Palm oil is the most important vegetable oil imported into Europe. The oil is used in large volumes by the food, personal care and biofuel industries. Opportunities for exporters in developing countries are likely to be found in niche markets such as organic, fair trade certified and/or red palm oil.

Palm oil is derived from the palm fruit (mainly Elaeis guineensis, and to a lesser extent Elaeis oleifera and Attalea maripa) in tropical countries. Around 90% of palm oil is produced in Indonesia and Malaysia. The oil is widely used worldwide, accounting for 65% of all vegetable oils traded internationally.

Palm oil contains highly saturated fats and is semi-solid at room temperature. This factsheet only focuses on palm oil used in the food industry. The oil is used in many food items such as margarine, ice cream, confectionery, filled milk and as cocoa butter substitute.

A sub-category of palm oil is red palm oil, which is unrefined and has a red colour due its carotene content. It is used as a cooking oil and in cosmetic products; new applications as food colouring are currently being researched.

• Palm Oil Exports by Country
• What requirements should palm oil comply with to be allowed on the European market?
• Through what channels can you get palm oil onto the European market?
• What are the end-market prices for palm oil?
• Environmental Impacts
• Wildlife Impacts
• Why Oil is Important
• 10 Companies Committed to Sustainable Palm Oil
• The economic and social impact of oil palm cultivation

Palm Oil Exports by Country

Global sales from palm oil exports by country totaled an estimated US$23.2 billion in 2019. Overall, the value of palm oil exports fell by an average -20.8% for all exporting countries since 2015 when palm oil shipments were valued at $29.3 billion. Year over year, international palm oil sales decreased by -24.7% from 2018 to 2019.

Led by Indonesia, Asian countries generated the highest dollar worth of exported palm oil during 2019 with shipments valued at $19.3 billion or 83.2% of the global total. In second place were European exporters at 7.6% while 5.9% of worldwide palm oil shipments originated from Latin American countries excluding Mexico but including the Caribbean. Smaller percentages came from Oceanian countries (1.9%) headed by Papua New Guinea, then exporters in Africa (1%) and North America (0.4%).

Below are the 15 countries that exported the highest dollar value worth of palm oil during 2019.

1. Indonesia: US$10.4 billion (44.8% of total palm oil exports)
2. Malaysia: $8.3 billion (36%)
3. Netherlands: $1 billion (4.4%)
4. Papua New Guinea: $423.7 million (1.8%)
5. Colombia: $402.8 million (1.7%)
6. Guatemala: $393.8 million (1.7%)
7. Germany: $265.2 million (1.1%)
8. Honduras: $256.8 million (1.1%)
9. Nepal: $189.1 million (0.8%)
10. Thailand: $147.8 million (0.6%)
11. Italy: $131 million (0.6%)
12. Ecuador: $126.8 million (0.5%)
13. Denmark: $112 million (0.5%)
14. Costa Rica: $110.9 million (0.5%)
15. United States: $87.2 million (0.4%)

The listed 15 countries shipped 96.6% of global palm oil exports in 2019 by value.

Among the top exporters, the fastest-growing palm oil exporters since 2015 were: Thailand (up 202.5%), Italy (up 134.8%), Colombia (up 48.8%) and Denmark (up 42.5%).

Five top suppliers posted declines in their exported palm oil sales namely Ecuador (down -43.7%), Indonesia (down -32.6%), Germany (down -27.8%), Malaysia (down -12.6%) and Papua New Guinea (down -1.5%).

Advantages

The following countries posted the highest positive net exports for palm oil during 2019. Investopedia defines net exports as the value of a country’s total exports minus the value of its total imports. Thus, the statistics below present the surplus between the value of each country’s exported palm oil and its import purchases for that same commodity.

