Money News

Malaysia palm growers warn new Sabah virus restrictions could halve output

KUALA LUMPUR (Reuters) - Malaysia’s biggest palm oil producing state Sabah could see crude palm oil production fall by as much as 300,000 tonnes a month after imposing new coronavirus restrictions in the high crop season, the Malaysian Estate Owners’ Association (MEOA) told Reuters on Friday.

A truck carrying oil palm fruits passes through Felda Sahabat plantation in Lahad Datu in Malaysia's state of Sabah on Borneo island February 20, 2013. REUTERS/Bazuki Muhammad/Files

Sabah state, which has become the epicentre of the coronavirus outbreak in the world’s second largest palm exporter, on Tuesday released new guidelines limiting plantation and mills to half capacity and capping operating hours to 6am-6pm.

Worsening labour shortages and La Nina-induced wet weather have already hampered production in Malaysia, and MEOA warned that the new restrictions could cut the state’s output by half.

Palm oil mills typically operate up to 22 hours a day during the peak production season from September-January, and a reduced 12-hour shift could lead to a massive backlog, MEOA council member Joseph Tek said.

Palm fruit bunches that are not processed soon after harvesting could be left to rot, further reducing yields.

“The perishable nature of crops will have disastrous consequences to the growers, especially the numerous smallholders in Sabah,” MEOA said in a separate statement on Friday.

The restrictions will impact over 1.544 million hectares of palm plantations, 132 mills, 12 palm kernel plants and 11 refineries, involving over 220,000 employees, the group representing mid-sized plantations said.

MEOA, and the Malaysian Palm Oil Association which represents palm giants, are appealing to the state government to lift the restrictions, arguing that social distancing is already the nature of work at estates and mills.

Sabah produces 5 million tonnes of crude palm oil a year, accounting for 25% of the nation’s output.

Malaysia has imposed targeted lockdowns this month amid a fresh spike in cases. It reported 847 new coronavirus cases on Thursday, raising the total to 23,804 infections and 204 deaths.

Reporting by Mei Mei Chu; Editing by Kim Coghill