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KUALA LUMPUR: Some palm oil millers in Malaysia, the world's second largest producer, have
temporarily halted production following a dramatic plunge in prices of the edible oil, a senior official
from a miller's association said on Monday.
Malaysian crude palm oil (CPO) prices have seen their biggest one-month decline in more than 13
years in June, tumbling 22% from a high of RM6,632 a tonne to RM4,922 on Monday, erasing most of
this year's gains.
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Malaysian millers purchase palm fruit bunches based on the monthly average CPO price - currently
about RM6,200
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- but sell theForextracted
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on the daily market price.
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"No mills can afford to buy fresh fruit bunches at these prices," Steven Yow, northern president of the
Malaysian Palm Oil Millers Association (POMA) told Reuters.
Malaysia's benchmark CPO futures had rallied to records this year due to a global edible oil supply
squeeze caused by a labour shortage, the Russia-Ukraine conflict, and an export ban in top palm
producer Indonesia.
The contract fell when Indonesia ended that ban and sought to boost exports, which ignited more
market volatility.
At current prices, the mills - which are already facing labour shortages and high input costs - stand to
lose at least RM150,000 for every 100 tonnes of CPO produced, Yow said, adding that buyers are
currently offering around RM4,700 for CPO.
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Yow said millers that have delivered on their contracted sales have stopped receiving fresh fruit
bunches from suppliers until prices normalise.
"This kind of situation has never happened before in the last 35 years," he added.
A substantial number of millers are affected, especially independent millers sourcing from
smallholders, Yow said.
He expects operations to normalise in July if price volatility and the difference between the monthly
average CPO price and the daily traded price declines. - Reuters
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