1. Indonesia: US$10.4 billion (net export surplus down -32.6% since 2015)
2. Malaysia: $7.8 billion (down -11.9%)
3. Papua New Guinea: $416.7 million (up 3.6%)
4. Guatemala: $378.1 million (up 43.1%)
5. Colombia: $253.6 million (up 41%)
6. Honduras: $242.1 million (up 20.6%)
7. Nepal: $185.6 million (reversing a -$31.9 million deficit)
8. Thailand: $145.2 million (reversing a -$205,000 deficit)
9. Ecuador: $113.9 million (down -47.6%)
10. Costa Rica: $68.2 million (down -34.6%)
11. Peru: $40.4 million (up 158.9%)
12. Oman: $40.2 million (reversing a -$30.3 million deficit)
13. Ivory Coast: $29.5 million (down -65.5%)
14. Solomon Islands: $25.2 million (up 22.7%)
15. Panama: $13.6 million (reversing a -$1.5 million deficit)

Indonesia has the highest surplus in the international trade of palm oil. In turn, this positive cashflow confirms Indonesia’s strong competitive advantage for this specific product category.

Opportunities

The following countries posted the highest negative net exports for palm oil during 2019. Investopedia defines net exports as the value of a country’s total exports minus the value of its total imports. Thus, the statistics below present the deficit between the value of each country’s imported palm oil purchases and its exports for that same commodity.

1. India: -US$5.4 billion (net export deficit down -9.5% since 2015)
2. China: -$4.1 billion (up 10.3%)
3. Spain: -$1.1 billion (up 35.2%)
4. United States: -$927.1 million (up 17.8%)
5. Italy: -$926.4 million (down -18.6%)
6. Netherlands: -$666.4 million (down -5.2%)
7. Russia: -$657 million (up 9%)
8. Japan: -$497.9 million (up 12.6%)
9. Pakistan: -$458.5 million (down -72.2%)
10. Turkey: -$371.9 million (down -10.9%)
11. South Korea: -$348.6 million (up 24.4%)
12. Belgium: -$317.5 million (down -3.6%)
13. Saudi Arabia: -$317.4 million (down -3.1%)
14. Vietnam: -$282.2 million (down -31.1%)
15. Iran: -$278 million (up 24.7%)

India incurred the highest deficit in the international trade of palm oil. In turn, this negative cashflow highlights India’s strong competitive disadvantage for this specific product category but also signals opportunities for palm oil-supplying countries that help satisfy the powerful demand.

Companies

Palm Oil Exporting Companies

According to global trading platform Alibaba, the following companies are top-rated examples of palm oil-trading companies located in the country shown within parentheses:

• Erapoly Global Sdn. BHD (Malaysia)
• Foshan Shunde Guoxin Ind. Co., Limited (China)
• MUZ Trading (Philippines)
• Novagen Genetica LtdA-EPP (Brazil)
• Passata Trading GmbH (Germany)
• Pt. Asianagro Agungjaya (Indonesia)

What requirements should palm oil comply with to be allowed on the European market?

Buyers in the European Union have strict requirements for palm oil. You will only be able to successfully market your product in Europe when you comply with these requirements. See our study on buyer requirements for vegetable oils for a detailed analysis of these requirements. They deal with the following topics:

Legal requirements

You must follow these legal requirements applicable to food ingredients and vegetable oils specifically:

• Traceability, hygiene and control
• Contamination: Contamination by polycyclic aromatic hydrocarbons and/or benzo(a)pyrene is a common problem faced by exporters of palm oil. Make sure to address extra contamination risks by 3-MCPD esters and glycidyl esters.
• Erucic acid content: Not highly relevant for palm oil
• Extraction solvents
• Product composition: Do not add unauthorised ingredients such as Sudan 3 and 4; this is a common problem faced by red palm oil exporters.
• Labelling, including allergens and nutrition & health claims
• Food contact materials

Additional requirements

You are advised to follow these additional requirements applicable to food ingredients and vegetable oils specifically:

• Food Safety Certification: In addition to HAACP, certificates such as IFS or BRC might be required by some buyers.
• Corporate responsibility and sustainable sourcing certification: Palm oil is criticised in Europe due to its environmental and social impact. This puts pressure on suppliers and buyers to comply with sustainability standards. The Roundtable on Sustainable Palm Oil (RSPO) promotes the sustainable production and trade of palm oil worldwide, and it is becoming a basic requirement for entry into the market. The roundtable is supported by large-scale industry players, such as Unilever, Carrefour, Nestlé and Ferrero. But it is also applicable to small or medium-scale players. In addition, companies often have their own policies regarding corporate social responsibility, which could have a strong benefits to you as a supplier.

