1) Position of palm oil among vegetable oils

Palm oil accounts for approximately 30% of the world' total vegetable oil production. By type of oil, palm oil is the most frequently-used vegetable oil (palm oil: 62 million tons, soybean oil: 48 million tons, rapeseed oil: 26 million tons). Palm oil is mainly produced in tropical regions near the equator. It is a perennial crop obtained from the pulp of oil palms. Oil palms bear fruit throughout the year for a period of 5 to 30 years. Although production capacity has a fluctuating cycle, it is continuing to grow on a global level.

2) Supply and demand conditions for palm oil

Indonesia accounts for 54% and Malaysia for 30% of the global production of palm oil. These two countries have palm plantations to achieve production capacity which far exceeds domestic demand. As a result, these countries export the majority of their palm oil. Conversely, main importing countries include India, China, and countries in the EU.
Total global production of palm oil in 2015/16 was 58.29 million tons, a year-on-year (YOY) increase of 6.5%. Of this amount, Malaysia produced 17.68 million tons (down 11.0% YOY) and Indonesia produced 31.23 million tons (down 6.0% YOY). Production in 2015/16 was significantly affected by the El Nino phenomenon. In particular, drought conditions continued in the Sabah Province and Sarawak Province of Malaysia. As a result, total global exports were 44.82 million tons (down 5.9% YOY). Of this amount, Malaysia exported 16.66 million tons (down 4.3% YOY) and Indonesia exported 23.76 million tons (down 8.8% YOY). Total global consumption was 62.4 million tons (up 3.3% YOY). Among this amount, India consumed 9.15 million tons (UP 0.6% YOY) and Indonesia consumed 8.81 million tons (up 23.0% YOY). This marked increase in Indonesia was due to BDF demand in conjunction with a subsidy system that was started from the summer of 2014. Conversely, China consumed 5.26 million tons (down 10.0% YOY). Decreased consumption in China was caused by an increase in soybean oil expression, and a resulting shift in demand from palm oil to soybean oil. As a result of these factors, the global year-end inventory of palm oil decreased by 28.2% to 9.54 million tons. In particular, a YOY decrease of 41.4% is forecasted for Malaysia.

3) Recent production trends

Total global production of palm oil in 2016/17 is expected to reach 63.8 million tons (up 9.5% YOY). Of this amount, Malaysia is forecasted to produce 19.37 million tons (up 9.5% YOY) and Indonesia 34.82 million tons (up 10.9% YOY). On the other hand, total exports are expected to reach 46.82 million tons (up 4.6% YOY). Of this amount, Malaysia is expected to reach 16.9 million tons (up 1.5% YOY) and Indonesia 25.5 million tons (up 7.3% YOY). Total global consumption is forecasted to be 63.46 million tons (up 2.5% YOY). Of this amount, consumption in India is predicted at 9.53 million tons (up 4.1% YOY) and Indonesia at 9.29 tons (up 6.5% YOY). Conversely, China will be 5.09 tons (down 3.2% YOY). The global year-end inventory of palm oil is expected to increase by 3.8% to 10.22 million tons. In particular, a YOY increase of 22.9% is forecasted for Malaysia.