- Advertisement -

recent surge in COVID-19 Cases in Southeast Asia have closed ports and shut down plantations and processors, leading to disruptions in the expansion of raw materials such as palm oil, coffee and tin.

ban in malaysiaThe world’s second-largest producer of palm oil has barred migrant workers from traveling to plantations, raising the prices of the ubiquitous edible oil used to make candy bars, shampoo and biofuels.


The lockdown in Vietnam, the world’s second largest coffee exporter by volume, has delayed processing and exports of coffee beans, raising production concerns in Brazil due to inclement weather. Global tin supplies have been affected by Covid-19-related disruptions at a smelter in Malaysia, contributing to higher prices for the industrial metal, which is used to connect computer chips to circuit boards in electronics.

Prices for each of these items have risen to several-year highs in recent months, adding to the cost to consumers.

- Advertisement -

“These supply shocks resonate globally as Vietnam and Malaysia hold large market shares of key commodities,” said Trin Nguyen, a senior economist at Natixis.

Businesses including Unilever plc, the consumer-goods company, and JM Smucker Co., which includes Folgers Coffee, have said rising raw material prices are contributing to cost pressures.

Biden’s silent shutdown: Businesses closed amid vaccine mandate, extended COVID relief

Unilever’s chief financial officer, Graeme Pitkethley, said, “The price of palm oil, which is a key ingredient for our skin-cleansing products, is now 70% higher than its long-term average, due to rising demand and lower harvests. The price is increasing with the yield.” In July. He said the company has already increased the prices of some products.

One of the reasons for the increase in the price of palm oil is also the surge in cases of Kovid-19 in Malaysia. The Southeast Asian country is recently reporting nearly 19,000 new cases and 400 deaths a day in its worst outbreak since the pandemic began. Travel restrictions since March last year have made it difficult for workers to access the plantations, leading to a steady decline in the number of labourers. The palm-oil sector depends on immigrants from Indonesia, which is the world’s largest commodity producer, as well as Bangladesh and India.

Tougher internal-movement restrictions in recent months in response to rising cases have added to the challenges facing palm-oil companies, as have outbreaks on plantations, leading to shutdowns.

sime darby tree planting Bhd. said that its labor shortage in Malaysia accounts for about a fifth of its total needs, which means about 6,000 unwanted vacancies compared to 2,000 in March 2020. The company said it produced about 6% of Malaysia’s crude palm oil last year. Labor shortages and deficient rainfall contributed to a 5% decline in palm oil production in Malaysia in the first half of the year, the company said.

The company said it has invested in new mechanization and automation to reduce dependence on manual labour.

FGV Holdings Bhd., which said it produces about 15% of the country’s crude palm oil, said it has faced challenges in producing expected quantities due to the recent surge in Covid-19 cases in Malaysia. The company said the transition to company estates and milling operations resulted in the mandatory lockdown.

The overall impact in Malaysia’s palm-oil exports has been a 13.6% decline in the first eight months of 2021 compared to the same period last year, according to data from the Malaysian Palm Oil Council, an industry group.

“You don’t have enough workers to harvest the fruits,” said Ivy Ng, regional head of agribusiness research at CGS-CIMB Securities in Malaysia.

As the government plans to reopen the economy later this year, Ms Ng predicts that rules on foreign workers will be eased early next year, allowing palm oil plantations to reduce their labor force. will help promote.

Get Granthshala Business on the go by clicking here

covid-19 travel control Coffee is killing in Asia too. Starting in July, an outbreak in Vietnam prompted the government to impose restrictions on movement that interfered with shipments. Vietnam is the world’s largest exporter of the bitter-tasting robusta beans used in instant coffee and espresso blends.

“Vietnamese exporters are finding it difficult to transport goods, including Robusta Green Coffee and King Coffee products, to ports for shipping around the world,” said Le Hoang Deep Thao, chief executive of TNI King Coffee and vice president of the Vietnam Coffee and Cocoa Association. .

Vietnam’s coffee exports from January to August 15 fell 8.2% compared to the same period last year. “Local and foreign traders are extremely concerned,” said Ms Le, adding that the coffee association was lobbying the government of Vietnam to relax restrictions to avoid delays in deliveries.

Large coffee companies often use both robusta and its aromatic cousin, Arabica, in their mixes and brews. Prices of both types have risen sharply this year, mainly driven by drought and frost in Brazil, the world’s largest coffee exporter. Vietnam’s production problems have been contributing to high prices over the past several months.

Western coffee companies say higher prices will affect consumers. “The cost of coffee has gone up,” Tucker Marshall, Smucker’s chief financial officer, said on an August earnings call, “we will take additional pricing action and measures to ensure that we correct the impact of inflation.”

Michael Orr, Spokesperson at Jedi Petes JDEP -1.16% NV, said the Dutch coffee company has seen “a sharp increase in material, freight and other costs over the past year, which will require us to take appropriate measures. Historically, green coffee prices fluctuate significantly. The market has reflected and we expect the example to continue.”

Tin prices have risen in recent months, as Malaysia Smelting Corp Bhd, one of the world’s largest refined tin producers, has reduced smelter workers over the past several months and reduced the spread of COVID-19. Operations have been stopped to comply with government regulations to limit. .

Malaysia’s tin exports declined 29% in June from a year earlier. A company representative said tin production had not yet returned to normal, but added that operations were expected to gradually resume to pre-pandemic levels as Malaysia’s government reopens the economy.

“The continued demand for tin solder in consumer electronics and supply disruptions due to lockdowns in tin producing countries around the world are driving tin prices upwards,” the company said in a financial report last month.

To read more from The Wall Street Journal, Click here.