KUALA LUMPUR: Malaysia's palm oil industry is facing a "moment of crisis", pressured by stagnant yields, rising costs and intensifying competition from alternative vegetable oils, said SD Guthrie Bhd group managing director Mohd Haris Mohd Arshad.

He said palm oil's long-standing advantages in versatility, nutrition and competitive pricing are increasingly being challenged by the rapid expansion of soybean oil supply.

"We are stuck between a rock and a very hard place. Over the last five years, soybean oil production has been creeping up and could surpass palm oil supply post-2025 or 2026," he said.

Mohd Haris was speaking at a panel session on "The Next Decade for Malaysian Palm Oil" moderated by Malaysian Palm Oil Council chief executive officer Belvinder Sron.

He attributed the surge in soybean oil supply to rising global protein demand, which has driven soybean planting and increased oil output as a by-product of crushing activities.

"Soybean isn't planted for oil, but higher protein demand leads to more crushing, and that results in more soybean oil entering the market," he said.

Mohd Haris noted palm oil's productivity advantage over soybeans has narrowed significantly over the years, reflecting structural weaknesses in the industry.

"We used to say palm oil was eight to 10 times more productive. Now it's four to six times. That trend shows declining productivity," he said.

As a result, palm oil supply has remained largely stagnant, while soybean oil availability has expanded sharply, altering historical pricing dynamics.

"There were times when palm oil traded at a discount to soybean oil, which was previously unheard of," he said, adding that cost competitiveness has become a growing concern.

"We talk a lot about sustainability and quality, but the real issue we haven't controlled is cost."

Mohd Haris identified slow replanting as a core contributor to rising costs, noting Malaysia's average replanting rate stands at only about two per cent.

"At that rate, trees can be 50 years old before replanting, when the optimal rate should be five per cent.

"With ageing trees, harvesting costs rise. Taller palms produce less fruit. Lack of replanting needs to be addressed to regain cost competitiveness," he added.

While large plantation companies typically replant at four to five per cent, Mohd Haris said smallholders face significant financial and labour constraints.

"Smallholders know they need to replant, but many can't afford loans or secure labour, especially given low profitability," he said.

He described the situation as a "catch-22", where replanting cuts off income and forces smallholders to start over, requiring external assistance from either the government or industry players.

On labour, Mohd Haris said Malaysia remains heavily dependent on foreign workers, making labour one of the industry's largest cost components after fertiliser.

"In Malaysia, it is about eight to 10 workers per hectare," he said, adding that mechanisation could raise land-to-worker ratios to 13 or 14 hectares per worker.

For a 10,000-hectare plantation, he said this could reduce the workforce by about 330 workers.

"At an average salary of RM3,500 a month, that translates to savings of about RM12 million annually.

"Mechanisation is key to lowering production costs and improving productivity," he added.

Mohd Haris also highlighted the use of superior planting materials to boost yields and shorten fruit-bearing periods.

"Better planting materials mature faster and produce more fruit, helping manage costs," he said.

Without decisive action on replanting, mechanisation and labour efficiency, he warned the industry's profitability would continue to weaken.

"If we don't tackle ageing trees and cost escalation, profitability will decline amid stagnant yields," he said.