Palm oil Prices

Palm oil is the largest vegetable oil in the world in terms of produced volume, just ahead of Soybean oil. Palm oil is a tropical oil and the production takes place almost entirely in Asia. The mesocarp (or fruit) of the oil palm has an oil content of about 50% and the palm kernel has and oil content of around 45%. This high oil content makes palm oil by far the most efficient vegetable oil crop in the world. An oil palm produces 10 times as much oil per hectare as soybeans, 5 times as much as rapeseed and 2 times as much as coconuts. Palm oil prices are in general also the lowest between the different oils.

Palm oil prices and investments have a very different structure than other vegetable oils. 85% of all the palm oil is produced in Malaysia and Indonesia. The tree typically grows in an area 10 degrees north or south of the equator. Oil palms have an economic lifecycle of 20 to 25 years. The planting of the trees can be done at any time of year; however, the most successful period is between June and December. First harvest can normally be done 30 months after planting the tree. Fruits can be harvested throughout the year, but the peak season for fruit is between July and September. The time long time before the palm produces means that palm oil production is very inflexible and palm oil prices can be volatile. Palm oil figures are mainly produced by PORAM and the USDA.

Several products can be produced from the oil palm: palm oil, palm kernel oil, palm olein, palm kernel olein, palm stearin, palm kernel stearin, palm fatty acid distillate (PFAD) and palm kernel expeller. The oils have different characteristics and all have their different uses in products. Palm fatty acid distillate for instance is a by-product of palm oil production. Prices of PFAD are lower than crude palm oil prices; the product also isn’t fit for human consumption. Palm kernel expeller is the by-product of the palm crush process. The product has an average protein level of 22% and is used as a cheap source of protein in animal feed. Because of the low protein value it is no serious competition to for instance soybean meal. 

Despite the many uses for the different palm oil products still 75% of global palm oil is used for food and cooking purposes. The oil is a staple in Asia, like soybean oil is a staple in the US and rapeseed oil is a staple in Europe. Because of this high regional demand there are clear seasonal spikes in palm oil prices. Demand for palm oil normally rises just before Ramadan or any of the important festivals in India.

Human consumption usage aside, palm oil is an important component of soap, detergent, pharmaceutical products, cosmetics, fuels and oleo chemical products. Fatty Acids derived from the splitting process can also be used in products such as candles and rubbers. The popularity of palm oil comes from some unique traits that the product has that are hard to reproduce. Palm oil prices fluctuate according to the supply and demand factors in these industries. For example, in recent years the usage of palm oil for biodiesel has gone up significantly. In Europe palm oil is used as a cheap feedstock for the many biodiesel plants in the port of Rotterdam. Palm oil prices are normally lower than rapeseed oil prices or soybean oil prices. Due to blending mandates in Malaysia and Indonesia , there is a steady demand for biodiesel. Because biodiesel directly competes with fossil fuels in the energy market, palm oil prices are correlated more and more with petrol prices these days.

Palm Oil Prices in Indonesia