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Description | Overview | History Palm oil producing countries | Indian palm oil  market | Major trading centers

Palm oil is a fatty edible vegetable oil, yellowish in color, derived from the flesh and the kernel of the fruit of the oil palm tree. The oil palm tree is a tropical, single stemmed tree having feather like leaves that gains a height of around 20 meters. The fruits of this tree, that are also the sources of the palm oil grow in bunches, are reddish in color, bigger than plums in size and have a single seeded kernel inside. The oil palm tree is native to the areas of coastal Africa and appears different from a coconut palm tree.

Palm oil is used in the manufacturing of soaps, ointments, cosmetics, detergents, and lubricants and also as cooking oil. Commercially palm oil is used in various forms such as crude palm oil, crude palmolien, refined bleached deodorized (RBD) palm oil, RBD palmolien and palm kernel oil.


Palm oil is basically an edible oil and almost 90% of the world production is used in for this purpose. The rest 10% of production accounts to the industrial uses. It is used as a substitute for cocoa butter and butter flat. This oil has a unique feature of remaining stable in a good range of temperatures and is often use to fry foods. Also, palm wine is made from tapping and fermenting the palm oil and it is very popular in the western African region.

The combined world production effort of palm oil sums up to around 35 million tons with Malaysia topping the production charts with around half of the production being done there. Indonesia and Nigeria follow Malaysia at the second and third rank. The production figure of palm oil makes it the second largest vegetable edible oil produced around the globe after soy oil. The production trend of palm oil has been up in the past few years accompanied by the consumption trend as well. An estimate of the per capita consumption of palm oil in the world is 9 pounds per year with the total consumption figure of around 33 million tons. China is the maximum palm oil consuming country of the world. The major consuming countries of palm oil in the world with their respective consumption figures pertaining to the year 2004-05 are

  • China (4.3 million tons)
  • Indonesia (4.1 million tons)
  • European Union (3.8 million tons)
  • India (3.7 million tons)
  • Malaysia (2.6 million tons)
  • Pakistan (1.4 million tons)
  • Nigeria (0.9 million tons)
  • Bangladesh (0.75 million tons)
  • Thailand (0.7 million tons)
  • Egypt (0.6 million tons)

The trade figures of palm oil make it incomparable to other vegetable oil traded round the globe. Approximately 80% of the world palm oil production (24 million tons) gets exported to the importing countries and this fact makes it the leading exported vegetable oil. The largest exporter of this oil is its largest producer, Malaysia, followed by Indonesia with the exports of around 12.5 million tons and 9.5 million tons respectively. These countries contribute to over 90% of the palm oil exported in a year. The export trend has also risen during the past few years. The other exporters of this oil are Papua New Guinea, Colombia, Sri Lanka, Singapore, Jordan, Thailand, European Union and United Arab Emirates.

The import figures of palm oil hover around 24 million tons like the export figure. China leads the importing list given below that also states the import figures individually

  • China (4.3 million tons)

  • European Union (3.9 million tons)

  • India (3.7 million tons)

  • Pakistan (1.5 million tons)

  • Bangladesh (0.7 million tons)

  • Egypt (0.6 million tons)

  • Russia (0.5 million tons)

  • Turkey (0.4 million tons)

  • Malaysia (0.3 million tons)

The history of oil palm tree starts from the western coast if Africa where it marked its origination. It is believed that it originated in the coastal area as it is considered to be of riparian species i.e. species that is not able to grow in shades but can tolerate flooding conditions. The western coast of Africa extends towards east from Sierra Leone to areas of Congo and this was the region where it was domesticated by the native people probably in Nigeria. With the help of the people who made agricultural shifts around 5000 years ago, the plantation spread throughout Africa. It also played an important role as a food plantation in the time of ‘Pharos’.

When the Europeans reached Africa to explore the continent in around the 15th century, they discovered palm tree and that was the time the rest of the world got introduced with it. The cultivation of palm spread throughout the world and in the 19th century palm oil began to trade. As late as in the 20th century, oil palm tree was introduced into Malaysia and palm oil started to get produced commercially in 1917. With time Malaysia developed as a dominant player in the world scenario and is currently the largest producer of palm oil in the world.

Cultivation pattern

Oil palm trees are generally grown in the tropical (hot and humid) conditions. The plantation belongs to the riparian species that can survive in flood conditions and a high water table. It can be cultivated on a various types of soil but the basic factor that supports the growth is the drainage and water content present in the soil. The plantation requires a well-drained soil and if it is not provided like in the sandy or clayey soil, the yield of the crop is affected adversely. The propagation of the tree is done with the help of its seed after providing proper treatment as the germination can get affected if the seeds are not treated.

