Malaysian palm oil extraction rate (OER): response to market and management factors.
The changed structure of the fresh fruit bunch (FFB) market has negatively affected the oil extraction rate (OER) of the Malaysian palm oil industry. This study, which employed econometrics to model the OER of the Malaysian palm oil milling industry, identified the fresh fruit market structure and mill maintenance as the two important OER influencing factors. Palm oil mills in Sabah and Sarawak in the eastern region of Malaysia, modelled by a dummy variable, indicated a significantly higher OER.
The FFB market changed after the 1989.90 season because of the drastic increase in processing capacity. Competition for the raw material increased, bidding the prices upwards, i.e. the quality of harvested fruits suffered due to the lack of incentive to harvest the fruits properly. Fruit quality control is required to improve the OER. In addition, greater maintenance of palm oil mills (POMs) is also needed to improve the processing efficiency and maintain higher OER.