Labor shortages set to lead Malaysia to 3rd year of palm oil losses

Malaysian palm growers are leaving thousands of tonnes of fruit to rot as a third year of worker shortages have left companies unable to increase their harvest during the peak production season.

Palm oil production in Malaysia, the world’s second-largest producer, is expected to decline, or at best remain unchanged from last year’s 18.1 million tonnes, according to planters and analysts.

Plantations across the Southeast Asian country are facing their worst labor crisis since the industry began in 1917, with the arrival of migrant workers who are the core of the industry’s workforce at a “snail’s pace”, he told Reuters. Malaysian Palm Oil Association (MPOA) head Joseph Tek despite the lifting of coronavirus-related hiring restrictions.

A shortage of skilled workers means companies cannot fully capitalize on the peak harvest season that runs from August to November, losing growth momentum after recent rains.

Production shortfalls in Malaysia will support futures prices for benchmark crude palm oil, the world’s most traded vegetable oil, which lost half its value after hitting a record in March.

Travel restrictions enacted in 2020 to combat the Covid-19 pandemic have left Malaysia’s palm oil industry with fewer than 120,000 foreign workers needed to maintain trees and harvest fruit clusters.

After that, palm oil yields plummeted to nearly 40-year lows in the 2020/21 marketing year, adding to the global shortage of edible oil triggered by the Russia-Ukraine war.

This pushed palm oil prices to record highs in March, inflating prices for food, detergents and other palm oil-based products.

Since then, however, palm oil prices have plummeted as exports from rival Indonesia, the world’s largest palm oil producer, resumed and global oilseed production rebounded, with estimates of record soy production in the United States and Brazil.

Malaysia’s palm industry had hoped its labor woes would ease after the government lifted a Covid-19 recruitment freeze in February, with the MPOA expecting 52,000 migrant workers to enter.

However, only a few hundred workers arrived, largely because of slow government approvals and concerns about worker protection.

Malaysia’s Ministry of Human Resources, which is responsible for approving the admission of foreign workers, did not immediately respond to Reuters queries for a comment on the labor crisis.

Messages sent to Minister of Human Resources Saravanan Murugan also went unanswered.