Palm Oil: Malaysia Turns to AI, Drones, and Satellite Imaging
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Palm Oil is the main pillar of Malaysia’s economy because it brings high-value exports and provides direct employment to more than 650,000 people, including about 450,000 smallholders. The Ministry of Plantations and Commodities of Malaysia and related agencies continue to increase the export of downstream Palm Oil products and their derivatives.
The Ministry has launched an advanced zero-waste policy involving a large amount of waste, including Palm kernel skin and mesocarp fiber from fresh Palm fruit bunches, empty fruit branches, and other fully used materials. In 2022, the total export value of Palm Oil and Palm products amounted to RM130 billion (US$29.8 billion), or 8.4 percent of Malaysia’s total export value.
Malaysia’s Palm Oil output will likely increase next year as more abundant labor, and the maturation of plantations for harvesting offset the impact of the El Nino weather pattern, the Malaysian Palm Oil Board (MPOB) said.
“We don’t see a very strong or serious negative effect of El Nino so far,” Ahmad Parveez, Director General of MPOB, told reporters on the sidelines of an industry conference in Mumbai. “We are anticipating higher production in 2024 than this year because of better labor availability, and some of the new areas would start yielding,” he added.
Palm Oil planters were forced to let thousands of tons of fruit rot for a third straight year in 2022 as a worker shortage prevented companies from increasing harvesting during the peak production season.
Malaysia lacks the infrastructure to retain any market share it gains in the short term. Across Peninsular Malaysia, land for Palm Oil expansion is limited as most areas have already been planted, and urban development is prioritized. Sarawak and Sabah are still growing their plantations at around 1.58 million hectares and 1.54 million hectares, respectively. However, the only Malaysian state rapidly expanding Palm Oil plantation areas is Sarawak.
Malaysia’s crude Palm Oil production in 2023 was expected to rise to 19 million tons from last year’s 18.45 million tons, Ahmad Parveez noted. But he explained that year-end stocks would remain near last year’s 2.2 million tons due to rising exports. Exports were forecast to rise to 16.3 million tons in 2023 from 15.7 million tons last year.
As per AgFlow data, Malaysia exported 2.4 million tons of Palm Oil in Jan – Aug 2023. The key markets were the Netherlands (0.2 million tons), India (0.12 million tons), Saudi Arabia (0.1 million tons), Mozambique (74,990 tons), Pakistan (70,000 tons), Japan (59,436 tons) and Spain (50,799 tons). For European countries, the Netherlands was followed by Italy (0.1 million tons), Sweden (74,578 tons), Spain (64,972 tons), and Denmark (19,596 tons) in Jan – July 2023, according to the MPOB.
In terms of port loading, Pork Klang leads others with (0.28 million tons) in Jan – Aug 2023, followed by Pasir Gudang (0.21 million tons), Sandakan (0.1 million tons), and Lahad Datu (96,591 tons).
Malaysia quoted the Netherlands the highest CFR price, USD 1,029 on average, in Jan – Sep 2023. In terms of Asian markets, China was offered the highest CFR price of USD 976, followed by Pakistan (USD 974), India (USD 972.5), and Bangladesh (USD 967).
For selected countries, trends of CFR price showed a similar situation for the Netherlands, China, and Bangladesh in Jan – Sep 2023. The price peaked in April and reached its lowest point in June. After that, it recovered in July and showed a stagnant trend. According to the MPOB, as of Sep 27, the CPO price was 3,771 Malaysian Ringgit (USD 802.3).
Palm Oil, used in everything from cakes to shampoo to cleaning products, competes with soybean Oil, sunflower Oil, and rapeseed-canola Oil, produced mainly by Argentina, Brazil, Russia, Ukraine, and Canada.
Sino–Malaysian Cooperation in the Palm Oil Industry
In 2022, Malaysia exported 3.14 million tons of Palm Oil and Palm products to China, making China its most important trading partner for edible Oil after India. The total export value of Malaysia’s Palm Oil and other Palm-based products to China increases by 13% to RM14.86 billion from RM13.16 billion in 2021.
In April, Malaysia signed a memorandum of understanding with a China Government-backed trade association to enhance Palm Oil trade and cooperation. They have to exchange and disseminate market information on Palm Oil and promote stabilizing the Palm Oil supply chain in Malaysia and China.
The Malaysian Palm Oil Board said its partnership with the China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce, and Animal By-Products will help Malaysia regain market share in the world’s most populous country.
Malaysia, the world’s second-largest Palm producer, and China, the world’s second-largest buyer, will jointly promote the use of Malaysia’s sustainable Palm Oil in China and the design and implementation of new technologies such as artificial intelligence in Oil Palm plantations.
“China wishes to work with Malaysia to secure the Palm Oil supply to the country,” the Malaysian board said in a statement. The agreement shall facilitate China’s participation in the technology exploration in the Oil Palm mechanization in Malaysia, which will help to increase productivity and reduce reliance on human labor in the plantation.
The Malaysian Palm Oil industry believes technologies such as AI, drones, and satellite imaging could be potential game-changers. They can help identify the ripest fruit and ensure higher productivity from individual Palm trees.
Technical cooperation includes aerospace technology, drones, and AI from China’s Great Wall Industry Corporation, specifically on age profile mapping and disease detection at Oil Palm plantations, as well as autonomous harvesting vehicles developed by Shanghai Westwell Information Technology Co Ltd.
PORTSIM China is a research and development center of MPOB housed in Shanghai, China. PORTSIM China signed a consultancy agreement with China’s Grand Industrial Holdings Co Ltd (GIH) last year. GIH is to obtain technical services from PORTSIM China involving the formulation of Palm products from 2021 to 2023, which will increase the consumption of Palm Oil by GIH. GIH, through their subsidiary Grand Oils and Foods (PG) Sdn Bhd, will bring in green field investments worth RM320 million in the Malaysian Palm Oil sector.
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