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Palm Oil Industry In Malaysia

1246 Words5 Pages

TASK I: GLOBAL RISK MANAGEMENT – PALM OIL

Palm oil is currently representing one third of the vegetable oil market in the world. An edible vegetable oil used in a wide variety of products ranging from food items to cosmetics and biofuel. The growth of palm oil has largely been driven by the consumption in the emerging markets especially in India and China due to rising populations and standards of living, and demand for biofuels.

Malaysia is one of the largest palm oil producers and exporters in the world. Malaysia currently accounts for 33 % (2014) of world palm oil production and 44% of world exports. Palm oil is one of the key commodities contribute 5.1% (2015) of the total Malaysia export. Top three importers of Malaysia palm oil are …show more content…

Below are some of the key challenges identified:

(a). International palm oil prices fluctuation

The palm oil price is determined by the supply and demand of international market. The crude palm oil (CPO) price is highly volatise and cyclical similar to others commodities in market. Figure 4 showed the average CPO price as compared to soybean and rapeseed oil. Within 10 years periods (2006 to 2015), the CPO price can be fluctuated as big as USD648 per tonne. There are number of factors affecting the global price of CPO including:
• global production and stock level of CPO and others substitute oils
• global consumption level of CPO and others substitute oils
• price of others substitute oils
• foreign exchange rate
• import and export duties and others …show more content…

Competition from substitute oils

The palm oil industry is facing stiff competition from others substitute oil like sunflower oil, canola oil, rapeseed oil, soy bean etc which are substitute of palm oil. Any reduction in price of substitute oils in global market might lead to consumers to increase the use of the edible oils to replace palm oil, which in turn could affect the demand of CPO and reclining CPO price in the international market.

(d). Weather condition, and other factors affecting production and supply of palm oil

Due to the El Nino weather phenomenon on year 2015, which brings drought to southeast Asia, the palm oil supply may be impacted due to lower rainfall especially in Malaysia and Indonesia. The lower rainfall coupled with the haze issue in the region (caused by forest fires at Sumatra and Kalimantan) will resulted in weaker palm oil yields and curb CPO output this year (2016).

(e). Change of consumer

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