Global Market Outlook on Palm Oil

  • Global palm oil supply has been witnessing a steady growth of 4.3 percent CAGR during 2012–2013 until 201–2019. The 2018–2019 supply is expected to increase by 4 percent against the previous year, due to the anticipated increase in palm production 
  • The anticipated decrease is primarily due to El Nino weather conditions, which will affect the yield of palm oil in 2018

palm-oil-market-size

  • Palm oil prices and contract structures are fixed by Malaysian suppliers using MPOB crude palm oil futures and adding the basis and freight costs. The basis is the difference between cash and futures prices. Profit margin set by the buyers depends on time of buying and selling 
  • Palm oil ending stocks also play a major role in driving the prices

Palm Oil Value Chain

  • The palm oil value chain begins with the fresh fruit bunches and has various end-use applications. In Malaysia, most of the big palm oil manufacturers are integrated from the plantation level until the end-use to gain maximum profits by economies of scale and elimination of middle men

Global Palm Oil Supply–Demand Analysis

  • The world’s consumption is expected to increase by 3.9 MMT to reach 68.4 MMT, mainly due to increase in demand from Indonesia, Malaysia, Thailand, China, and India
  • The average monthly consumption is expected to be at 5.7–5.8 MMT this year

Market Outlook (2016–2017) 

  • Global production and consumption of palm oil increased at a CAGR of 4.3 percent and 3.6 percent, respectively, from 2012–2013 to 2018–2019F
  • Global production and consumption are expected to grow at 4.1 percent and 4.7 percent, respectively, during 2018–2019F as compared to the previous year 
  • The expectation of El Nino weather condition is expected to bring down both yield and the production levels 
  • Palm oil stock levels increased by around 16.9 percent in 2018-2019 due to higher beginning stocks and high production of oil. The palm oil stock levels are expected to improve with the production and yield levels during 2019-2020

Palm Oil Global Demand by Application (2017–2018)

  • The global palm oil demand witnessed a steady increase in the recent decade, due to increasing demand from the food industry
  • The main demand for palm oil is for food application, followed by industrial use, which is for biodiesel manufacturing
  • Globally, the estimated use of palm oil in the bio-diesel industry in 2017 is expected to increase by 9–10 percent to 9.53 MMT from 8.77 MMT the previous year

Palm Oil Consumption by Country (2017–2018)

  • India, Indonesia, and the EU are the largest consumers of palm oil
  • Malaysia and Indonesia are the major soybean producing areas and together export around 91 percent of the global palm oil
  • In the coming years, Indonesia is expected to surpass US and Brazil in biodiesel production, hence, its consumption rates are expected to increase