InvestorQ : What are the key demand and supply drivers of palm oil?
Arti Chavan made post

What are the key demand and supply drivers of palm oil?

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Mitali Bhutta answered.
2 years ago

Malaysia and Indonesia are the world’s major producers of palm oil. CPO is the first level variant that is extracted from the palm fruit. When CPO is further refined it creates products like refined palm oil, palm kernel oil and RBD Palmolein. Refined derivatives of CPO are important ingredients in edible oil. CPO has an interesting linkage with crude oil prices. When crude oil becomes too expensive, more of CPO gets diverted towards bio-fuel production that that reduces the supply of CPO. On the other hand when the price of crude oil goes down the price of CPO goes down due to weak bio-fuel demand.

Indonesia and Malaysia account for 90% of the world CPO output with Thailand, Colombia and Nigeria chipping in with the balance. The world’s largest consumer of CPO is India, followed by Indonesia, EU, China and Pakistan. India consumes nearly 21.3 MMT of edible each year of which nearly 45% is accounted for through palm oil. India alone accounts for nearly 20% of the world consumption of CPO and hence is the world’s largest market for CPO. Prices of CPO are largely determined by the cropping patterns and the supply coming from Indonesia and Malaysia as the two principal producers of CPO in the world. Consumption patterns and shifts also matter a lot. For example, India used to consume more than 50% of edible oil in the form of groundnut oil 3 decades back. That has now shifted to 70% consumption through Palm Oil and Soya Bean oil.