Palm Oil

Palm oil is the largest of the big four vegetable oils, the quartet of palm, soybean, rapeseed/canola, and sunflower that together are more than 90 percent of world vegetable oil (see the breakdown pie). It is the most produced and most traded of all, roughly 80 million tonnes a year, pressed (unusually) from the fruit of oil palms rather than a seed, and yielding several times more oil per hectare than any annual oilseed crop. Supply is a duopoly: Indonesia produces roughly 46 to 48 million tonnes and Malaysia roughly 19 million tonnes, together about 85 percent of world output. The price benchmark is the Bursa Malaysia crude palm oil future, FCPO, 25 tonnes quoted in Malaysian ringgit per tonne with physical delivery into Malaysian port tank installations, making it the rare world benchmark denominated in neither dollars nor euros. India is the largest import buyer, followed by China, the EU, and Pakistan, and palm's discount or premium to soybean oil steers millions of tonnes of switching demand each year.

Energy policy is eating the market. Indonesia's biodiesel mandate, raised to B40 (a 40 percent palm blend in diesel) from January 2025 with ambitions toward B50, diverts well over 13 million tonnes of palm oil a year into domestic fuel, structurally shrinking the exportable surplus of the world's largest producer. The market's great modern shock combined politics and food inflation: in April 2022, with sunflower oil cut off by the war in Ukraine, Indonesia abruptly banned palm exports to protect domestic cooking-oil prices, and FCPO spiked above MYR 7,000 per tonne. The ban relented within a month but established export policy as a permanent risk premium. The other long-term constraints are agronomic and regulatory: aging plantations and chronically slow replanting cap output growth, labor shortages persist in Malaysia, and the EU deforestation regulation conditions access to the European market on proof that oil comes from land not deforested after 2020.

Palm is also the most ubiquitous edible oil, and that explains how vegetable oils supply close to a tenth of the calories people eat directly, as the calorie pie below shows. Oil is the most energy-dense food there is, roughly 884 calories per 100 grams of pure fat, and palm in particular hides inside an estimated half of all packaged supermarket products, from instant noodles and biscuits to chocolate, margarine, and fried snacks, as well as the frying oil of much of Asia and Africa. The calories arrive soaked into food rather than poured at the table, which is why a cooking oil quietly rivals entire grains as a calorie source.