather resilience—while building long-term competitive advantages through sustainability, mechanization, and value addition.

Success in the global market will depend on the industry’s ability to transform from a commodity price-taker to a differentiated, sustainable supplier of palm-based products, ensuring both economic viability and environmental responsibility in an increasingly demanding global marketplace.

Data sources: Malaysian Palm Oil Board (MPOB), Malaysian Palm Oil Council (MPOC), Bursa Malaysia

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