We are hearing from the market that some feel that the proposed Malaysia "limit" to oil palm area is a signal for expansion! The area limit (first mooted at a lower level, then raised) has been suggested as a measure to improve the image of Malaysian palm oil against foreign accusations of deforestation. At the same time, it may ease palm's supply glut (resulting from rapid expansion when palm prices were buoyed in the biofuels boom). 

Some figures may explain this alleged “pro expansion” mood. 6.5 million hectares is significantly higher than the current licensed area; and the implied pace of expansion would be 130,000 hectares per year for a push to the limit by 2023 (the “target” year mooted by the government, see red line in chart). This is a significantly faster pace than recent growth in hectarage (blue line) of 69,000 hectares per year in the recent 3 years.

But if there is an upward revision of planted area, of say 5%, the pace of expansion to reach the limit could be 80,000 hectares per year (yellow line; not so far off the recent 3-year average change).

How would the area expansion be distributed? Or perhaps 2023 is not a “target” year and upstream industry players are quite mistaken in interpreting it this way.

Read more at Palm Weekly!