Labor Shortage, Low Yields Are Bringing Palm Oil Production to Five-Year Low in World's Second Large

Oil palm planters in Malaysia, the world’s second largest producing country, are facing the lowest output in five years as they are challenged by the country’s worst-ever labor shortage and weak yields.

Total production for the country is expected to drop below 18 million tons, or 6 percent off from last year, and the lowest annual volume since 2016, according to the Malaysian Palm Oil Association - a growers’ group that represents 40 percent of Malaysia’s palm plantations by area.

As the most consumed vegetable oil in the world, palm oil has been a leading driver of the rally in global vegetable markets this year. Low palm oil supplies out of Malaysia and a decimated canola crop in Canada have collided with soaring demand as global economies reopen.

The lack of skilled harvesters in Malaysia have left fruit bunches rotting on trees, blocking plantations from capitalizing upon the peak production months of August through October - losing between 20-30 percent of production this year, and losing out on about $4.8 billion in revenue. Malaysia’s Prime Minister Ismail Yaakob announced that to combat the historic labor shortage, the country will allow fully vaccinated migrant workers to enter the country for the plantation industry in a case-by-case manner, although quotas have not yet been set.

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