We asked them this: What impact did the super El-Nino weather episode this year have on your plantations? And what are your expectations for the year ahead?
Lee Yeow Chor: “I had never imagined prior to this that the weather could play such an important role. We always believed in good planting material and good agronomic practices. These are important, but weather – especially drought – can change all that.
This year, we were hit with the effects of drought, not just from last year but also early this year. At the same time, there was a double whammy in that the Government also announced the freeze in foreign labour intake in February, and that created a lot of havoc and uncertainty in the recruitment process.
At today’s palm oil stock level of 1.5 million tonnes and two months ago at 1.4 million tonnes, prices should have moved much higher because it is a very low-stock level.
However, prices have been sort of capped, due to two main factors. One is the price of petroleum which dictates the usage of vegetable oil for biodiesel, not just palm oil but vegetable oil in general. Secondly, of course, the still abundant supply of soybean oil in the market.
These factors have played a major role in capping how high palm oil prices can go.
Nevertheless, prices have moved up. I believe there is a positive support at this current price level and moving forward, prices will be positive.
Bek-Nielsen: “The weather will always make the crop. We had severe El Nino last year and the repercussions of that have been extreme. I am convinced that Malaysia during 2016 will achieve its lowest yields per hectare in the past 25 years.
It has indeed been a challenging year but nevertheless, a year that has been blessed with better prices. I expect production next year will recover with prices very likely heading lower.”
Zakaria: “I think 2016 is a very challenging year for the Malaysian palm oil industry. We were badly affected by El Nino, and we continue to be affected until now.
I expect next year to be better for the palm oil industry in terms of yield.”
Lee Oi Hian: “After El Nino, I think we are going to have a much higher crop in the second half of 2017 and in 2018.
I am happy to see our Plantation Industries and Commodities Ministry’s flexible policy on the deferring of the biodiesel policy for the industrial sector. It is a good move.
You should save your money for when you really need to subsidise. The price of palm oil is adequate now, why spend reserves subsidies? This is the first time I have seen the ministry adopting a flexible policy, and I would like to pass our word of encouragement to them on this.”
Wong: “For the next six months, I believe that our production is going to be low and it will not recover so fast. It will only recover in the second half of 2017 onwards, even though we see a slight recovery at the moment due to the seasonal crop pattern.
In Sarawak, due to the severe El Nino impact, the most affected area is the northern region while the central and the southern regions of Sarawak are less affected.”
Yusof: “There was severe underestimation in the market about the production of palm oil in Malaysia and Indonesia for this year and next year. The El Nino occurred for one and a half years to two years. That put a huge strain on our palm oil industry and it will take about two years to recover.
Yes, the fact that production is low, prices should be high and that would comfort producers. It is a balancing act in the market place.
But keep in mind that soybean has been doing exceptionally well for the last five years. Production has somehow been very good. Nevertheless, North and South America cannot have perfect weather continuously for five or 10 years. And when the weather pattern changes, their supplies will be affected, and the beneficiary will be palm oil.
Our production is recovering and likely to increase. Should there be drought or floods in the near future, the supply of soybean oil will be reduced and palm oil prices will increase.”