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ABSTRACT |
Technological Development and New Growth Areas of the Oil Palm Industry
Technological development has transformed the Malaysian palm oil
industry into a strategic and well planned industry that responds to
global challenges. In particular, genetic knowledge since as early as
1912 first led the phenomenal growth of the industry through the
planting of tenera instead of dura palms. This was complemented by
the government allocating land to the poor and landless to plant more
oil palm, in great part causing the area to increase from 54 000 ha in
1960 to 1.02 million hectares in 1980 and 2.03 million hectares in
1990. By 2006, there were 4.16 million hectares of oil palm, constituting
nearly two-thirds of the national agricultural area (Table 1). Malaysia
continues to be the world’s largest palm oil producer with a production
of 15.90 million tonnes in 2006.
The success of the crop is largely market driven with good longterm
price prospects for palm oil making oil palm more attractive than
most other crops. Palm oil contributes more than one-third of the
national agricultural GDP, generating RM 31.81 billion in export
earnings in 2006, making it one of the pillars of Malaysia’s economy.
At present, the industry employs more than 1.5 million people in the
core and related sectors. This paper provides an overview of the
technological developments which have propelled the industry into a
strategic and important sector and which will shape the future of the
oil palm agro industry.
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Impact Assessment of Liberalizing Trade on Malaysian Crude Palm Oil
This study analyses the impact of lifting the export tax on Malaysian
crude palm oil. In the first section, the structural equation is developed
incorporating Malaysian palm oil products, especially focusing on crude
palm oil (CPO) and processed palm oil (PPO). The study deals with
the conceptual model and dynamic specification of the Malaysian palm
oil market model as regards the oil palm area, palm oil supply, domestic
consumption, imports and exports of palm oil products, stocks and
domestic price relationships. The model also included the Indonesian
palm oil market model as well as world palm oil price relationships
due to the significant impact of both factors on Malaysian palm oil in
international trade.
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A Study on the Relationship between the Futures and Physical Prices of Palm Oil
The difference between cash and futures prices is known as basis. It
represents the local demand and supply situation as well as the risk
factors associated with the physical commodity trade. Forecast basis
can be used with the futures prices to predict the cash price of palm oil.
In addition, using the expected trends in basis can improve hedging by
both buyers and sellers. Forecasts for other crops using basis from simple
historical averages compare favourably with the results from more
complex forecasting models. This work investigated the behaviour of
crude palm oil (CPO) basis and compared practical methods of
forecasting CPO basis by regions in Malaysia using multi-year historical
averages.
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Price Volatility Spill Over in the Malaysian Palm Oil Industry
This study examines volatility spill over between the domestic prices of
selected palm oil products and the major causative factors of the
volatility. Empirically, it was found that palm oil has moderate price
volatility and a short-term effect in unidirectional and bi-directional
price volatility spill over to the domestic prices of selected palm oil
products. Since crude palm oil (CPO) is a price leader among the other
selected palm oil products, an effort should be made to stabilize its
price to minimize volatility in all the other prices. Using the major
causative factors of price volatility, a model was developed to forecast
domestic prices for the selected palm oil products. The prices for CPO
and RBD palm olein (POL) were forecast and found to be good with
error of less than 2% with all the directions for prices correct. Stabilizing
the palm oil price can be done through market power by a monopolistic
producer or forming a producer cartel or through international
commodity agreements between buyers and sellers. It is believed that
creating an alliance between Indonesia and Malaysia should boost the
bargaining power of both countries in setting the CPO price and control
output, thereby reducing the volatility of all palm oil products in the
future.
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