Palm Oil Plantation
Palm Oil Market
The global demand for all major vegetable oils is estimated to be in excess of 100 million tons per year, with the consumption of palm oil representing circa 40% of this market. The market has experienced relatively stable growth in recent years, at a CAGR of 7.6% during the period from 2003 to 2011.



In the past 15 years, global palm oil production grew at a much faster rate (+209%) than the expansion of land with mature oil palm trees (+167%). This was mainly the result of planting better suited and higher yielding varieties. In the period 1995-2010, the size of the land with mature oil palm trees around the world increased by 8 million hectares to 12.8 million hectares. This impressive growth rate was a result of a strong global vegetable oil demand and the political as well as economic reforms that were implemented in response to the Asian financial crisis of the late 1990s.


Currently, there are approximately 20 countries that have oil palm plantations. The 3 main palm oil production countries--Malaysia, Indonesia and Nigeria--control 88% of global palm oil production.

Malaysia Oil Palm Plantations
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China, which is the largest importer of Malaysian palm oil and the world’s largest CPO consumer, is expected to continue contributing to global demand. The China government has been stockpiling food since the start of 2009, amidst concerns that a repeat of the 2008 food crisis would cause severe social unrest in the country. The China stockpiling of palm oil, soybeans and corn has been recorded by industry reports such as Oil World and by the United States Department of Agriculture (USDA). Recent increases in China imports have been due to aggressive purchases by COFCO, the state-owned agency responsible for food purchases. Certain analysts expect a 12% year on year increase in China palm oil imports in 2010, despite the global economic crisis.


Demand for CPO, in common with other vegetable oils, has remained relatively robust, even through the current global economic turbulence. This is being driven by growing demand from the food industry (which accounts for around 80% of palm oil use), which is anticipated to increase in line with expectations of higher GDP growth from the three key consuming/buying markets; demand from China, India and the EU accounts for approximately 19%, 10% and 19% of global vegetable oil demand respectively.



Due to the economic development and population increment caused the demand of palm oil in developing countries increase rapidly. Meanwhile the increment demanding of food and environmental, causing the demand of fats potent in developing countries higher than advance countries.

Palm oil has been consistently more price competitive than soybean oil, sunflower oil and rapeseed oil due to lower production costs. Prices of soybean oil and rapeseed oil develop in the same price range because both oils are very compatible while sunflower oil is normally traded at a premium. The price gap with palm oil increases sharply in a situation of increasing demand like in the period 2007 - second half of 2008 (figure 1.3). Fluctuations in palm oil production have virtually nothing to do with demand but are due partly to the biological yield cycle and partly to extreme changes in rainfall. Its production can be adjusted to demand only with a long time lag of at least three years. This make the adjustment task for the three earlier mentioned competing major soft oils much more difficult and increase the general volatility of prices for vegetable oils. Since the second half of 2008 the price gap between palm oil and other vegetable oils declined sharply and reached its smallest difference in the first half of 2010.


Demand for vegetable oils is accelerating, due largely to income growth in populous regions and the influence of bio-diesel program. Palm oil will supply the majority of the growth in demand for vegetable oils to 2020, particularly with regard to export availability. Palm oil production is cost competitive relative to other oils, and this will underpin its growing share in world vegetable oil production. The future prices of palm oil and palm kernel oil will be tied increasingly to energy prices. Amount of palm oil trading has exceeded total of oils and oilseeds trading in 2010.





In the period 1995-2010 global palm oil consumption showed a steady growth, more than tripling from 14.7 million tones to an estimated volume of 46.8 million tones. This increasing volume (+32.1 million tones) was mainly consumed by India (+5.7 million tones), China (+5 million tones) and the EU (+4.3 million tones). India surpassed the EU (in 2008) and China (in 2009) as the leading global user of palm oil:



Environmental concerns and the increasing price of crude mineral oils have resulted in a worldwide trend to utilize vegetable oils such as rapeseed oil, soybean oil and palm oil for the production of bio-fuels and electricity. In 2006, it was estimated that a mere 2%conversion of the world’s diesel requirement from CPO into bio-diesel would eliminate all global vegetable oil inventories. The Directors believe that the growth in the production of bio-diesel will be particularly pronounced in Asia. In addition, bio-fuel initiatives in Europe, such as the edible oil requirement for food, are causing an increase in demand for vegetable oils, primarily rapeseed, by bio-fuel producers. In turn, Europe’s demand for palm oil has greatly increased in food processing, as locally produced oil crops are diverted for bio-fuel usage.


 
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