Prolonged labor crunch at Malaysia’s palm plantations seen hampering yields, output

Malaysia’s palm producers could face lower yields and output in the second half of 2022, as a labor crunch in the plantation sector is set to prolong after Indonesia halted its migrant workers from going to Malaysia from this month, trade sources said.

The Indonesian government has reportedly imposed a temporary freeze on Indonesian workers entering Malaysia from July, citing issues on employment terms and worker protection. Malaysian planters faced a shortage of migrant workers to harvest crops during COVID-19 lockdowns and as a result, fell short of their production targets and missed the year’s yield estimates.

Malaysia recorded a yield from palm oil-yielding fruits, otherwise known as Fresh Fruit Bunches, or FFB, of 6.90 mt/hectare from January-June, compared with 7.16 mt/hectare for the same period last year, according to data from the Malaysian Palm Oil Board.

The average crude palm oil yield slid to 1.36 mt/hectare in January-June, from 1.42 mt/hectare in January-June 2021, the MPOB data showed.

“Harvesting FFB still needs a lot of manual labor,” a Malaysia-based trader said. “If the freeze on hiring is prolonged and the fruits are not being harvested in time, planters will face a loss in production.”

Production of Malaysian CPO over January-June slipped 1.12% to 8.27 million mt, compared with 8.364 million mt in January-June 2021, the MPOB data showed. Malaysia’s total palm oil production is expected at 18.5 million mt this year, according to the Malaysian Palm Oil Association, but trade sources recently said the projection could be much lower if migrant labor does not arrive in time.

The lower-than-expected output may provide some support to palm oil prices, which have fallen by more than 30% since the peak in March. Although, the upside is seen limited by threats of increased Indonesian exports since it lifted an export ban in May, traders said.

Tags: estimates, palm, Indonesia, plantation sector, prices, labor crunch, Crude palm oil, migrant workers, Production, Malaysia, yields, output, shortage, producers