Will returning guest workers boost Malaysian oil palm yields in FY2024?

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Returning Guest Workers Expected to Boost Malaysian Oil Palm Yields in FY2024

Maybank Investment Bank Bhd (Maybank IB) anticipates a recovery in Malaysian oil palm planters' yields for the financial year 2024 (FY2024), driven by the return of guest workers. This projected improvement follows a period of diminished fresh fruit bunches (FFB) and crude palm oil (CPO) yields in FY2022-FY2023, which were attributed to labour shortages stemming from border closures during the Covid-19 pandemic, impacting harvesting and field maintenance activities.
Impact of Labour Shortages on Past Yields

During FY2022 and FY2023, several Malaysian-listed plantation companies experienced a decline in FFB and CPO yields when compared to the FY2020-FY2021 period. The primary reason cited for this downturn was the scarcity of guest workers, essential for both crop harvesting and ongoing field upkeep. The cessation of international travel and stringent border controls implemented during the Covid-19 pandemic directly led to these critical labour deficits, consequently affecting production levels.
Projected Yield Improvement in FY2024-FY2025

With the gradual return of guest workers largely addressing the labour shortages that have plagued the sector, Maybank IB forecasts an upward trend in yields for FY2024 and FY2025. This influx of labour is expected to facilitate more comprehensive harvesting and maintenance operations, thereby contributing to a restoration of previous yield levels and potentially exceeding them as operations normalise.
Rising Unit Costs and the Need for Yield Improvement

The sector faces upward pressure on its unit costs, with the average cost per mature hectare rising at a compound annual growth rate (CAGR) of 4.5 per cent from FY2014 to RM10,921 in FY2023. More significantly, the operating cost per CPO tonne has escalated at a faster CAGR of 7.5 per cent over the same period, reaching RM2,435 per tonne in FY2023. This faster increase in operating cost per tonne is partly a consequence of the declining CPO yields observed in recent years, creating a double challenge for planters.
Financial Implications of Increased Yields

Should planters succeed in elevating their yields, their financial performance stands to be significantly enhanced. Maybank IB's projections indicate that a mere 10 per cent increase in CPO yield could boost the proforma FY2023 core profit after tax and minority interests of covered planters by a substantial nine to 132 per cent, underscoring the critical link between yield recovery and profitability.

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Will returning guest workers boost Malaysian oil palm yields in FY2024?

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