Malaysia urges palm oil mills to resume production despite price drop

KUALA LUMPUR - Malaysian authorities on Tuesday (June 28) called on palm oil millers to resume production and buy oil palm fruits from farmers, after a plunge in prices of the edible oil prompted some companies to halt processing.

Unprofitable pricing meant some mills in Malaysia, the world's second-largest palm oil producer, had temporarily halted operations, an industry body said on Monday.

Malaysian crude palm oil futures posted their biggest one-month decline in more than 13 years in June, recording a 22 per cent drop and erasing most of this year's gains. Prices had rallied to a record high earlier in 2022 due to supply concerns.

Wee Jeck Seng, deputy minister for plantation industries and commodities, said the government had received complaints about mills refusing to buy oil palm fruits.

"The fruits cannot be kept for more than two to three days, or they will rot. It will affect smallholders," Datuk Seri Wee told reporters on the sidelines of an industry seminar.

"The millers should be responsible, no matter if prices are high or low," he said.

The state-run Malaysian Palm Oil Board (MPOB), the industry regulator, will discuss the matter with mills, Mr Wee said.

Ahmad Parveez Ghulam Kadir, MPOB's director-general, said the regulator has requested mills restart production and was studying action that could be taken against them should they fail to do so.

"We are still on a production downtrend ... At this critical juncture we plead that they buy and negotiate prices," Datuk Ahmad Parveez told reporters.

The Malaysian Palm Oil Millers Association (POMA) told Reuters on Monday that at current prices, the mills - which are already facing labour shortages and high input costs - stood to lose at least RM150,000 ringgit (S$47,250) for every 100 tonnes of crude palm oil produced.

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