Sourcing Oleochemicals from South America: What Procurement Needs to Know

South America’s oleochemical frontier: Palm Oil, Policy, and Procurement risk in focus
 

An overview of South America’s oleochemical market 

Oleochemicals are critical inputs across a wide range of industries including personal care, food, pharmaceuticals, detergents, and bio-based materials. Derived mainly from natural oils and fats, they are gaining importance as sustainable alternatives to petrochemicals. 

Among feedstocks, palm oil remains central to global oleochemical production. While Southeast Asia dominates, shifting supply dynamics and sustainability concerns are pushing buyers to explore alternative regions. 

Here, South America – led by Colombia – is emerging as a strategic hub. Colombia is Latin America’s largest palm oil producer, with Brazil and Ecuador adding scale to the regional supply base. For procurement teams, the region offers diversification and proximity advantages, but also faces challenges such as infrastructure gaps, policy risks, and price volatility. 

Market landscape 

Global oleochemicals context 

• Feedstock center of gravity: Palm and palm-kernel oil remain the dominant global feedstocks into oleochemicals; world palm oil output for 2025 is estimated [2] at approx. 80.8 MMT, underscoring continued scale from Southeast Asia. 

• Price environment: The FAO Vegetable Oil Price Index [1] has been firm through mid-2025; FAO noted the index at 169.1 in August 2025 (highest since July 2022), with gains led by palm/sunflower/rapeseed oils. This frames input-cost risk for oleochemical chains.  

• Macro driver: USDA’s latest palm oil production dashboard [2] (PS&D) confirms sustained multi-year growth in global supply (2023/24 at 76.1 MMT, 10-yr CAGR 3%), providing the baseline against which regional (incl. South America) opportunities are assessed. 

South America’s position (with Colombia in focus) 

• Regional relevance: South America is a secondary but rising-pillar for palm-based feedstocks feeding oleochemicals, offering diversification from Southeast Asia and proximity advantages for the Americas. Official industry data show Colombia’s 2024 palm oil production at 1.72 MMT [3] (down modestly vs. 2023). As of late-2024 tracking, Jan-Nov output was 1.6 MMT, closing the year near 1.72 MMT. This keeps Colombia the largest producer in Latin America.  

• Geographic concentration: USDA’s country explorer highlights key producing departments, Meta (31%), Cesar (15%), Santander (14%), Magdalena (10%) [2], indicating logistical corridors and aggregation points for downstream oleochemical players. Fedepalma (a Colombian alliance of RSPO certified palm oil growers) notes palm and palm-kernel oils account for 94% [3] of Colombia’s oil & fat production and 66% of consumption, underlining strong local integration into food, energy (biodiesel), and industrial uses that can influence exportable surpluses for oleochemicals.  

Palm oil – The critical feedstock 

As per Andrés Arango Maldonado, Industry Expert, “Palm oil remains the cornerstone feedstock for oleochemicals, with Colombia consolidating its role as the anchor producer in South America. In 2024 the country closed at 1.72 million MT of crude palm oil (CPO), and by January-June 2025 cumulative sales reached 1.326 million MT, according to Fedepalma–SIPSA. This marks a growth compared with the 1.211 million MT recorded in the same period of 2024, highlighting the sector’s resilience.” 

Domestic vs. export dynamics – From the distribution of sales, Colombia’s market shows a structural duality: in Jan-Aug 2024, 75.3% of volumes were absorbed domestically and 24.7% exported; by Jan-Aug 2025, exports expanded to 31.3%, while domestic sales adjusted to 68.7%. This rebalancing confirms the country’s growing integration into international supply chains while maintaining a strong domestic base. 

Biodiesel policy as commercial driver – National biodiesel sales represent a critical stabilizer for the palm value chain. Monthly participation of biodiesel in domestic palm oil use consistently averages 43-45% over the last decade (2016-2025). With the B10 mandate – a government requirement to blend 10% biodiesel with 90% petrodiesel fuel – reinstated in 2025, biodiesel not only absorbs a reliable share of production but also creates spillovers into oleochemicals. Industry estimates indicate that 8.5%-10% of biodiesel output corresponds to glycerin streams, a direct input into oleochemical applications. This structural linkage strengthens Colombia’s positioning as a regional platform for both fuels and chemical derivatives. 