Quality requirements

The two main quality problems in palm oil are hydrolysis (formation of fatty acids) and oxidation (rancidity). To avoid these problems, palm oil should be stored between 32oC and 40oC and remain protected from pro-oxidants such as carotenoids and metal ion. The moisture content in the oil should be kept between 15 and 25%.

Make sure to also prevent contamination by other foreign materials (such as dust) by keeping facilities and equipment clean. Palm oil can also be contaminated with glycidyl esters and 3-MCPD. The European Food Safety Authority (EFSA) has commissioned a research concerning these contaminants, the potential health risks for humans and the possible tolerable daily intakes.

Labeling requirements

Label your bulk product in the English language unless your buyer has indicated otherwise. Labels must include the following:

• Product name
• Manufacturers lot or batch code
• If the product is destined for use in food products
• Declaration of allergenic substances
• Name and address of exporter
• Products country of origin
• Shelf life: Best before date / use by date
• Net weight/volume in metric units
• Recommended storage conditions
• Organic (if relevant): Name/code of the inspection body and certification number

Packaging requirements

Transportation of palm oil depends on the volumes being transported:

• Very large volumes of commodity palm oil are stored and transported in tank containers.
• Smaller volumes are transported in intermediate bulk containers (IBCs), steel drums or high-density polyethylene (HDPE) drums.

Requirements for niche markets

Requirements for niche markets that are applicable to vegetable oil suppliers are:

• Organic certification: Organic is a niche market for palm oil, but it is an increasingly interesting proposition due to the growing organic market in Europe. Palm oil has wide applications in the food industry, and can be used similarly in the organic sector.
• Rainforest Alliance: Palm oil is currently the only vegetable oil that can be certified by the Rainforest Alliance. Rainforest Alliance: Sustainable Agriculture Network focuses on environmental issues and can be an important opportunity to diversify yourself from other suppliers.
• Fair trade certification: Fair trade certification does not offer many opportunities for palm oil, except for red palm oil – which is a consumer product. Fair for Life has a few certified operators handling red palm oil.

Through what channels can you get palm oil onto the European market?

Market segments

Palm oil is widely used by the food industry in the manufacture of products such as margarines, confectionery, baked goods and crisps (as a frying oil). It is considered to be one of the most versatile oils (and relatively cheap) within the food industry. It is usually not sold as a consumer product.

Organic palm oil has similar applications, but it is used in the production of food products for the niche organic market, commanding smaller volumes.

Different to regular palm oil, red palm oil is a consumer product. It can mostly be found in niche retailers in Europe. Lower-priced and standard quality red palm oil can be purchased in ethnic shops, whereas higher-priced and high-quality (often organic-certified) red palm oil is usually available at health shops or as a premium product in supermarkets. Red palm oil is usually used for cooking; newer applications as a food colouring are currently being investigated.

Market channels

The trade channels for conventional palm oil are not different from the general structure for vegetable oils as described in our study on market channels and segments for vegetable oils.

The channels for niche palm oil are:

• Organic palm oil is often traded by specialised (organic) importers or refineries in Europe. Examples are Brochenin (France), Henry Lamotte (Germany), ZOR, Tradin and DO-IT (Netherlands).
• Red palm oil also enters the market via specialised importers, but does not go through further refining. It is mostly used for cooking. Research is being done into the use of red palm oil as natural (non-synthetic) food colouring. Natural alternatives to food colouring are scarce, but red palm can be used by manufacturers who want to label their products as additive-free, without sacrificing the colouring that makes the food products more appealing.
• Fair-trade certified (red) palm oil still represents a highly specialised market. Market entry is usually via specialised (ethical) traders, often in the framework of sustainability projects. An example is the FairWorld Project making Fair and Sustainable Palm Oil in Ghana.

What are the end-market prices for palm oil?

Price breakdown

In general, the following margins can be expected for palm oil:

• Brokers: approximately 0.5 to 2% or a fixed price per tonne.
• Importers: depending on whether the oil is simply being forwarded (5–10%), or whether the importer has to re-sell specific quantities (10–20%).
• Refiners charge a fixed amount per tonne of oil refined.

The margins charged by other industry players such as food manufacturers, bottlers and retailers will depend greatly on the segmentation and added value of the final product, for example whether it has an organic certification.

