Public Investment Bank analyst Chong Hoe Leong attributes this to Indonesia’s need to flush out inventories built up to full capacity during its three-week ban on export of the commodity.

Indonesia, the world’s largest palm oil exporter, lifted the ban on May 23, once its cooking oil supply and prices stabilised.

Even after the ban was lifted, prices continued to rise to RM6,500 per tonne before settling at RM4,700 today, the same level as in December last year.

Chong also warned that palm oil producers would suffer “a big loss” if the current labour crunch is not resolved soon.

“We are now facing a severe shortage of workers in the plantation sector. We need about 120,000 more workers to help bolster the country’s palm oil output,” he told FMT Business.

Production is expected to peak in October, making it even more urgent that new workers arrive soon.

Chong noted that while most of the Indonesian migrant workers returned to their home country during the two-year Covid-19 pandemic and lockdown, very few have returned.

In a recent report, Malay Mail said that as of April 1, there were already 475,678 applications by foreign workers to enter the country, with 77,000 opting for the plantation sector.

So far, only 2,605 applications have been approved for the manufacturing and plantation sectors.

Meanwhile, Bloomberg reported that a shortage of fertilisers has also hampered production.

The report said that prices had continued on an upward trend in the last year before stabilising in the last few months. As a result growers struggled to buy enough to meet their needs earlier in the season.

In a recent statement, plantation industries and commodities minister Zuraida Kamaruddin said that palm oil production is expected to rebound from a five-year low of 18.1 million tonnes to between 23 million and 25 million tonnes this year.

However, with the shortage of fertilisers, growers are expecting lighter fruit bunches, thus output is likely to amount to just 18.5 million to 18.7 million tonnes.