The Edge Markets (18/03/2020) - KUALA LUMPUR/SINGAPORE (March 18): Malaysia has directed palm plantations to continue operations even as the country shuts businesses to prevent the spread of the coronavirus, a producer group said on Wednesday, ensuring steady supplies of the tropical oil to global markets.
Malaysia is the world's second-largest producer of palm oil, which is used in everything from cosmetics to cookies and accounts for about 65% of global edible oil exports.
The country has closed its borders and restricted internal movement by shutting schools and businesses from Wednesday until March 31, after its tally of infections climbed to the highest in Southeast Asia, at 790 cases and two deaths.
Closure of palm plantations as a part of the measures earlier had caused concerns in top importers, including India.
But the Commodities Minister on Wednesday agreed to exempt palm plantations from the restricted movement order, Nageeb Wahab, chief executive of the Malaysian Palm Oil Association, told Reuters.
"The Minister informed us that the Cabinet has reviewed our appeal and reasoning, and consented to allow the industry to resume operations with immediate effect," Nageeb said.
GLOBAL SUPPLY CONCERNS
Malaysian palm oil futures jumped 5% in early trade on supply concerns after plantations were forced to shut operations. Palm futures prices also rose in China and India.
Palm oil analysts had estimated that Malaysia's crude palm production would drop by 350,000-700,000 tonnes for the month of March due to the harvest pause, potentially cutting March inventories to 1.0 million to 1.3 million tonnes.
India, the world's top vegetable oil importer, could have taken a hit if the supply was disrupted, said Sandeep Bajoria, chief executive of the Sunvin Group, a Mumbai-based vegetable oil broker. He said India had less than a month's supply.
India, which consumes about 1.9 million tonnes of edible oil a month, has 1.5 million tonnes at ports and in the pipeline traders said. The country on an average imports 1.25 million tonnes a month, the balance made up with domestic production.
China, the world's second-biggest edible oil importer, has large inventories of soybean oil but stockpiles have started declining.
Malaysia's February end-stocks fell to 1.68 million tonnes, the lowest since June 2017, according to data from the Malaysian Palm Oil Board.
Indonesia, the world's biggest palm oil producer, has yet to take a decision on plantation closures, an industry official said.
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