The Sabah state government in Malaysia is closing palm oil estates and mills across the districts of Tawau, Lahad Datu and Kinabatangan until at least the end of this month.
Estates will be shut from 25-31 March and mills from 27-31 March to limit the movement of palm oil workers after some farm workers tested positive for the virus.
Producers were confident that output should catch up once operations resume later next week, but a subsequent announcement from the Malaysian government that the country's movement control order will be extended until 14 April may prolong these palm closures.
The government initially imposed a nationwide shutdown of non-essential businesses from 18-31 March, in which palm oil mills were initially included but managed to successfully appeal.
Market participants are still waiting for a formal announcement on what the Sabah order could mean for palm mills, as the nationwide lockdown is a federal order whereas the closures were mandated by the state.
Sabah is Malaysia's biggest palm oil producer, accounting for 25pc of Malaysia's 19.9mn t of crude palm oil (CPO) production in 2019.
Preliminary data for February shows CPO production in Sabah at 318,537t, steady from January output, but down by 34pc from February production a year earlier that stood at 427,802t. This follows a national trend with palm oil stocks falling to their lowest level in February since June 2017.
Prolonged shutdowns may hinder the ability of the palm oil industry to meet blending mandates domestically, with B20 set to be implemented across the transport sector in Sabah from 15 August and nationwide by June 2021.
