Palm Oil Market

Palm oil is an economically important and versatile vegetable oil that is used as raw material for both food and non-food products. Large red and orange ‘fresh fruit bunches’ grow on palm oil trees, which can be broken up into individual fruits. Both the flesh and the kernel of the fruit yield palm oil. Each fresh fruit bunch weighs between 10 kg and 40 kg, and the flesh of the fruit (not the kernel) yields over 50 per cent oil (Food and Agricultural Organization of the United Nations (FAO), 2002). Around the world, vegetable oil production totals approximately 150 million metric tons per year, of which approximately one-third is palm oil (FAO, 2013). Palm oil is the most widely used vegetable oil in the world and is found in supermarket products ranging from margarine, cereals, sweets and baked goods to soaps, washing powders and cosmetics. Increasingly, palm oil is also being used as a first-generation biofuel. In 2011 oil palm plantations produced over 53 million metric tons of palm oil on 16 million hectares. Most of this production (89 per cent) comes from Indonesia and Malaysia (see Figure 11.1), where palm oil is a key economic driver and is an important component of GDP.

Over the last few decades the growing consumption of palm oil and simultaneous expansion in plantation area has been criticized by civil society organizations as a driver of deforestation as well as displacement and disruption of human and animal populations. The sustainability standards emerging in the context of these concerns include the Roundtable for Sustainable Palm Oil (RSPO), Organic and Rainforest Alliance.1 The International Sustainability and Carbon Certification (ISCC) and the Roundtable on Sustainable Biomaterials are other standards involved in the palm oil industry, and are covered in Section 6. Palm oil compliant with voluntary sustainability standards accounted for 15 per cent of global production in 2012 (RSPO accounted for the vast majority of this; Organic production accounted for 0.1 per cent of global production volumes; see Figure 11.2 and Table 11.2 for a breakdown by voluntary sustainability standard).

 

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1. [Since Rainforest Alliance’s palm oil program is in its early stages, only RSPO and Organic are discussed in the palm oil chapter of the SSI Review 2014.]