World prices

Only red palm oil is sold directly to consumers. The world prices for conventional palm oil (in bulk) are therefore an interesting starting point for you as a supplier, since conventional palm oil is not a consumer product.

Since 2012, palm oil prices have seen a general decrease, with a small peak in the beginning of 2014. In 2015 and 2016, price levels decreased further to prices below US$ 700 per tonne. This decrease is mainly driven by two trends in the biofuel industry: a sharp decrease in petroleum costs and the global increase of soybean supply. However, in April 2016 prices have started to increase to levels above US$ 720 per tonne. Prices are expected to rise even more due to poorer supplies as a result of El Niño.

Organic palm oil

Prices for organic palm oil are 40 to 50% higher than those for conventional palm oil.

Red palm oil

Red palm oil is a consumer product. Examples of retail prices for red palm oil are specified in the table below. Note that these prices are based on web shop checks and that they vary according to type of retail outlet, the product’s net content and origin.

Brand and details	Retail outlet	Price and packaging size	Price per litre
Real Food Source (organic)	Real Food Store, United Kingdom	£11.99 (€13.81) / 1 litre	€13.81
Rotes palmöl (organic)	Zentrum-der-Gesundheit.de, Germany	€19.50 / 1 litre	€19.50
AMANPRANA Rode Palm Olie(organic and Fairtrade)	Ekoplaza, the Netherlands	€9.95 / 325 ml	€30.61
Bio Today Rode Palm Olie (organic)	Albert Heijn, the Netherlands	€9.95 / 325 ml	€30.61
Mama Africa Red Palm Oil	Alter Africa, France	€5.90 / 1 litre	€5.90

Environmental Impacts

Palm oil production and deforestation go hand in hand.

To build palm oil plantations, producers clear trees in tropical rainforests, destroying the biodiverse regions. Deforestation is a significant contributor to climate change; when the forests are lost, carbon is released into the atmosphere, causing global warming.

Removing the native forests often requires burning timber and forest undergrowth, putting significant amounts of smoke into the atmosphere.

In Indonesia and Malaysia, much of the land is on tropical peat soil. This rich soil sequesters carbon. Clearing the land releases that carbon into the atmosphere, which contributes to climate change.

Despite the environmental impact, the Indonesian government plans to convert 45 million acres of rainforest into palm oil plantations by 2020. The tropical nation has already allowed the deforestation of 25 million acres of peat lands to make room for palm oil plantations.

Wildlife Impacts

Animals living in the biodiverse regions where palm oil is produced are at risk.

Deforestation causes animals to lose their homes. During the production process, animals are often injured or killed. Orangutans and Sumatran tigers are at risk of extinction and several others species, including the Sumatran rhinoceros, sun bear, and clouded leopard, are also suffering because of palm oil production.

Cutting down forests also puts animals at risk of poaching. The World Wildlife Federation reports that the roads built to provide access to vehicles and equipment also provide access for poachers who kill mother orangutans and sell their babies on the illegal wildlife market. Some are sold as pets and others are used in wildlife tourism parks. Animals that wander into villages while fleeing the destruction are often killed.

Choosing Palm-Oil-Free Products

It’s possible to choose products without palm oil to protect the environment – but identifying which products contain the destructive ingredient is harder than it seems. On labels, palm oil might be listed as palm kernel, palm kernel oil, palm fruit oil, palmate, palmitate, palm olein, stearate, stearic acid, ethyl palmitate, or several other iterations.

You can also look for products made with sustainable palm oil.

In 2008, the Roundtable on Sustainable Palm Oil developed a certification for sustainable palm oil. To date, 68 growers and 281 palm oil mills producing 11.37 million tons of palm oil have been RSPO-certified.

The criteria require that palm oil does not come from fragile ecosystems or forests containing significant concentrations of biodiversity, including endangered species. Production must not impact forests where local communities depend on the forest to meet their basic or cultural needs.

To qualify for certification, producers must show minimal use of pesticides and fires, fair treatment of workers, and fulfil a requirement to consult with local communities before development of new plantations on their land.

Palm oil is a versatile ingredient in myriad products, but as this article has shown, the bad outweighs the good. Shop intelligently and avoid products that contain palm oil, or shop only for certified sustainable palm oil from now on.

