Palm oil production has been dominated by two countries: Indonesia (53% of output) and Malaysia (31% of output), which collectively account for 84% of global CPO volumes. Recently, however, Nigeria, Thailand, and Columbia have emerged as globally competitive players, collectively accounting for another 7% – 8% of total global CPO output and rising.
The world’s largest consumers of palm oil are India and China, who import 21% and 16% of the world’s CPO, respectively, followed by the European Union—specifically, Italy, the Netherlands, Spain, Germany, and the UK—whose confectionary and biomass industries collectively account for another 7% – 8% of global consumption.
Mainly used globally in food, cosmetics and as bio-fuel industries, the demand for palm oil and its related products is robust. Palm oil differs from many other alternative common vegetable oils in its high level of palmitic acid, which is approximately 44%. Palm oil contains approximately 50% saturated fatty acids, 40% monounsaturated fatty acids, and 10% polyunsaturated fatty acids.
There are a couple of reasons why palm oil has been the favored crop to meet growing demand for vegetable oils. Firstly, it has lowest production costs. Secondly, its composition means it’s versatile and can be used for food and non-food purposes alike: some oils are not suited for cosmetic uses such as shampoos and detergents. Third, it gets incredibly high yields.
- Stays semi solid at room temperature which means it can help to keep spreads like margarine spreadable
- It has other properties which help to make food appear fresh or crisp for longer
- It has no colour or smell so it doesn’t change the product when added
- It is used as biofules in some European countries to replace fossil fuels such as coal, gas and diesel
Supply: Most of the supply of palm oil comes from two countries – Indonesia and Malaysia. As a result, the price of the commodity can be heavily influenced by government policies and news from these countries
Weather: The concentration of palm oil supply in a small handful of countries also magnifies the role that weather plays in determining prices. The tropical climate conditions could delay the harvesting and processing of crops and create supply shortages. Extreme dry weather could also impact prices. Oil palm plants depend on ample rain to grow and flower. Drought conditions might not only limit fruit yields on plants, but they also have the potential to kill entire plants
Biofuel Demand: Biofuels currently represent a small but growing use for palm oil. Factors such as the price of corn and other sources of feedstock could impact this demand
Competing Oils: Oil produced from palm fruit and kernels competes with many other oils including sunflower, soybean, rapeseed, corn, canola and cottonseed.
- Favourable nutritional properties of palm oil
- Growing demand for vegetable oil as feedstock for biodiesel production
- Low cost benefit
- Growing use of palm oil in the production of cosmetics and cleaning products
- Replacement of mineral oils with palm oil in power stations
- Expanding application of palm oil in edible and non-edible sectors
- Rising demand for palm oil from Oleochemicals
- Competition from Soyabean oil
- Environmental concerns related to palm oil production
- Limited land availability
- The Asia-Pacific region led the global and is predicted to develop significantly during the evaluation period due to increased palm oil demand in different sectors
- Many medium and small producers in the region rely on it as a primary source of revenue. The sector is largely important for creating and advancing the region’s cultivators
- Because of their increasing biodiesel penetration, Europe and North America are likely to rise moderately during the forecast period
- Due to the region’s distinct demography, changes in mass eating habits, and increased demand from the food business for diverse delicacies, the North American region is expected to experience exponential expansion shortly
- Latin America and the MEA region are likely to be the fastest-growing regions in the palm oil market
- The global palm oil market size was valued at USD 63.7 billion in 2021 and is anticipated to grow at a compound annual growth rate (CAGR) of 5.1% in terms of revenue from 2022 to 2030. The market is driven by exponentially growing demand from the food, beverage, biofuel, energy, personal care, and cosmetics industries