Focus on Malaysia

by World Grain Staff
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Malaysia has no wheat growing sector, but it’s a giant of the world’s oilseeds industry sector. In 2008-09, it was the world’s second largest producer of palm oil, behind Indonesia, and a major exporter.

In its annual report on the Malaysian oilseeds sector, the U.S. Department of Agriculture’s (USDA) office in Kuala Lumpur put crude palm oil output at 17.9 million tonnes in 2008-09, a rise of 2%. It gives Malaysia an exportable surplus of 15 million tonnes of palm oil and 1 million tonnes of palm kernel oil. "Malaysia will remain a formidable competitor in the world vegetable oil market," the attaché wrote.

"While China is expected to remain the most important market for Malaysian palm oil, the U.S. has emerged as the fourth-largest market for Malaysian palm oil (since the FDA requirement for the transfat labeling in January 2006)," it said. "Malaysian palm oil exports to the U.S. have doubled from 600,000 tonnes in 2006 to 1.2 million tonnes.

Palm oil has come under attack, both from environmental bodies, who claim that rain forest has been cleared to produce it, and from health lobbies. The Malaysian industry has worked hard to rebut their claims. Sometimes the irritation shows through.

The Palm Oil Blog, run by Tan Sri Datuk Dr. Yusof Basiron, chief executive officer of the Malaysian Palm Oil Council (MPOC), recently referred to "perverted views of anti-developing country environmentalists." It pointed out that many countries have cleared land for agriculture. "Why are NGOs selectively picking developing countries for their campaigns when the actual land clearance is much more obvious in countries like New Zealand and others?" he asked.

Another recent entry asked "What Deforestation? Many critics of the Malaysian oil palm industry do not know that Malaysia agreed to generously keep aside its pristine natural tropical forests 15 years ago when the country pledged at the Rio Earth Summit to maintain a minimum of 50% of its land area under permanent forests," it said. "The policy behind the pledge remains intact as Malaysia today still has 56% of its area under permanent natural forests."

The feeling that some of the opposition to palm oil betrays a remnant of old colonial attitudes is displayed on the MPOC’s web site, which refers at one point to "anti-palm oil campaigns that have been launched by a small group of activist organizations in London and northern Europe."

Palm oil has also been the subject of long arguments over its effect on health. Its status as "transfat free" has helped bolster exports.

Oil palms were introduced into the British colony of Malaya, in what is now Malaysia, in 1910 by William Sime and Henry Darby. Sime Darby Plantation is, following the 2007 merger of Sime Darby Berhad, Golden Hope Plantations Berhad and Kumpulan Guthrie Berhad, the world’s largest palm oil producer, producing about 2.4 million tonnes or 6% of the world’s crude palm oil output annually, with plantations in Indonesia as well as Liberia.

According to the Malaysian Palm Oil Board’s own statistics, there are 411 FFB mills in operation in Malaysia, with a capacity of 94.6 million tonnes a year. They produce crude palm oil from the pericarp of the fresh fruit bunch (hence FFB). The 42 palm kernel crushers have an annual capacity of 5.2 million tonnes. Fifty-one refineries have a capacity of 19.2 million tonnes and 17 oleo chemical plants can process 2.6 million tonnes.

High palm oil prices have slowed the development of Malaysia’s biodiesel sector. As the attaché put it, "palm oil biodiesel appears to have lost some of its luster." There are also signs of a change of heart from the buyers.

"Europe, the biggest market for Malaysian biodiesel, has started to have some fears that the biofuel may not be so green after all," the attaché said. According to the annual oilseeds report, some investors have put a break on plans, although others have carried on. "In the meantime, the government of Malaysia imposed a freeze on new licenses in order to ensure that the licensees are bona fide operators," it said.

Malaysia’s parliament did pass a Biofuel Industry Bill on April 16, 2007. It provides for the mandatory use of biofuel and licensing of activities relating to the biofuel sector, but the mandate has not been implemented. "Malaysia will likely only mandate domestic use of biofuel — most likely 5 percent palm olein blended in diesel — when crude petroleum and palm oil market prices offer a reasonable profit to the biofuel manufacturers," the attaché said.


According to the International Grains Council, Malaysia will import a total of 3.7 million tonnes of grain in 2009-10, compared with 3.5 million the year before. Wheat imports are put at 1.2 million tonnes, compared with 1.1 million, while maize imports have risen to 2.5 million from 2.4 million tonnes.

The country also imported an unchanged 500,000 tonnes of soybeans and 1 million tonnes of soy meal. Rice imports are put at 900,000 tonnes, up from 800,000.

The history of the rice sector in Malaysia over recent years has been one of a progressively reduced state role.

Bernas, which holds the sole licence to import rice into Malaysia, is also the buyer of last resort for local paddy farmers. It was privatized in 1996 under a deal, which says that it has to ensure a sufficient supply of rise at stable prices. On Oct. 28, the Malaysian planter, Tradewinds, which already has a 62.3% stake in Bernas, offered to buy the rest of its shares.

Of more than 400 commercial rice mills in the country, 32 are owned and operated by Bernas, making it the nation’s biggest rice miller. It can mill 400,000 tonnes of paddy rice a year, giving an output of 270,000 tonnes. Bernas also enforces the paddy minimum price set by the government.

According to Bernas, Malaysia is around 70% self-sufficient in rice, with approximately 140,000 registered paddy farmers. The self-sufficiency level is set to increase to 90% in 2010, under the Ninth Malaysia Plan.

An article published by the Kuala Lumpur Star on Oct. 27 characterized the psychological importance of rice. "Malaysia hit the panic button on its rice supply security last year after it encountered severe price escalation in imported rice as well as shortage in its supply due to the imposition of export curbs by major rice suppliers in Thailand, India, Vietnam and China as a measure to contain their domestic food price inflation in 2007," according to the newspaper.

It pointed out that Malaysians annually consume about 2.2 million tonnes of rice, of which some 657,900 tonnes need to be imported. Projected rice production in Malaysia stands at 1.92 million tonnes in 2009, compared with the consumption figure of 2.23 million tonnes.

"Rice remains the major staple and provides close to onethird of daily calorie intake on average," a study published last year by the Australian Bureau of Agricultural and Resource Economics said, noting that rice consumption per person had declined by around 15% between 1990 and 2005. "Per-person consumption of starchy roots also declined markedly between 1990 and 2005, with a significant decline in consumption of cassava."


Malaysia produces no wheat, but consumption of wheat in Malaysia is on a long-term uptrend. According to the ABARE study, consumption per person rose from 33 kilograms in 1990 to 58 kilograms in 2005.

Annual imports of wheat are approximately 1.1 million to 1.2 million tonnes, and typically about 800,000 tonnes come from Australia, although that figure has been significantly less in drought-affected years. Between 150,000 and 200,000 tonnes come from Canada, and 120,000 tonnes come from the U.S. as well as some smaller amounts from the Black Sea. There are three large milling companies — Malayan Flour Mills, Federal Flour Mills and Interflour — as well as three smaller mills.

Chris Lyddon is World Grain’s European editor. He may be contacted at: