SOME Malaysian millers of palm oil have stopped production as the prices of the edible commodity tumble, Reuters reported today.

Malaysian crude palm oil (CPO) prices yesterday saw their biggest one-month decline in more than 13 years in June, diving 22% from a high of RM6,632 per tonne to RM4,922 ringgit.

Malaysian millers buy palm fruit bunches at the monthly average CPO price – currently about RM6,200 – and sell the extract at the daily market price.

A senior representative of a millers’ group told the news agency that the dramatic drop in prices meant that the fresh fruit bunches were now unaffordable.

“No mills can afford to buy fresh fruit bunches at these prices,” Steven Yow, northern president of the Malaysian Palm Oil Millers Association (POMA) told Reuters.

He said the mills stood to lose at least RM150,000 for every 100 tonnes of CPO they produced.

Malaysia’s benchmark CPO futures had marked record highs this year due to a global supply shortage caused by a tight labour market, the Russia-Ukraine war, and Indonesia’s export ban.

Malaysia is one of the top producers of the commodity, accounting for 25.8% of the world’s production and 34.3% of exports in 2020.

Yow said millers have stopped receiving fresh fruit bunches from suppliers until prices normalise. 

“This kind of situation has never happened before in the last 35 years.” – June 28, 2022.