Palm Oil

09 June 2014 04:11 PM

Palm oil, unlike most of the edible oils, is extracted from the fruit pulp (mesocarp). However, palm kernel oil is extracted from kernel. Asian countries are the largest producers and consumers of palm oil. India is the largest importer and consumer of palm oil.

It is scientifically known as Elaeis guineensis. There are two important species of oil palm are cultivated in the world Elaeis guineensis (African Oil Palm) and Elaeis olifera (American Oil Palm). Of the two, E. guineensis isthe most widely grown species.

Economically Important Products:

Palm fruit contains nearly 60 % of oil. Palm oil contains palmitic acid, a mono-unsaturated oleic acid, poly-unsaturated linoleic acid and stearic acid. The typical blend in palm oil is 45 % palmitic, 40 % oleic, 10 % linoleic and 5 % stearic.

Palm oil is rich in carotenoids (pro Vitamin A), tocotrienols and tocopherols (Vitamin E). It contains no trans fatty acids that are considered to be harmful for human health as they enhance blood cholesterol formation

Palm oil is available in different forms in the market such as Crude Palm Oil (CPO), Crude Palmolein, RBD (refined, bleached, deodorized) Palm Oil, RBD Palmolein and Crude Plam Kernel Oil (CPKO).

Climate and Cultivation

Oil palm thrives well in hot and wet tropical lowlands. The major production regions receive evenly distributed rain with at least 45-50 cm per month. Yields are directly dependent on rainfall. Optimal temperatures are in the range of 80 and 90°F. Oil palm is generally cultivated within a few hundred ft from sea level, although some cultivars are tolerant lower temperatures at higher elevations. High humidity and cloudiness prevail in most regions, but 5 to 7 hours of direct sunlight per day is beneficial.

World Scenario

World production of palm oil has been rising steadily has doubled from about 28 million tons in 2022-03 to about 56 million tons in 2012-13. Indonesia has become the largest producer since 2005-06 moving ahead of Malaysia.

Palm oil output from Indonesia increased more than three times from about 9 million tons in 2001-02 to about 28 million tons in 2012-13 and may cross 30 million tons in 2013-14 as indicated the latest USDA estimates. Production of palm oil from Malaysia has also increased but at a slow pace from about 12 million tons to about 19 million tons in the corresponding period. Production, consumption and trade of palm oil in the world have uniformly been increasing during the past decade.

Table 1: Trends in demand and supply of world palm oil (in million tons)

	Production	Trade	Consumption	Closing stocks
2009-10	46.1	35.5	45.5	5.5
2010-11	48.7	36.9	47.5	6.2
2011-12	52.0	39.0	50.8	7.2
2012-13	55.8	42.8	54.8	7.1
2013-14	58.5	42.6	57.3	7.6

Source: USDA

Indonesia and Malaysia are the largest exporters accounting for about 88% of total palm oil exported in the world. Among importing countries, India is the largest importer accounting for about 20% of total imports in the world followed by EU-25, China and Pakistan.

Domestic Scenario

Domestic production of palm is negligible so far. To promote oil palm cultivation in the country, a centrally sponsored programme was initiated in 1992-93. The responsibility of implementation of the Oil Palm Development Programme (OPDP) is being carried out by Horticulture Departments/Agriculture Departments of the respective state governments.

Table 2: Trends in demand and supply of palm oil in India (in 000 tons)

	Production	Imports	Consumption	Closing stocks
2009-10	50	6603	6440	940
2010-11	50	6661	7080	571
2011-12	50	7473	7425	669
2012-13	50	8307	8425	601
2013-14	50	8750	8894	507

Source: USDA

India is net importer of palm oil and produces only a negligible amount. India is the largest consumer of palm oil and almost all the consumption requirement is met through imports. Consumption of palm oil in India has been rising consistently over a period due to rising demand particularly from fast food and snack industry.

Major Markets:

Spot markets:

Chennai, Mumbai and Kolkata

Futures markets:

RBD Palmolinfuturesare tradedon NCDEX and ACE

External Trade

Major import sources: Indonesia and Malaysia

Major export destinations: NA

Factors Influencing Palm Oil Prices:

· Demand and Supply conditions in major import sources

· Domestic demand

· Import policy and tariffs changes