Supply (production)
Index Mundi’s list of palm oil producers shows that
- Indonesia produces 40.5 million tons (55% of world annual total)
- Malaysia produces 21.0 million tons (28% of world total)
- Thailand produces 4.0 million tons (4% of world total)
- World total is about 72.5 million tons
The annual yield varies only moderately due to weather conditions.
Click graph to read report
Land use
- Indonesia; 11.7 million ha (of 190 million ha; 6%)
- Malaysia; 4.5 million ha (of 33 million ha; 14%)
Demand
- Food (added to processed foods)
- Biofuel (for EU; 30-40% imports)
Price
CME Palm Oil Futures, USD/Ton, 1998-2018
Futures and options trade on CME
Notes
The EU aims to phase out palm oil and soybean oil from biofuels by 2030. The reasons are deforestation, global warming and human rights.
As a food additive, the health effects of palm oil are mixed. The bottom line is that the oil is free of trans fats, which is good, but high in saturated fat which is bad if you have high cholesterol.
I made this research just to get an overview of palm oil. Some points to look further into:
- Why are Indonesia and Malaysia so dominant? Can other countries potentially scale up to their levels?
- If demand picks up, can Indonesia and Malaysia increase supply? That is, they already use a significant amount of land – how much more can be allocated?
- How about age of palm trees and yield? If majority were planted during a recent boom, can it be that yields drop as the trees age?
- Will the combination of cheap shale oil, switch to electric vehicles and ban of palm oil bio fuels completely eradicate palm oil for transportation?
Conclusion
From this brief overview I cannot draw any conclusions. It seems loss in demand for bio fuel is offset in demand for food. Supply is stable.
Categories: Uncategorized
Tags: commodities, etfs, finance, futures, palm oil, trading