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Malaysian independent palm oil millers are facing significant hurdles in offloading crude palm oil (CPO) as national inventories hit record peaks, prompting refineries to scale back deliveries. Industry sources indicate that this supply glut has led to a buildup of unsold stocks at mills, creating a storage crisis that may force operators to stop purchasing fresh fruit bunches (FFB) from smallholders within weeks.
Market participants have raised alarms over the deteriorating quality of long-stored CPO, which is increasingly falling 'off-specification' and becoming unsuitable for the export market. For Malaysia's 440,000 smallholders, the situation is critical; since FFB must be processed immediately after harvest, any halt in mill operations risks a total loss of income rather than just a decline in prices.
Data from the Malaysian Palm Oil Board (MPOB) underscores the severity of the glut, showing a 24.54% month-on-month surge in inventories to 3.51 million tonnes in September. This was fueled by production hitting an all-time high of 2.12 million tonnes while exports simultaneously dropped by 12.13%. Furthermore, high domestic CPO prices have encouraged price-sensitive international buyers to switch to more affordable edible oil alternatives.
Industry stakeholders are now urgently lobbying the government to temporarily suspend the 10% CPO export duty. They argue that the current levy makes Malaysian oil uncompetitive compared to Indonesian supplies, which are estimated to be between RM700 and RM900 per tonne cheaper. The Ministry of Plantation and Commodities has confirmed the proposal is under consideration by the Ministry of Finance, with a decision expected following upcoming Cabinet discussions.
Compounding the inventory issue are allegations of 'cocktail' blending, where imported palm oil is purportedly mixed with local supply for re-export under Malaysian labels. Experts warn that if true, this practice displaces local production and undermines the integrity of the Malaysian Sustainable Palm Oil (MSPO) certification. Authorities, including Customs and MPOB, are being urged to verify import and origin records to protect the national brand's reputation.
Source: The Edge Malaysia