The tree produces a little or no fruit in the first three years. But after this time, the tree begins to produce fruits, which are harvested when they become ripen. Various tools are used to harvest the oil palm fruits such as chisel or hooked knives attached to long poles and some times, also by climbing on the tree directly. The fruits are obtained from the tree until it gets around 30 feet long as harvesting fruits from such a tall tree gets very difficult. That why the tree is injected with a herbicide to kill it or it is bulldozed down.

Palm oil producing countries

Palm oil is derived from the oil palm tree, which is cultivated in over 42 countries of the world and is largely used as an edible cooking oil. Palm oil production in the world accounts up to around 35 million tons, it being at the second place regarding the edible vegetable oil production. The major producer countries of palm oil in the world along with their production figures pertaining to the year 2004-2005 are
  • Malaysia (15 million tons)
  • Indonesia (14 million tons)
  • Nigeria (0.8 million tons)
  • Thailand (0.7 million tons)
  • Colombia (0.65 million tons)
  • Papua New Guinea (0.38 million tons)
  • Cote d’Ivoire (0.34 million tons)
  • Ecuador (0.3 million tons)
  • Costa Rica (0.24 million tons)
  • Congo (0.2 million tons)

Malaysia is the largest producer of palm oil in the world with approximately 43% contribution in the world’s production. Indonesia has been the closest competitor to the leader country in this production context. It contributes to approximately 40% in the world figures. The world production has increased with time and is still rising @ 7%. The same is the case with the area covered under the cultivation of oil palm tree. This crop is cultivated in around 28 million acres of land over the world.

Production of palm oil in India

India holds a very small share of palm oil production in the world figures. It hardly contributes to the world production and is not able to satisfy its domestic consumption demand. It produces a mere 70000 tons of palm oil annually i.e. just 0.2% share in the total world’s produce. The state having the maximum production of palm oil in India is Kerala as it produces 20000 tons per year. Kerala, cultivating oil palm trees on around 12000 hectares of land, also hold the maximum acreage with 10000 hectares pertaining to a public sector enterprise namely Oil Palms India Ltd and the rest pertaining to the private sector. Godrej is the maximum oil palm plantation company in India producing over 20000 tons per year. India has been looking forward to increase its production a bit more to push it up to 3 lakh tons in the year 2015 to 2020.

Indian palm oil  market

India is basically a net importer of the palm oil. It never had a production history in context of this oil. But it does have a vast palm oil consumption and import background. India produces around 70000 tons of palm oil annually which stands at approximately 0.2% share in the worlds total production. Kerala is the largest palm producing state in India with 30% share in the total production figures of the country. Among the companies indulged in the production of palm oil, Godrej emerges as a leader with the same amount of production as Kerala.

Indian palm oil consumption hovers around 3.7 million tons, which is a much bigger quantity as compared to the production figure. The country ranks 4th regarding its consumption level. It is not capable of fulfilling the domestic consumption demand and that is why it has to rely on imports of the oil. The major demand of palm oil arises from the food and cooking oil industries.

After China and European union, India is the third largest importer of vegetable oils. Palm oil contributes to around 48% of the total edible oils that are imported in the country. The country’s imports of palm oil reach up to 3.7 million tons that is same as the consumption figure. This means that most of the country’s demand is heavily dependent upon the country’s import. Palm oil imports in the country are controlled with the help of high import duties imposed by the government. The countries from which palm oil is imported are Malaysia and Indonesia. The Indian palm oil market is largely organized and is in the hands large refining companies.

Market Influencing Factors

  • World demand and supply fluctuations of the competitive edible oils
  • Domestic demand and supply fluctuations of other oils and oilseeds
  • Seasonal cycles, as April to December is the peak production period
  • Import policies of the importing nations
Major trading centers of palm oil

The major crude palm oil markets in the world are
  • Bursa Malaysian Derivatives (BMD) – largest futures market for crude palm oil
  • Indonesia

Crude palm oil markets in India are

  • Kandla (Gujarat)

  • Mumbai (Maharashtra)

  • Kakinada (Andhra Pradesh)

  • Chennai (Tamil Nadu)

  • Vijaywada (Andhra Pradesh)

  • Haldia (West Bengal)

  • Indore (Madhya Pradesh)

Crude palm oil is also traded at the Indian commodity exchanges like National Commodity & Derivatives Exchange ltd, Multi Commodity Exchange of India ltd and National Multi Commodity Exchange Ltd.


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