KUALA LUMPUR • The coronavirus pandemic has left Malaysia’s palm oil industry without enough workers. The shortage could cost farmers as much as 25 per cent of their annual production – a loss worth about US$2.8 billion (S$3.9 billion).
Malaysia’s economy relies on palm oil, its most important agricultural commodity, but palm oil needs migrant workers from Indonesia, Bangladesh and India to do the jobs that locals will not do.
As countries in South-east Asia struggle to get the Covid-19 outbreak under control, governments have tightened restrictions on travel for workers coming and going.
“In the past, when people left, people also came,” said Mr Nageeb Wahab, chief executive of the Malaysian Palm Oil Association, a growers’ group that represents 40 per cent of palm plantations by area.
“Now, the coming is nil, and the leaving may be more after Malaysia’s movement control order.”
Though environmental activists have pushed to rein in the palm industry for years, the labour shortage in the industry signals the disruption unfolding at companies and farms around the world that depend on migrant workers.
More than 70 per cent of Malaysia’s plantation workers come from outside the country, according to an estimate by Rabobank.
Malaysia produces about 26 per cent of the world’s most common cooking oil.
Production was already expected to drop by as much as 10 per cent due to last year’s dry weather and less aggressive fertilisation.
Now, the labour shortage suggests the shortfall could more than double, Mr Nageeb said, and growers are beginning to fidget.
In April, top producer United Plantations warned investors of a potential threat to production in the second half of this year “as the present lockdown policy and restrictions on travel in many South-east Asian countries will prevent guest workers from Indonesia, Bangladesh or India from seeking job opportunities in the Malaysian plantation industry”.
Labour shortages have plagued growers for years, though never this acutely.
Malaysia’s plantations now compete with higher wages offered by the growing industry in Indonesia, the world’s biggest producer, and while benefits and employment practices vary, the industry has a reputation for exploitation and abuse.
Automation has offered little relief. Palm fruit is fragile, growing in bunches that can weigh as much as 45kg, growing 18m off the ground. Most of it is still harvested by hand.
Compared with soya or rapeseed, harvesting palm fruit requires 25 times more workers.
The sudden and rapid outbreak of the coronavirus has turned long-term challenges into short-term ones, said Ms Aurelia Britsch, head of commodities at Fitch Solutions.
“The sector is currently recording labour shortages, as ongoing lockdown measures mean palm oil estates are generally unable to recruit new foreign workers at a time when some employees have been repatriated to their origin countries due to the pandemic,” she said.
In better times, the farmers might have raised wages to attract more workers. Not now, with global economies in free fall and commodities prices growing more volatile.
Even with a shortage of labour and, potentially, supply, the tropical oil is on course for its biggest annual drop since 2012.
Stopping production is an option for rubber and other crops, a way to use less labour and eat into stockpiles, forcing prices to rise.
“It’s not as simple as stopping production to let prices go up,” said Mr Nageeb. “The moment you stop your production for two weeks, to bring it back to normal will take two months.”
Without enough workers to harvest the crop in a timely way, palm fruit will rot. The fruit that is harvested also has to be sent quickly to crushing mills or it will start to oxidise, increasing acidity levels and reducing oil quality. Manual labour is also required to keep trees pruned and healthy for future seasons.
For migrant workers, the virus outbreak and the lockdowns that followed have been gruelling.
Those who left may not be able to return, losing a steady, if modest, source of income. Those who stayed faced other problems, said Ms Glorene Das, executive director of Tenaganita, a Malaysian non-governmental organisation that promotes migrant workers’ rights.
The government requires employers to provide workers with adequate social distance and protective gear, as well as routinely disinfected work environments. That applies to plantation operators too, but “the remoteness of these locations and the lack of labour inspectors contribute to difficulty in enforcement”, according to the International Labour Organisation.