Factors affecting for sustainable improvement of palm oil industry in the world market: Ex-post forecast approach

Currently, there is significant political and economic dependence on the palm oil industry in Malaysia, Indonesia, and Thailand. They are the most significant world producers and exporters. The objective of this study is to investigate the factors affecting the sustainable improvement of world production, consumption, and price in the palm oil market. This study employed a vector error correction model (VECM) along with an ex-post forecast approach. The data used monthly data from January 2014 to December 2019, covering 72 observations of pre-COVID-19 periods for analysis purposes. The study found that there were significant long-term relationships among the variables representing palm oil consumption, world population, and soybean oil price for palm oil price. Additionally, there were short-term relationships among exchange rates, palm oil production, and consumption for price. Changes in world total palm oil production are based solely on changes in world palm oil price. Moreover, changes in world total palm oil consumption are also based on world population, soybean oil price, and changes in world palm oil price. In summary, companies and governments that proactively implement sustainable measures will be better positioned to navigate regulatory challenges, maintain market access, and ensure long-term industry stability.