Palm Oil Price

Palm oil is classified into the category of oilseeds, together with soybeans, canola, rapeseed oil, and sunflower oil, to name a few.

 

Quick Overview of Palm Oil

✔️An overview of palm oil
✔️Interesting facts about the history of palm oil
✔️The production of palm oil
Trading palm oil as an agricultural commodity
What are the price drivers of palm oil?
The uses of palm oil
Did you know?

 

An overview of palm oil

As an agricultural commodity

Oilseeds constitute one of six agricultural commodities. The other five agricultural commodities are:

• Dairy products comprise cheddar cheese, dry whey, class III milk (cheese milk), and class IV milk.
• Cereal grains such as corn, barley, oat, rough rice, and wheat.
• Meat includes livestock like lean hogs and cattle from which bones, hooves, hides, meat, and organs are produced.
• Soft commodities refer to cocoa, coffee, tea (black and green), and frozen concentrated orange juice (FCOJ).
• Miscellaneous agricultural commodities are described as commodities that do not fit into one of the other five categories of agricultural commodities. Wool (fine and greasy sheep wool), rubber (natural and synthetic), and lumber, also called timber, are classified into this category.

Agricultural commodities are defined as commodities that are obtained from the growing and harvesting of crops, and/or the raising of livestock.

 

As a vegetable oil

Palm oil is edible vegetable oil, which is produced from the fruit of oil palm trees, of which there are two main species:

• Elaeis guineensis is native to West and Central Africa, and also cultivated in countries such as Indonesia and Malaysia in Southeast Asia.
• Elaeis oleifera is native to Central and South America, and also, inter alia, grown in Southeast Asia, New Guinea in the Pacific region, and in countries in West Africa, such as Ghana and Nigeria.

Two types of palm oil are produced, namely:

• Crude palm oil, commonly referred to as palm oil, is squeezed from the fleshy orange pulp of the fruit of the oil palm tree.
• Palm kernel oil is obtained from crushing the kernel – the stone in the centre of the fruit.

 

Properties of palm oil

• Generally, palm oil consists of about 50 percent saturated fat, 40 percent mono-unsaturated fat, and 10 percent polyunsaturated fat.
• Palm oil can withstand high temperatures and does not overcook.
• It has a smooth and creamy
• Palm oil is odourless.
• It has a natural preservative effect which helps to extend the shelf life of perishable food products.
• Crude palm oil has a rich orange colour because it is pressed from the orange pulp of a palm tree’s fruit.
• In its refined form, palm oil is a pale-yellow colour.
• It keeps its nutritional value.

Other names used for palm oil include palmitate, palmate, and palmitic acid.

 

Facts about the oil palm tree

• Oil palm trees grow in humid tropical conditions. Hence, they are cultivated in regions 8 to 10 degrees south and north of the equator.
• A tree takes between 3 and 5 years to reach its full commercial potential, establishing its yield after 4 to 6 years. Its productivity starts to decline after about 20 years.
• The oil palm has a single stem and grows up to approximately 20 metres in height.
• It has leaves approximately 5 metres long.
• Tiny flowers grow on short branches, developing into large clusters (bunches) of oval fruits, weighing more than 20 kg. Each bunch contains hundreds of palm fruits, which are about the size of large olives. Adult oil palms produce clusters of fruit approximately 15 times a year.
• When ripe, the fruits are black with a red base, featuring a single oily seed called the kernel.
• Palm trees produce 5 to 10 times as much oil as other oil seed crops.

 

Interesting facts about the history of palm oil

History has it that the oil palm originated from West Africa, where palm oil was used as a staple food crop and as cooking oil, about 5 000 years ago.

It is believed that Arab traders had introduced palm oil to the Egyptians. Casks of palm oil were found in Egyptian tombs where people were buried, indicating the high social value attributed to the oil.

In an article, published in The Conversation 0n 24 June 2025, Jonathan E. Robins mentioned the following about palm oil: ‘During the “deadly middle passage” across the Atlantic, palm oil was a valued food that kept captives alive. As the author of a 1711 book noted, traders also smeared captives’ skin with palm oil to make them “look smooth, sleek, and young” before sending them to the auction block.’

Robins continued, describing, ‘By the mid-1600s, Europeans were rubbing palm oil on their own skin, too. European writers, learning from African medicinal practices, claimed that palm oil “does the greatest cures upon such, as have bruises or strains on their bodies.”’ (Accentuations in the quotations above are by the article writer.)

The Industrial Revolution in Britain and the expansion of overseas trade significantly contributed to the use of palm oil in the international market.

By 1840, palm oil was so cheap to completely replace whale oil in products like soap and candles.

In 1917, Malaysia’s first commercial-scale plantation was established.

 

Production of palm oil

 

Largest palm oil-producing countries in the world

Indonesia is by far the largest palm oil-producing country in the world, followed by Malaysia. Together the two countries produce more than 80 percent of the world’s most consumed vegetable oil.

Statista reported that the following five countries were the biggest producers of palm oil in the 2025/2022 timeframe.

1. Indonesia: 45.30 million metric tonnes (MT)
2. Malaysia: 18.30 million MT
3. Thailand: 3.15 million MT
4. Colombia: 1.75 million MT
5. Nigeria: 1.40 million MT

Forty-two other countries produced 6.22 million MT of palm oil during the given period.

