Technical Efficiency and Export Potential of the World Palm Oil Market

Hakimah Nur Ahmad Hamidi, Norlin Khalid, Zulkefly Abdul Karim () and Muhamad Rias K. V. Zainuddin
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Hakimah Nur Ahmad Hamidi: Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia
Norlin Khalid: Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia
Zulkefly Abdul Karim: Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia
Muhamad Rias K. V. Zainuddin: Faculty of Business, Economics and Social Development, Universiti Malaysia Terengganu (UMT), Kuala Terengganu 21030, Terengganu, Malaysia

Agriculture, 2022, vol. 12, issue 11, 1-16

Abstract: Palm oils have been proven to have the highest yield among vegetable oils, which is one of the critical factors in ensuring global food security. However, the world palm oil market has not been entirely utilised due to intervention policies that disrupt the global trade flow. Hence, this study aims to identify the technical efficiency of palm oil exports and then analyse the export potential of two leading producers and exporters of palm oil, Malaysia and Indonesia. A stochastic frontier model (SFM) has been used to estimate the level of technical efficiency across two countries for a sample of 59 major palm oil importing countries during 2009–2019. Palm oil export potential is then calculated using the value of technical export efficiency obtained from the SFM. The main findings revealed the technical inefficiency of world palm oil exports. Comparing the two countries, the Indonesian average technical efficiency value is higher than Malaysian throughout the year. Moreover, the technical efficiency estimates reveal that Malaysia and Indonesia dominate different markets, except in the Netherlands. In terms of export potential, the study found that both major exporting countries of palm oil have great potential to tap more into the same countries, namely China, India, Thailand and the United States. The policy implications of this study suggest that policymakers from both countries should set up a new combined strategy to maximise the palm oil export to their trading partners. Low technical efficiency values in several importing countries show great potential to explore further. Hence, there is a vast potential market for palm oil export to be tapped in those countries.

Keywords: palm oil; trade; technical efficiency; export potential; stochastic frontier analysis (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2022
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