Palm oil markets and future supply

Abstract

This article considers the recent trends in the palm oil market balance and the future prospects for palm oil fundamentals. The article finds that there exists potential for the demand for palm oil and its products to increase quite steeply, partly due to emerging demand as a relatively cheap biofuel (whether as palm biodiesel or for direct burning), and partly due to its price advantages in edible applications. In terms of supply, as long as there is willingness to plant more area with oil palm in environmentally sensitive areas, there will be continued growth in the oil palm industry. This development is likely to be led primarily by Indonesia with increasing areas planted with oil palm, notably in Kalimantan, and by continued yield improvements in Malaysia.