Just right at her feet Malaysia is the proud landlord of hectares upon hectares of palm oil fields stretching from the north of the peninsula to the vast arable lands in the southern state of Johor. And yet again over in East Malaysia in the princely states of Sabah and Sarawak there is plenty more; carpeted out in tantalising testimony to how and where the country plans to butter its bread.

The commodity, which currently trades at US$3,000 per tonne – and which by accounts is slated to rise even further in the months and years ahead – is immensely sought after in most parts of the world. Whether it be touted for its bio-fuel zeal in Europe or the United States, palm oil is by and large well-documented for its clean-air properties.

It therefore is no hackneyed stroke of speech to say that palm oil has indeed a future for Malaysia and Malaysia a future with it!

And just nowhere is that pact with the country’s future more vividly dramatised than in the declaration contained under the country’s 3rd Industrial Plan (3IMP) clearly identifying the commodity as a potential revenue spinner along with the export of halal food products. And to make sure that Kuala Lumpur has the wherewithal to transport this invaluable commodity, it is busily augmenting fleets of chemical tankers to prepare for the return of the economic upswing when large-scale transportation to the rest of the globe becomes a virtuous necessity.

So what really is palm oil? It actually is edible oil required for cooking and which according to users have myriad other utilities such as for oleochemicals (chemicals derived out of biological oils and fats)

Along with the emergence of India, Brazil and interestingly of oil-rich Middle Eastern states; palm oil’s rise has been as inexorable as the ‘forward march’ of emerging economies spoiling for a share whose demand any economist anywhere, would readily concur as being inelastic. Such was the allure of palm oil and its fields, that it clearly explained away the high food prices of early 2008 whose outcome was nothing more than of it being a simple case of farmers switching to plant and harvest the commodity over the unprofitable cash crops.

The relentless appetite for the commodity rests firstly on account of rising incomes in emerging economies and secondly as mentioned, its demand inelasticity which would almost certainly guarantee its purchase for use in the kitchens across the pan-Asian continental mass of India, China and West Asia.

According to the Malaysian Palm Oil Board, Malaysia commands 41% of the world’s production and 47% of global exports. The Board further noted that “as one of the biggest producers and exporters of palm oil and palm oil products Malaysia has an important role to play in fulfilling the world’s growing need for oils and fats in general”.

And in the words of independent cargo surveyor Societe Generale de Surveillance Malaysian palm oil exports rose 5.1% last month in May happening as it did even in the throes of a recession. 

What is more, there is something else. Indonesia’s recent move to impose export duties on crude palm oil has meant Malaysia’s gain by the movement of the product to Malaysian inventories. 

That could only mean more Malaysian exports of the commodity to the likes of China and India which analysts widely predict to happen in May and beyond. And when winter falls in the last quarter of the year in Europe and the United States compelling increased usage of the palm oil for heating and other purposes, Malaysia amongst the nations in the world will be doing what the rest can only dream of: grin from ear to ear.
 
Quite frankly, the country has never had it that good or even for the investors who snap up palm oil fields in the country.

Article contributed by Victor Verstier, a Singapore-based free lance journalist.