KUALA LUMPUR: The agricultural commodities, a key sector for the Malaysian economy, has seen robust growth in 2024 and is poised for further growth especially for palm oil this year, industry officials and observers said.
The sector - comprising six commodities namely palm oil, rubber, timber, cocoa, pepper and kenaf - has significantly bolstered the nation's economy, they added.
Sector's Contribution
According to the Ministry of Plantation and Commodities data, the sector contributed RM64.6 billion to Malaysia's gross domestic product (GDP) from January to September 2024, representing 5.3 per cent of the GDP.
The sector also played a critical role in international trade, contributing RM152.1 billion to exports, which accounted for 12.2 per cent of the country's total exports. This marked a notable 15.3 per cent increase from the same period in 2023.
On the import side, the sector's value stood at RM54.8 billion from January to October 2024, leading to a total trade value of RM206.8 billion and a trade balance of RM97.3 billion.
Palm Oil: Sustaining Eonomic Momentum
Palm oil continued to be Malaysia's most significant agricultural commodity in 2024, accounting for a substantial share of the sector's GDP and export contributions.
According to the data from Malaysian Palm Oil Board (MPOB), crude palm oil (CPO) production rose five per cent to 17.85 million tonnes from 17.00 million tonnes in 2023.
The board said exports of palm oil and other palm-based products grew by 10.2 per cent, amounting to 24.57 million tonnes compared to 22.28 million tonnes in 2023, with the total export value increasing significantly by 14.3 per cent to RM99.29 billion, driven by high palm oil prices.
India, China, Kenya, the European Union and Turkey remained the key export markets.
Palm oil stocks in November 2024 decreased to 1.84 million tonnes from 2.40 million tonnes in November 2023, supported by reduced imports and increased exports.
The average CPO price from January to November 2024 was RM4,120 per tonne, a 7.8 per cent rise compared to RM3,821 per tonne in the same period in 2023.
MPOB director-general Datuk Ahmad Parveez Ghulam Kadir said the Malaysian palm oil industry performed better in 2024 compared to 2023, with notable improvements in production, exports and prices.
For the full year of 2024, Ahmad Parveez said CPO production is expected to recover to at least 19.00 million tonnes (as projected by MPOB), supported by improved labour conditions and expanded productive areas, particularly in Peninsular Malaysia and Sarawak.
"Palm oil exports are expected to grow to 15.60 million tonnes, driven by stable demand from major markets like China and the EU.
"Additionally, Indonesia's higher usage of palm oil for biodiesel is anticipated to keep stocks below 2.00 million tonnes, with CPO prices forecasted to remain strong, trading between RM3,900 and RM4,200 per tonne," he told Business Times.
Palm Oil Industry To Stage Stronger Performance
For 2025, Ahmad Parveez said the industry is poised for further growth. Continued labour improvements and strong export demand are expected to contribute to a more positive outlook.
"The specific details and projections for 2025 will be unveiled at the Palm Oil Economic Review and Outlook (R&O) Seminar 2025 on Jan 14. This seminar will provide comprehensive insights into the industry's performance, current trends, and future prospects," he said.
Fitch Ratings raised its 2025 and beyond assumptions for Malaysian CPO prices due to a slower rebound in Indonesia's yields and rising biodiesel consumption there.
The firm raised its price assumptions to US$800 (RM3,578) per tonne for 2025 and US$700 per tonne thereafter.
"We had earlier assumed an average price of US$750 per tonne in 2025 and US$650 per tonne thereafter. Our revised assumptions reflect a slower rebound in yields in Indonesia, the world's largest palm oil producer, and increasing biodiesel consumption in the country," it said.
Despite the hike, Fitch said its assumption implies that prices will weaken from 2024, due to better supply of palm oil and competition with soybean oil.
Fitch expects a rebound in CPO output in 2025, helped by a weak La Nina.
Malaysia Continues To Lead Rubber Industry
According to the data by Malaysian Rubber Board (MRB), the rubber industry contributed RM27.56 billion from January until October last year, an increase of 20.8 per cent year-on-year. This represents 2.2 per cent of the total national exports which valued at RM1,242.88 billion.
Malaysia is maintaining itself as a global leader in the rubber glove sector with 420,000 hectares of untapped rubber fields ready to be processed.
The Department of Statistics Malaysia (DOSM) said exports of Malaysia's natural rubber grew 20.6 per cent month on month to 48,151 tonnes in October.
The export performance was contributed by natural rubber-based products including gloves, tires, tube and rubber thread.
Gloves were the main exports of rubber-based products with its value jumping 21.8 per cent month on month to RM1.5 billion (US$340 million) in October.
Economic analyst Dr Zulkufli Zakaria said looking at a comparative analysis between the production and demand of natural rubber, there is a potential demand that is slightly higher than production in 2025 due to Thailand's and China's decline in production due to adverse weather conditions.
An amount decline of up to 4.5 per cent in 202,5 contributed to a decline to 14 million metric tons, said Zulkufli.
"The global yearly demand for natural rubber is approximately 15.25 million tons, and the production is 14.4 million tons. However, as mentioned earlier, 2024 shows a greater decline due to adverse weather conditions.
"In summary, there is a shortfall of approximately 0.85 million tons in supply compared to demand in 2025, which could lead to a deficit in supply and as for the monetary value gap, the demand value (US$26.65 billion) exceeds the projected production value (US$25.2 billion) by around US$1.45 billion," he said.
Despite the robust sector performances, Public Investment Bank Bhd remains cautious about the average selling price trends for rubber gloves moving forward.
The firm said the anticipated decline in raw material prices in the first half of 2025 could prompt Top Glove Corp Bhd to maintain flat or marginally lower pricing to prioritise market share.
"Nevertheless, we believe this will be mitigated by a higher sales volume driven by the impending US tariff hike on China medical gloves effective in Jan 2025," it said in a note.
Rubber Sector Driver
Malaysia's rubber industry has recorded many achievements through the Malaysian Sustainable Natural Rubber (MSNR) initiative, which was implemented to ensure rubber remains a commodity that can compete in international markets.
The recent export of MSNR compliant rubber to the European Union (EU) reflects Malaysia's commitment to complying with international sustainability standards ahead of EU Deforestation Regulation implementation.
The event saw the first export involving two companies, Lee Rubber Group Sdn Bhd and Seng Hin Rubber (M) Sdn Bhd, each exporting 100 tonnes of natural rubber to Slovakia and the Netherlands respectively.
The MSNR initiative, which was introduced by the MRB on Oct 7 this year, aimed at ensuring the country's rubber industry meets international standards in line with the United Nations Sustainable Development Goals 2030.
It is a sustainability recognition through a regulatory and enforcement approach granted to LGM's licence and permit holders to ensure that rubber produced could enter the global market as a sustainable and competitive product.
Moving forward, Plantation and Commodity Minister Datuk Seri Johari Abdul Ghani said the ministry targets to slash rubber imports to RM3 billion from RM6 billion currently within five years, reducing the country's dependency on foreign rubber sources.
The country's rubber industry currently produces 350,000 tonnes of natural rubber annually.