Why Oil is Important

Palm oil accounts for 35% of the world’s vegetable oil market and there’s a very good reason why.

Efficiency

Harvested all year round, oil palm trees produce on average 10 tonnes of fruit per hectare – far more than soya, rapeseed and sunflower crops.

This means oil palm requires 10 times less land than the other three major oil producing crops, soya, rapeseed and sunflower . In addition to the 3.74 tonnes of palm oil per hectare, 0.4 tonnes of palm kernel oil and 0.4 tonnes of palm kernel expeller/cake are also produced from the fresh fruit bunches or FFB.

Palm kernel expeller is used extensively in the energy and animal feed sector. Palm kernel oil is a widely used ingredient in the personal care market.

Versatility

Palm oil demand continues to grow because it is the most versatile of all vegetable oils. This is because palm, palm kernel oil can be processed to form a wide range of products with different melting points, consistencies and characteristics. 

Feeding a global population

In November 2011 the global population reached 7 billion and by 2050 it is expected to increase by 2 – 3 billion. Since oil palm is the most efficient oil crop available, it is a crucial commodity when it comes to feeding the growing number of people on our planet. The importance of palm oil becomes clear when we consider that many people in the developing world rely on it as a cheap and available cooking medium.

Providing livelihoods

Many people rely on palm oil for their livelihoods. Oil palm smallholders are some of the poorest farmers in the world. The money they earn from growing oil palm trees is crucial to feed and care for their families.

Supporting economies

Farming and producing palm oil form the backbone for many communities and, indeed, countries. Palm oil accounts for 11% of Indonesia’s export earnings, with one third of this production attributed to smallholder farmers.

10 Companies Committed to Sustainable Palm Oil

As consumers become more aware of palm oil-related deforestation, a select few companies are leading the charge and making bold commitments to sustainable sourcing. There’s still more work to be done, but this week we’re happy to give these 10 companies a well-deserved pat on the back.

1. Nestlé

Pushed by an aggressive Greenpeace campaign, in 2010 Nestlé committed to a global no deforestation target by 2020, alongside other members of the Consumer Goods Forum. Nestlé is the largest food company in the world but is only a tiny player in the global palm oil market — yet deforestation connected with the ingredient means the target has become a key priority for the company.

The company’s trailblazing partnership with its leading palm oil supplier, Golden Agri Resources (GAR), and The Forest Trust (TFT) is a shining example of how sustainability collaboration can drive dramatic change.

2. Unilever

Unilever is one of the world’s largest buyers of palm oil with about 1.5 million tons purchased annually (or 3 percent of global production), but fortunately it is now also one of the world’s greenest buyers. The company reached its target of 100 percent certified sustainable palm oil covered by GreenPalm Certificates in 2012, three years ahead of its original schedule.

Taking things a step further, the company made another commitment in 2013: All palm oil bought will be traceable to known sources by end of this year.

3. Kellogg’s

The packaged food sector has the strongest palm oil commitments overall, according to a recent report from the Union of Concerned Scientists. Kellogg’s is an industry leader, having recently committed to a zero-deforestation policy with full traceability by 2015.

4. Starbucks

Last year, Green Century Balanced Fund, an environmentally responsible mutual fund, filed a shareholder resolution against Starbucks due to concerns that some of the company’s palm oil suppliers used deforestation practices.

In response, the coffee giant announced that it will purchase all palm oil from suppliers with sustainable certification by 2015. A Starbucks spokesperson had this to say: “I can confirm that our products in the U.S. and Europe currently use RSPO certified palm oil and we have committed to extending our use of RSPO certified palm oil to 100 percent of our products globally by 2015.” Some have pointed out the shortcomings of RSPO, but this is certainly a good first step.

5. L’Oreal

L’Oreal, the parent company of brands like Kiehl’s and The Body Shop, is one of the top dogs in the personal care sector when it comes to sustainable palm oil sourcing. It ranked the highest among its competitors in the Union of Concerned Scientists’ recent Palm Oil Scorecard for its commitment to buying traceable deforestation- and peat-free palm oil.

6. Mars, Inc.

Mars, Inc., the manufacturer of the popular chocolate candy bars Mars Bar, 3 Musketeers and Twix announced its commitment in March to transition to 100 percent certified sustainable palm oil in its products by the end of 2014.

