Palm oil

Palm Oil Global Market Outlook

Market Overview

Global Supply (2022–2023): 144.4 MMT

Global Consumption (2022–2023): 76.7 MMT

Global Ending Stocks (2022–2023): 17.05 MMT

Cost Drivers

The labor cost and processing cost of palm into various commodities

• Indonesia and Malaysia are the chief palm oil producers in the world and together account for around 85 percent of the global palm oil supply. Global production of the four vegetable oils- palm oil, sunflower oil, soybean oil, and rapeseed oil, is estimated to increase in 2022

• The national crude palm oil output of Indonesia will rise by 2.5 percent to 46.5 million tons in 2022 compared to 45.3 million tons in 2021

Global Palm Oil Supply–Demand Analysis

Palm oil production in both Indonesia and Malaysia is expected to continue in a positive trend in 2023. Malaysia may continue to face the ongoing labor shortage for a few months. Indonesia will be able to have a more vigorous output recovery relative to Malaysia, due to good estate management and no halt of operations, as well as a labor shortage.

Market Outlook (2022–2023)

• Palm oil production is expected to increase in Colombia by 0.1 MMT and in Thailand by 0.2–0.3 MMT and in other countries, Guatemala, Honduras, Brazil, and several African countries, and in Papua New Guinea

• The major consuming country and importer, India is all set to improve the domestic supply of major edible oils to face the consumption demand and also reduce imports.

• Malaysia’s palm oil stocks are expected to rise by 5-8 percent month-on-month (MoM) to 1.68 million tons at the end of 2022, due to higher output and lower exports

Global Palm Oil Trade Dynamics

• Indonesia and Malaysia are the largest palm oil-exporting countries, accounting for approx. 90 percent of the global exports with most of the imports to India, the largest palm oil importing country. India’s imports were declining till June but increasing since the beginning of July and are expected to improve in the upcoming months.

• The global palm oil trade from 2016/2017 to 2021/2022 is estimated to grow at a CAGR of 4 percent. The major export destinations of palm oil in 2021 are India, China, European Union countries, the US, and Pakistan. The US import may not increase significantly but the lesser-than-expected, soybean production estimate may strengthen demand for palm oil.

• Indonesian Government’s unstable policies on palm oil exports have disrupted the market. The palm oil export ban is lifted by the Indonesian government, but still, the exporters had to face some difficulties, such as the unavailability of cargo. Thus, the changing export policies may not have a positive effect on the market

Global & Regional Palm Oil Derivative Markets

The crude palm oil is processed into the RBD Palm Olein and RBD Stearin. Globally, palm oil derivatives have been estimated to increase at a CAGR of 1 percent from 2015–2016 to 2021–2022. The crude palm oil prices and share prices of most of the planters are falling after the export ban is lifted. With an increasing trend in the population and FMCG industry, the usage of palm oil derivatives will substantially increase.

• The Indonesian palm oil derivatives have been estimated to decrease at a CAGR of 4.5 percent from 2015–2016 to 2021–2022

• The palm oil derivatives market is expected to grow at a CAGR of around 7 percent for the next five years.

• Palm olein and palm stearin are majorly used in the food and oleochemical industry. The increasing trends of the FMCG industry in emerging markets will boost the palm derivatives production