All around the world, there are countries producing agricultural products which most of us do not have a great deal of attention to. Most of buy processed foods at the grocery store and do not think a great deal about the ingredients just do you like the taste of the item, for example cookies. One of the items in the supply system is palm oil.
In an article by Mei Mei Chu and Naveen Thukral of Reuters, the Palm Oil industry comes primarily from Malaysia and Indonesia which produce 90% of the world’s palm oil. Indonesia is the largest producer with 60% market share and Malaysia has about 30% to equal 66.2 million tonnes.
In oil palm plantations in Malaysia they are having problems with workers, there is not enough of them as COVID has reduced the number of people who can come into the country. Normally migrant workers from Indonesia and South Asia, but similar to all farms around the world, if the farms are not maintained more pests including rats, moths and bagworms are allowed to ruin crops.
In Malaysia, the Malaysian Palm Oil Board data shows a drop in average crude palm oil yields to 1.41 tonnes an acre from 1.56 tonnes over the same period from last year.
Indonesia has more people and does not have the same labor shortages and expects output to rise as more acreage was planted with palm trees.
Linking to dividend paying stocks, we often look around in our backyard and in reality no matter the industry we can see similar concerns around the world. Traditionally people in less developed countries have come to more developed countries for higher wages than what they would earn in their own country. COVID has slowed down movement of people and some degree of mechanism is a possible solution, however skilled people are always needed. Hopefully the companies where you invest your money continues to attract and retain good people.
There are more questions than answers, till the next time – to raising questions.