Research Article Open Access

System Dynamics Analysis of the Determinants of the Malaysian Palm Oil Price

Sahra Mohammadi1, Fatimah Mohamed Arshad1, Bilash Kanti Bala1 and Abdulla Ibragimov1
  • 1 Universiti Putra Malaysia, Malaysia
American Journal of Applied Sciences
Volume 12 No. 5, 2015, 355-362

DOI: https://doi.org/10.3844/ajassp.2015.355.362

Submitted On: 9 March 2015 Published On: 10 July 2015

How to Cite: Mohammadi, S., Arshad, F. M., Bala, B. K. & Ibragimov, A. (2015). System Dynamics Analysis of the Determinants of the Malaysian Palm Oil Price. American Journal of Applied Sciences, 12(5), 355-362. https://doi.org/10.3844/ajassp.2015.355.362

Abstract

This paper investigates the major determinants of the Malaysian palm oil price using a system dynamics approach. System dynamics methodology is very relevant for examining the feedback relationships, non-linearity and delays exist in palm oil market. It helps understand the palm oil market structure and the resultant behavior and performance particularly On crude Palm Oil (CPO) price. The simulation results indicate that the Malaysian CPO price is significantly affected by the local CPO production as well as the world CPO and soybean oil prices. It is also found that CPO price is less sensitive to biodiesel production, as biodiesel currently accounts for small portion of total CPO demand in Malaysia.

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Keywords

  • System Dynamics
  • Commodity Systems
  • Palm Oil
  • Malaysia