Production Cost of Palm Oil in Malaysia

The Malaysian oil palm industry is facing rising production cost which is partly due to a stagnation in productivity. This affects business profitability, especially during those times when prices of palm oil are low. A low replanting rate has contributed to an age profile featuring the existence of more old palms which are less productive. There will be larger areas of old palms in the near term if the current low replanting rate continues, and will result in pushing production cost to a higher level.
The article provides an overview of the need to monitor production cost dynamics to mitigate further cost increases. In particular, these include, among others, the prospects of using clonal materials during replanting, addressing the skyrocketing cost of fertilizer application, the approach towards integrated pest and disease management, and the prospects of precision agriculture, good agricultural practices, etc.

Networking and Innovation in the Malaysian Palm Oil Industry: Past,Present and Future

This article encourages leaders in the oil palm and palm oil industry to think deeply about networking, and to form both informal and formal networking groups so that more innovation can be achieved. It introduces ideas from a range of leading strategic management theorists about the links between three main kinds of networking and three corresponding stages of the process of innovation. Different kinds of networking groups are helpful at different stages of the innovation process. Open and informal social networking within ‘creative networks’ and ‘transformation networks’ supports the development of radically new technologies and new ways of thinking about how to apply them to counter the challenges faced by businesses in a fast-changing global economy. In contrast, once firms reach the final stage of creating new products and markets based on groundbreaking technologies, it makes sense to share ideas less freely. More secretive and closed ‘process networks’, in which the partners are bound by formal contracts, tend to be useful at this stage.

The argument is supported by practical examples from the Malaysian palm oil industry which has a long and successful record of both networking and innovation. The article concludes with recommendations for applying these ideas to a range of challenges currently faced by the industry. Different challenges require different approaches, so managers will need to engage in both co-operative and competitive behaviour at the same time. This can create uncomfortable tension between the need to share technical information to solve problems, and the need to keep commercial secrets. Such tension can be managed more easily when it is clearly understood which kind of networking is needed for each of the various challenges to be dealt with.

The Challenges Facing Palm Oil in the 21st Century

The palm oil sector is facing short-run as well as long-run challenges. The short-run challenges focus on the ability of the sector to counter the economic cycle, whereas the long-run challenges are associated with fundamental issues pertinent to the sector. Both short-run and long-run challenges are products of biological factors of the oil palm and its products, as well as the behaviour of substitute oils, vegetable and/or mineral. The Malaysian palm oil sector has little control over the economic cycle as the cyclical behaviour depends heavily on other substitutes used as vegetable oils or biofuels. The long-run challenges of the sector are the slower rate of improvement in oil palm yields than other oilseeds, low labour productivity mostly due to problems in the mechanization of the harvesting operation, functional obstacles to palm oil usage in temperate countries due to its lipid composition, and the non-tariff barriers against palm oil by the importing nations, particularly the European Union (EU) and USA. Some possible solutions are proposed.

The Impact of Petroleum Prices on Vegetable Oils Prices: Evidence from Co-integration Tests

The prices of petroleum and vegetable oils appear to be moving in tandem, a trend which was not observed before. This study seeks to investigate the long-term relationship between the prices of crude oil and selected vegetable oils. To that end, the bivariate co-integration approach using the Engle-Granger two-stage estimation procedure was applied. The study utilized monthly data over the period of January 1983 through March 2008. The results provide strong evidence of a long-run relationship between the two product prices.