Trade and compliance – Exports, concentrated in crude oil shipments, increasingly serve oleochemical buyers in Latin America and Europe. Compliance frameworks are also advancing: 99% of planted area is verified deforestation-free (2011–2023), and uptake of RSPO/ISCC certification continues to expand. These conditions make Colombian palm oil a credible, sustainable feedstock in line with the EU’s deforestation-free regulation and with buyers’ traceability requirements. 

Implication for procurement – For oleochemical industries, Colombian palm oil offers a reliable base that balances domestic absorption through biodiesel and food channels with export opportunities. Its integration into biodiesel programs ensures steady local demand, while exports provide optionality and competitive cost structures. This dual market dynamic positions Colombia as a critical, compliant, and growing feedstock hub in the Americas. 

What is the supply-demand outlook for South American oleochemicals? 

Oleochemical production & consumption trends 

South America’s oleochemical industry remains at a formative stage compared to Asia or Europe. While the region possesses abundant palm oil feedstock, the conversion into downstream oleochemical derivatives is still limited. This creates a structural gap: countries like Colombia export crude and semi-processed oils but rely on imports for advanced intermediates such as fatty alcohols. 

Trade data reflects this imbalance. In 2023, Colombia imported approximately USD 14.4 million worth of industrial fatty alcohols [8], signaling reliance on external supply to serve its detergent, personal care, and industrial chemical sectors. 

Feedstock availability & competing uses 

The foundation of South America’s oleochemical potential lies in palm oil. Colombia, Brazil, and Ecuador together account for most the region’s supply, though scale differs widely. Colombia alone produces nearly three times the volume of Brazil or Ecuador [9].

In Brazil, the implementation of B15 [6] from August 2025 adds structural demand for vegetable oils, reinforcing upward pressure on the regional vegetable oil complex, even though soybean oil dominates biodiesel feedstock. 

The outlook for oleochemicals in South America reflects a tension between feedstock abundance and derivative scarcity. Colombia’s production of 1.7-1.8 MMT of palm oil in 2024-25 confirms the region’s raw material strength. Yet, oleochemical conversion capacity remains limited, as seen in the reliance on imports for fatty alcohols. 

Meanwhile, competing uses, particularly biodiesel, are tightening exportable surpluses. Both Brazil’s B15 [6] program and Colombia’s steady B10 blending level ensure that a significant share of palm oil is locked into energy use. This makes the feedstock base less flexible for oleochemical exports. 

What are the procurement challenges and risk factors category managers should be aware of? 

Price drivers & volatility 

Oleochemical prices in South America are closely tied to global vegetable oil dynamics, with feedstock prices remaining the dominant driver. The FAO Vegetable Oil Price Index [1] averaged 169.1 points in August 2025, the highest since July 2022, supported by firmer palm, sunflower, and rapeseed oil quotations. This underscores that oleochemical input costs are directly exposed to swings in edible oil markets. 

Weather variability in Southeast Asia (Indonesia, Malaysia) affects global palm oil supply and therefore South American oleochemical input costs. Even though Colombia and Brazil are producers, world benchmark prices are largely set in Asia. Biofuel programs absorb local feedstock, reducing exportable availability for oleochemicals and tightening the balance. For example, Colombia’s reversion to B10 biodiesel mandate in January 2025 and Brazil’s move to B15 [6] in August 2025 increase structural demand for vegetable oils, reinforcing upward price pressure. 

Currency volatility is another persistent factor. The Colombian peso and Brazilian real often experience sharp swings against the US dollar, directly impacting export pricing and import costs for oleochemical intermediates. 

Sustainability, policy & logistics considerations 

Sustainability 

Colombia positions itself as a leader in deforestation-free palm oil. FEDEPALMA and the Ministry of Agriculture report that 99% of Colombian palm plantations were verified deforestation-free between 2011 and 2023, backed by satellite monitoring. Certification uptake is rising, with RSPO and national sustainability standards expanding coverage, though smallholder integration remains a challenge. Brazil and Ecuador have smaller palm sectors, but expansion has raised scrutiny on biodiversity impacts, particularly in the Amazon and Chocó biomes. 

