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Growing Importance of Palm Oil in Global Markets

Palm oil has an important contribution in bio-fuel as it is one of the raw materials for manufacturing bio-fuels. Palm oil has a wider consumption and the global market of palm oil has been growing at a steady pace over the years in line with the vegetable oil sector. Palm oil has the biggest market in the Asia-Pacific region, accounting for nearly 50% of total global revenues. Future growth in the market will be governed largely by rising importance of certified sustainable palm oil.

Abhijeet Banerjee

Palm oil is a vegetable oil extracted from the reddish pulp or mesocarp of fruits of palm trees. In Portuguese it is also called “dende oil”. Palm oil and palm kernel oil are both versatile oils extracted from different parts of the oil palm fruit. Palm oil is extracted from the flesh or pulp of the fruit (the outer part) while palm kernel oil is extracted from the soft part of the seed (the inner part). Palm oil is 52% saturated while palm kernel oil holds 86% saturated fat. Palm kernel oil is mainly used in a broad range of consumer products, from soaps and cosmetics to detergents and candles. It also finds use as an extensive spectrum of food products such as shortenings, cooking oil and margarines.  

Palm Oil Advantages:

Palm oil has an important contribution in bio-fuel as it is one of the raw materials for manufacturing bio-fuels. Biodiesel from palm oil is advantageous for the ecosystem as it releases less carbon dioxide into the atmosphere when compared with gasoline. The biofuel productivity yield of palm oil is the highest among all oilseed crops and in terms of productivity/yield - it is surpassed only by sugarcane. 

In comparison to other edible oils, palm oil is rich in antioxidants and vitamin E and also has high content of carotene. It also ranks better than other oils, as it remains stable at high temperatures making it suitable for deep frying. Also, red palm oils needs no hydrogenation process and do not possess any trans-fatty acids. Malaysia and Indonesia are the two major producers of palm oil in the world contributing more than 85% of global production. Indonesia is the largest producer and exporter of palm oil worldwide. 

Palm oil is used in various food and non-food products containing including chocolate, cookies, detergents, instant noodles, ice creams, lipsticks, margarine, packaged bread, pizza dough, shampoo, and soaps, and so on. Palm oil has a wider consumption and the global market of palm oil has been growing at a steady pace over the years in line with the vegetable oil sector. 

Growth is mainly attributed to increasing food applications and changing cooking oil preferences, it is the steady adoption in industrial applications that has added to global consumption. Palm oil is used as an important ingredient in almost 50% of all processed food products. It has give its numerous health benefits as well like improving  vision, higher proportion of antioxidants & vitamin K, in addition to providing improved metabolism & curb weight loss. It is beneficial in reducing risk of cancer & cardiovascular diseases and also has the ability to slowdown degenerative neurological diseases.  

Growth seen in Asia-Pacific Region: 

Palm oil has the biggest market in the Asia-Pacific region, accounting for nearly 50% of total global revenues. (As per 2019 data). The Asia-Pacific or Asia Pacific is the part of the world in or near the Western Pacific Ocean. It generally includes countries of East Asia, South Asia, Southeast Asia, Australia and New Zealand. There are various factors supporting the market growth in this region such as rapidly growing population and the corresponding growth in demand for food commodities. Factors like improvement in retailing network, changing dietary habits, rapid urbanization have also contributed in improvement in palm oil demand in the Asia-Pacific Region. 

Steadily growing economies in this region, improving living standards, increasing crop yields and oil production, changing facets of consumer health concerns, and rising demand from oleo chemicals are the other contributing factors. Production in the region has increased significantly in recent years also due to increase in cumulative land area of palm oil plantations, rising oil palm yield, in addition to frequent investments in technology and R&D related activities.  

Demand Outlook Better For India: 

Palm oil accounts for nearly 43% of India's edible oil consumption presently and is second largest consumer globally. In India, palm oil consumption has increased by roughly 250 percent in last twenty years as per trade estimates. Irony is that India still continues to be the largest importer worldwide. The trade relation between India and Malaysia has improved in recent months, and Indian importers have resumed purchases of Malaysian palm oil May 2020 onwards. As lockdown restrictions are easing, chances of improving demand from caterers or hotel & restaurants or roadside dhabaas etc are also turning bright. Online food delivery services have resumed already. In India palm oil has greater consumption share from these industries. Therefore demand outlook shall remain better for Indian markets in coming months.   

Future Growth Determinants

In all the demand potential of palm oil is growing for world markets including India and its future growth in the market will be governed largely by rising importance of certified sustainable palm oil (CSPO) against the backdrop of public concerns over environmental, social, and deforestation issues related to palm oil cultivation. Also, growing focus of developed nations on clean and green fuel as well was rise in application as a feedstock in biofuel production shall be other influencing factors for future growth of the global palm oil market.  

Other key driving factors with respect to development of palm oil consumption/market shall include its attribute of being the cheapest form of vegetable oil, rise in production in Indonesia and Malaysia, growing demand from the food sector for use as margarine, bakery fat, frying fat, and cooking oil. High yields palm oil plantation, more focus of consumers towards health & wellness shall also contribute in future market growth, apart from undesirable effect of partially hydrogenated oils on cholesterol levels.  

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