Palm Oil

Palm oil is the vegetable oil produced in largest amount having pushed soybean oil into second place in 2004/05. Palm is generally the cheapest commodity vegetable oil and also the cheapest oil to produce and to refine. By reason of its availability and (relatively) low cost, it is an important component of the increasing intake of oils and fats in the developing world. Without the large volume of exported palm oil from Malaysia and Indonesia, there would be a major problem in meeting world demand for vegetable oil.

The oil palm originated in West Africa and was taken to Malaysia (then Malaya) by the colonial rulers in the 1870s as an ornamental. It was 1917 before the oil palm was first planted as an oil crop. The variety Tenera (a hybrid of Dura and Pisifera) is now generally cultivated. The plant is grown in a nursery for 12-18 months before it is planted in the field where it bears fruit 30 months later and has an economic life of 20-30 years. A mature tree produces 10-15 bunches a year. These are 10-20 kg in weight and have 1000-2000 fruitlets. Each 10g fruitlet has a kernel (3-8% ), which is the source of palmkernel oil. When pressed, the fruitlets give palm oil with an oil extraction rate of ~20%. A normal plantation will yield ~ 4t of palm oil/ha/year. The best plantations have yields of 7-8 tonnes/hectare and there is evidence that some are even higher. Although there are peaks and troughs, harvesting occurs all the year round producing a continuous supply of oil. The fruit bunches and fruitlets cannot be stored and extraction must be carried out as soon as possible. Many plantations have their own mill. For example, in 2005, Malaysia had 395 mills with a further 25 in the planning or construction stages.

The oil is generally refined, bleached, and deodorised (RBD oil) and much of it is fractionated to give palm olein and palm stearin thereby extending the usefulness of this oil. During refining some valuable minor products are removed though these may be trapped in a side stream for separate use. Alternative refining procedures produce a red palm oil by retaining a larger proportion of the carotenes in the crude oil. Since the carotenes are biological precursors of vitamin A, the red oil can be used to reduce blindness, particularly in children on diets otherwise deficient in carotenes.

Table 1 contains details of production, trade (exports and imports) and consumption for food and non-food purposes of palm oil in 2011/12. Total consumption is almost the same as production and imports and exports are also similar in level. Small differences in these pairs are covered by changes in stocks. So-called "ending stocks" at 6.7 million tonnes represent only 50 days supply.

Table 1. Palm oil: production, export, import, and consumption (for food and non-food purposes) in 2011/12.
All figures are million tonnes.
Production: 50.7   (Indonesia 25.9, Malaysia 18.2, Thailand 1.5, Columbia 0.9, Nigeria 0.8, other 3.4)
Exports: 39.0   (Indonesia 18.2, Malaysia 16.6, other 4.2)
Imports: 38.1   (India 7.5, China 5.8, EU-27 5.2, Pakistan 2.1, Bangladesh 1.0, USA 1.0, other 15.5)
Consumption: 8.9   (India 7.4, Indonesia 7.1, China 5.8, EU-27 5.1, Malaysia 3.0, Pakistan 2.1, Nigeria 1.3, Thailand 1.1, USA 1.0, Bangladesh 1.0, other 14.0)


Production of palm oil in 2011/12 was almost 51 million tonnes coming mainly from Indonesia and Malaysia with smaller amounts from Thailand, Nigeria and Columbia and the balance from over 20 other countries. The Table contains information for the ten major consuming countries. It is clear how important imported palm oil is to the highly-populated Indian sub-continent (India, Pakistan, and Bangladesh) with a combined annual consumption of at least 10.2 million tonnes.

Production in Malaysia has been an important element in the development of that country and in the world supply of dietary oils and fats in the last 30 years. Production in Malaysia has increased from only 1.3 million tonnes in 1975, through 4.1 million tonnes in 1985 and 7.8 million tonnes in 1995 to 18.2 million tonnes. In 2011/12, Production in Indonesia rose from an even lower base to exceed Malaysian output in 2005/06. Malaysian and Indonesian experience in producing, trading, and financing palm oil is now being exported to other counties with favourable conditions for growing the oil palm.

Malaysia and Indonesia are the dominant exporters of palm oil, exporting 91 and 70%, respectively, of the palm oil they produce. The lower proportion in Indonesia is a reflection of the population in these two countries of 237 million in Indonesia and only 30 million in Malaysia. On the basis of trade in oils and fats in 2011/12, Malaysia supplied 25.8% of world exports as palm oil with Indonesia providing 25.7% as palm oil, so these two countries together supply over one half of total trade in vegetable oils. Beyond these figures there are also exports at lower levels of palmkernel oil and of coconut oil from these countries.

The major importing countries/regions are India, China and EU-27. The USA has never been a significant consumer of palm oil and in the past denigrated the oil as a “saturated tropical oil”. Consumption has risen slightly in recent years as American food manufacturers revised their recipes to lower the level of trans unsaturated acids produced through partial hydrogenation of soybean oil. The large figure for “others” in the imports and consumption columns is an indication of the very large number of countries importing and consuming palm oil.

Palm oil is widely used in the food industry with, for example, palm olein used as a frying oil and palm stearin as hardstock in the production of spreads and cooking fats. A mid-fraction also produced during fractionation is used as a cocoa butter equivalent (CBE). Palm oil is being used increasingly for non-food purposes. In 2001/02 when production was 25.3 million tonnes, 3.9 million tonnes (15%) was used for industrial purposes. Ten years later in 2011/12 those figures rose to 50.7 and 12.8 million tonnes (25%). If or when palm biodiesel becomes a widely traded commodity, the proportion used for industrial purposes will rise still further.

Palm oil is a source of valuable minor components, particularly carotenes (especially α- and β-carotene) and tocols (especially the tocotrienols).

Palmkernel oil, which is a second product from the oil palm, is discussed in the section on lauric oils.

Updated: March, 2013