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Palm Oil Market Outlook to 2020

Crude palm oil (CPO) is the largest vegetable oil consumed by volume in 2012

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2014-01-09 01:41:01 - Palm Oil Market Outlook to 2020 - a new market research report on

Crude palm oil market is now regarded as the largest vegetable oil market in terms of volume demand, having reported strong growth over the last two decades. Crude palm oil demand represents one-third of the total vegetable oil demand in 2012. Growth in the emerging markets such as India and China has largely driven overall demand growth over recent years. New demand markets in the last decade, such as biodiesel, have also played a major role regarding consumption trends. Consequently, CPO has become more closely correlated to energy prices, which has thus has the effect of propelling CPO prices into a new trading range. Analysts predict that the market will be short term bearish due to global economic instability but



mid to long-term bullish due to the continued demand for palm and land scarcity.

Palm oil is obtained from the fruits of the oil palm tree, also known as the Elaeis Guinnesis tree, which originated in West Guinea. When Europeans reached Africa to explore the continent in the 15th century, they discovered the palm tree, thus introducing it to the rest of the world. The cultivation of palm spread globally, and in the 19th century, the trade of palm oil began. In the 20th century, the oil palm tree was introduced into Malaysia and palm oil began to be produced commercially in 1917. Palm oil started to take off in the mid-1980s, with large commercial planting and cultivation of the plant in Malaysia and Indonesia in the early to mid-1990s; until then, palm had largely been a smallholders crop, however smallholders remain important in this sector.¹

Palm oil is exported to a significant number of countries and at its current rate of growth, palm oil and its products will continue to be the most sought-after edible oil in the global market. Oil palm´s uniqueness comes from its ability to produce two types of oil. Palm oil is available through the flesh of the fruit whereas, palm kernel oil is obtained from the seed or kernel. Both palm and kernel oils have different carbon compositions and are predominantly used in the food industry value chain.

Crude palm oil (CPO) has grown from strength to strength in the last two decades to become the largest vegetable oil consumed by volume, now representing one-third of the vegetable oil market. Growth has largely been driven by consumption in emerging markets such as China and India. However, the average consumption of vegetable oils per capita in China and India remains well below that of the West, thus offering a further upside in the food segment, which accounts for the bulk of palm demand.

In the last decade, new demand markets, such as biodiesel, have also played a major role regarding consumption. Consequently, CPO has become more closely correlated to energy prices, which has the effect of propelling CPO prices into a new trading range, and likely with it a new floor. This, coupled with the fact that palm oil has firmly found its place within the newly favored agricultural asset class which remained in the doldrums for many years, will ensure that prices remain fairly high.

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