Policy 

Government incentives in Colombia include credit lines and sustainability-linked programs, while Brazil supports palm expansion in Pará under its Social Fuel Seal [9] policy framework. Trade measures, such as the EU Deforestation Regulation (EUDR, effective 2025), will affect exports of palm oil and derivatives from South America. Exporters will need to ensure full traceability and compliance with geolocation data to access the EU market. 

Logistics 

South America’s logistics infrastructure is less developed compared to Asia. In Colombia, palm oil is concentrated in Meta, Cesar, Santander, and Magdalena, requiring transport to ports like Buenaventura and Cartagena. Internal bottlenecks (roads, security issues) often delay movements and increase costs. Brazil’s palm oil is concentrated in Pará, with exports moving through northern ports, where seasonal weather and limited storage capacity pose risks. Freight volatility in global shipping markets, especially for containers and bulk vegetable oil tankers, remains an added variable for oleochemical exporters. 

Key takeaways for category managers 

South America is steadily positioning itself within the global oleochemical map, anchored by Colombia’s role as the region’s largest palm oil producer. While production levels in Colombia, Brazil, and Ecuador provide a meaningful feedstock base, downstream oleochemical conversion remains comparatively limited, resulting in reliance on imports for higher-value intermediates. 

Global vegetable oil markets, particularly palm oil from Southeast Asia, continue to set the price environment, ensuring that South American oleochemicals remain exposed to external volatility. At the same time, regional biodiesel mandates absorb significant volumes of palm oil, reducing the flexibility of exports for oleochemical use. 

Sustainability and compliance pressures, notably the EU Deforestation Regulation (EUDR) effective in 2025, are now shaping trade dynamics, requiring traceability and certification as standard practice. Logistics remain another limiting factor, as inland-to-port movements and infrastructure constraints increase costs and affect reliability. 

South America’s oleochemical potential is anchored in palm oil availability, but exportable volumes are influenced by biodiesel policy and local consumption. Production growth in Colombia (1.7-1.8 MMT annually) provides regional stability, while Brazil and Ecuador contribute smaller but important balances. 

The region remains dependent on imports for certain oleochemical intermediates, such as fatty alcohols, despite glycerin export activity. Price drivers are tied to global vegetable oil benchmarks, currency volatility, and local blending mandates. Sustainability compliance (RSPO, EUDR) and logistics reliability are central risk factors shaping market participation. 

South America is therefore best understood as a strategic supplementary source in the global oleochemical chain one that can provide diversification and sustainability benefits, but where risks must be carefully monitored through policy, price, and logistics developments. 

References 

1. August 2025. 
   https://www.fao.org/worldfoodsituation/foodpricesindex 
2. USDA Foreign Agricultural Service (FAS). Production, Supply and Distribution (PS&D) – Palm Oil, Global and Country Data (2023–2025). 
   https://apps.fas.usda.gov/psdonline  
3. FEDEPALMA (Federación Nacional de Cultivadores de Palma de Aceite de Colombia). Palm Oil Production Updates 2023–2024. 
   https://web.fedepalma.org  
4. Portafolio (Colombia). Producción de aceite de palma en Colombia cerró en 1,72 millones de toneladas en 2024. (Jan 31, 2025). 
   https://www.portafolio.co  
5. USDA GAIN Report. Colombia Biofuels Annual 2025. (Resolution 40431 and biodiesel blending policy). 
   https://gain.fas.usda.gov  
6. Argus Media. Brazil to raise biodiesel blend mandate to B15[6] from August 2025. (Jun 25, 2025). 
   https://www.argusmedia.com  
7. Reuters. Brazil approves biodiesel blend hike[7] to 15% from August 2025. (Jun 25, 2025). 
   https://www.reuters.com  
8. OEC (Observatory of Economic Complexity, UN Comtrade-based). Colombia – Industrial Fatty Alcohols Imports and Glycerol Exports, 2023. 
   https://oec.world  
9. USDA IPAD (International Production Assessment Division). Crop Explorer – Brazil and Ecuador Palm Oil Production, 2024/25–2025/26. 
   https://ipad.fas.usda.gov/cropexplorer  
10. Daabon USA. Sustainable Palm Oil and Deforestation-Free Commitment (Colombia). 
    https://daabonusa.com 
11. Council of Palm Oil Producing Countries (CPOPC[11]). Palm Oil Statistics – Colombia 2023 Production.