InfoSAWIT, KUALA LUMPUR - Crude palm oil (CPO) supply is predicted to remain reduced until the first quarter of 2022,

as unresolved labor constraints continue in Malaysia while high export tax policies keep buyers away from larger purchases from Indonesia.

Sathia Varqa, founder of Singapore-based Palm Oil Analytics noted that Malaysia is short of around 70,000 workers, the main reason for the shortage of palm oil in the world. Varqa said the shortage of workers meant reduced harvests and less area for oil palm cultivation, particularly in Peninsular Malaysia which has lost palm oil production from 90,000 hectares of land and about 10,000 hectares in Sabah [the state in East Malaysia].

"So, we also estimate that there is crude palm oil (CPO) production from around 100,000 hectares of land that has been lost due to the conversion of plantations to urban areas," Varqa said at the S&P Global Platts event last November 17, which was reported by SPGlobal.

Due to the closure of borders due to the pandemic in 2020, foreign workers, who make up about 70% of the workforce in Malaysian palm oil plantations, are unable to re-enter the country. Therefore, Malaysian palm oil production this year is estimated to decrease to around 18.3 million tons, from the previous 19.2 million tons in 2020.