MPOB urges palm oil mills not to reject FFBs for processing
Posted on : 29 Jun 2022  Source of News: Borneo Post

KUCHING (June 29): The Malaysian Palm Oil Board (MPOB) has urged palm oil mill operators nationwide not to reject fresh fruit bunches (FFB) supplied to them.

MPOB said in a statement yesterday that there had been media reports that some palm oil mills rejected the supply of FFB for processing due to the decline in crude palm oil (CPO) prices in the global market.

Its director-general Datuk Dr Ahmad Parveez Ghulam Kadir was quoted as saying that palm oil mills that process oil palm fruits should continue to do so because the action to stop operations will cause losses to producers, including smallholders.

“We were surprised by the statement of Palm Oil Millers Association (Poma) and were not consulted on the issue. MPOB is engaging with Poma to find solutions to issues faced by the millers,” he said.

When the price of CPO was high, breaching RM8,000 per tonne in March, the palm oil mills made huge profits.

However, when the price of CPO declines, the millers should not reject the FFB supplied by smallholders, he argued.

He said in a situation where palm oil prices decline amid labour shortage and rising prices of fertilisers, the readiness of palm oil mills to receive and process FFB will ease the burden of producers and smallholders.

A total of 464 palm oil mills are licensed by MPOB throughout the country to process oil palm fruits.

FFB transactions at the mills are based on the average monthly price of crude palm oil while the supply of CPO is according to the daily market price, he said.

According to Reuters June 28 report, some palm oil millers in Malaysia – the second largest producer of palm oil in the world – have temporarily halted production following a dramatic plunge in prices of this edible oil.

Quoting Malaysian Palm Oil Millers Association (Poma) northern president Steven Yow, Reuters reported that Malaysian CPO prices have seen their biggest one-month decline in more than 13 years in June, tumbling 22 per cent from a high of RM6,632 (US$1,506.25) a tonne to RM4,922 on Monday, erasing most of this year’s gains.

Malaysian millers purchase palm fruit bunches based on the monthly average CPO price – currently about RM6,200 – but sell the extracted oil based on the daily market price.

“No mills can afford to buy fresh fruit bunches at these prices,” Yow was quoted as saying.

Malaysia’s benchmark CPO futures had rallied to records this year due to a global edible oil supply squeeze caused by labour shortage, the Russia-Ukraine conflict and an export ban by top palm oil producer Indonesia.

The contract fell when Indonesia ended that ban and sought to boost exports, which ignited more market volatility.

At current prices, the mills – which are already facing labour shortages and high input costs – stand to lose at least RM150,000 for every 100 tonnes of CPO produced, Yow said, adding that buyers are currently offering around RM4,700 for CPO.

Yow told Reuters that millers that have delivered on their contracted sales have stopped receiving fresh fruit bunches from suppliers until prices normalise.

The stoppages may range from one day to one week.

“This kind of situation has never happened before in the last 35 years,” he added.

A substantial number of millers are affected, especially independent millers sourcing from smallholders, Yow said.

Yow told Reuters that he expects operations to normalise in July if price volatility and the difference between the monthly average CPO price and the daily traded price declines.

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