“We will continue to source 100 percent RSPO mass-balance certified palm oil, but we are now strengthening our commitment as follows to ensure this palm oil is genuinely sustainable,” the company said in its press release. To do this, it plans to “go beyond the RSPO criteria” by setting its own benchmarks for suppliers.

7. Hershey’s

Not to be outdone by confection competitor Mars, Hershey’s is making bold strides towards sustainable sourcing in its own right. The company committed to use 100 percent RSPO certified palm and palm kernel derivatives in 2011, and actually reached that goal by the start of this year – one year ahead of its 2015 target.

“We believe that certifying both our palm oil and palm kernel derivatives puts The Hershey Co. at the leading edge among consumer products manufacturers in this important area of palm certification,” a Hershey’s spokesman told Triple Pundit in an email.

In December, Hershey’s announced it would go beyond RSPO certification and work with its suppliers to achieve 100 percent traceable and sustainably sourced palm oil by the end of 2014, one of the most progressive palm sourcing commitments in the packaged goods industry.

8. Mondelēz

You may not know Mondelēz by name, but you’ll surely recognize its benchmark brands like Oreo, Nutter Butter, Ritz Crackers and Honey Maid. A leader in the packaged goods sector, Mondelēz plans to purchase 100 percent certified sustainable palm oil (CSPO) committed to 100 percent transparently sourced, traceable palm oil which does not contribute to deforestation or loss of peatland by 2020.

9. Procter & Gamble

Procter & Gamble committed to a no deforestation policy in April 2014 as a result of a public campaign by Greenpeace. P&G’s new policy builds on the existing RSPO criteria and includes protection of peatland.

“Greenpeace will continue to engage with P&G to ensure that this policy is implemented before 2020 and effective action is taken to deal with problematic suppliers,” the group said on its website.

10. Reckitt Benckiser

The maker of personal care products like Clearasil and Calgon, Reckitt Benckiser has committed to trace palm oil back to its origin, and asks suppliers about the GHG footprint of their production. The company has also committed to using 100 percent RSPO certified palm oil by 2015 and using 100 percent physical CSPO by 2020.

Currently Reckitt Benckiser sources just over 4 percent of its total palm oil from RSPO GreenPalm certificates, according to the Union of Concerned Scientists, so the company still has a long way to go in realizing its commitment.

Palm oil is one of the most profitable land uses in the tropics. For the main producing countries, palm oil can significantly contribute to national economies, driving rapid economic growth and contributing to the alleviation of rural poverty.

In Indonesia, the average income in a complete financial year of an oil palm plantation is up to $2,500 per hectare, compared to only $250 for a rice plantation. There are an estimated 25 million Indonesians living indirectly from palm oil production.

Nevertheless, unsustainable production also has potentially negative economic consequences at local and global levels in contributing to habitat destruction, pollution and climate change.

The economic and social impact of oil palm cultivation

Palm oil is the main agricultural export of Indonesia and Malaysia, generating 10 % and 5 % respectively of their exports. The sector provides employment for 721 000 smallholders and labourers in Malaysia, and 4 million in Indonesia; a further 11 million in the two countries are indirectly dependent on it.

Most oil palm jobs are in remote rural areas, where alternative employment is scarce, thus helping to promote rural development and alleviate poverty. However, not all have benefited; in both countries, indigenous communities often lack legal documents certifying their ownership of land, and there are many legal conflicts between oil palm companies granted government concessions in forested areas, and the people who have used the land for centuries.

In some cases, this has led to local people losing access to land and resources. As a result of such problems, in one survey nearly half of 187 villages in Indonesian Borneo were opposed to palm oil companies. There are also serious concerns about abusive labour conditions on some plantations.

Finally

The palm oil industry has helped lift millions of people out of poverty in Indonesia and Malaysia, which together account for around 85 percent of global production. Oil palm plantations have created millions of well-paying jobs, and enabled tens of thousands of smallholder farmers to own their own land.

In Indonesia the palm oil industry accounts for 1.6 percent of GDP and employs 4.5 million people. As the majority of the harvest is exported the industry brings in more than $18 billion a year in foreign exchange, the single biggest contributor in the country.