Global production of palm oil has been rising steadily for five decades. Between 1995 and 2015, annual global production quadrupled, from 15.2 tonnes to 62.6 million tonnes. By 2050, it is expected to quadruple again, reaching 240 million tonnes. (Source: The Guardian)

Palm oil is an extremely efficient, popular, and productive vegetable oil crop, offering the highest yield at a lower production cost compared to other oil crops (rapeseed, sunflower, or soybeans) per hectare of land. For instance, oil palms can produce up to 10 times more oil per hectare than soybeans. This makes palm oil the least expensive vegetable oil in the world.

Furthermore, oil palm trees account for 7.4 percent of all the cultivated land for vegetable oils worldwide, but produce the highest output, producing 39.6 percent of all oils and fats, according to analysts.

Palm oil also provides a steady income, making it attractive for millions of farmers on smallholdings. Green Global Travel estimates that there are about 5 million farming families in Indonesia and Malaysia alone that depend on palm oil production for their income.

Palm oil production contributes about 40 percent of the production of vegetable oil worldwide.

 

Processing palm oil

Most of the information concerning the processing of palm oil is obtained from the fao.org website, and the website of Palm Oil Alliance, an organisation promoting ‘the importance of sustainable palm oil in achieving the UN Sustainable Development Goals.’

The processing of palm oil comprises several steps:

• Harvesting

When individual fruits start falling off the trees, it is a sign that they are ready for harvest.

Harvesting involves labourers, cutting off branches in order to dislodge the bunch (bundle), allowing it to fall to the ground.

 

• Bunch reception (From the trees to the mills)

After harvesting, the fruit bunches are taken to the mills within 24 hours. At the mills, the fruit bunches are divided into separate groups to check their quality. The ripeness of the oil palm fruit is one of the key factors that determine the quality of the bunches.

The quality level achieved is dependent on the quality of the bunches taken to the mill. The mill cannot improve the quality of the fruit but can prevent or minimise further deterioration.

 

• Threshing (removal of the fruit from the bunches)

The fruit bunch consists of fruit embedded in spikelets that grow on the main stem. One of two methods is applied to remove the spikelet from the stem:

• Manual threshing is where the spikelets are removed from the bunch stem with a machete or axe and then separating the fruit from the spikelets by hand.
• A mechanised system in which a rotating drum with rotary beaters, called a threshing machine, is used to remove the fruit from the spikelet, leaving the spikelet on the stem.

 

• Sterilisation

The next step in the process is to cook or steam the fruits, eliminating any bacteria and stopping enzyme activity. Sterilisation brings the degradation of the fruit to an end.

The choice for cooking or steaming depends on the size of the processor. Small processors will cook the fruits because they are not capable of generating steam. Larger steamers will use steam to sterilise the fruits.

The bunch waste (empty bunches) is either used as cooking fuel for the fruits or empty bunches are processed into fertilizers, to be used in the plantations.

Meanwhile, the steamer softens the fruit, helping to relieve the natural oil.

 

• Extraction of the palm oil (Digestion of the fruit)

The fruit masses, which contain palm kernel, fibres, water, and oil, are treated to separate all components. A plunger is used to crush the fruit, extracting the palm oil through pressure force. The oil gathered from the crushing is not yet pure palm oil. It still contains water.

The water-oil mixture is quite thick, making it necessary to add hot water to the mix in order to thin the substance. This eventually forces the oil (which is lighter than water) to form a layer on top of the water. The oil is then extracted from the water, but it still needs further processing at the refinery.

 

• Refining

A bleaching step is now applied in which the oil is mixed with a special type of natural earth, which helps to bind impurities and remove them from the oil.

A steam process follows to remove volatile components, which turn into gas and eventually leave the oil. The result of this process is healthy vegetable oil.

 

• Fractionation

Palm Oil Alliance describes this step as follows: ‘After refining, the oil is brought to a fractionation facility where it is separated into different fractions. Each fraction has specific properties. A very important one is the melting point. The melting points of these fractions determine their application. Some can, for example, be used for the production of margarine, while others are used for cookies or creams. In this way, palm oil finds its way into a great variety of products.’

 

• Oil storage

The purified oil is now stored in tanks or plastic drums at the required temperature before it is despatched from the mill.

 

 

Trading palm oil as an agricultural commodity

Palm oil is traded as an agricultural commodity on the Bursa Malaysia in Kuala Lumpur, the capital city of Malaysia. The price of Crude Palm Oil Futures (FCPO) on the Malaysian exchange serves as a benchmark for the global price of palm oil futures contracts. The size of a palm oil futures contract is 25 metric tonnes.

The Chicago Mercantile Exchange (CME) offers two contracts that track the price of palm oil:

• USD-denominated Malaysian Crude Palm Oil Calendar Futures (CPO), tracking the price of unrefined palm oil.
• USD-denominated Malaysian Palm Olein Calendar Futures (OPF), tracking the price of refined palm oil.

Both contracts are financially settled.

It is advisable to obtain the services of a regulated, and registered commodity broker who will also provide guidance, and a trading platform, and help you to determine your risk appetite. The broker will also indicate the pros, cons, and risks involved when trading palm oil as a commodity.

 

What are the price drivers of palm oil?

There are various factors influencing the price of palm oil, for example:

• Supply and demand

As with any plant-based oil, supply and demand play a key role in determining the price of palm oil.

Most of the global supply of palm oil comes from Indonesia and Malaysia. Government policies in these two countries can heavily affect the price of palm oil. For instance: In late April 2025, the Indonesian president, Joko Widodo, announced a ban on palm oil (refined and crude) exports.

This unprecedented step was taken to mitigate rising food prices in the country and to quell local unrest, but it sent a shock wave across the agri-food markets. So much so, Widodo reversed his decision in response to mounting pressures from palm oil producers after three weeks.

Furthermore, the Indonesian government’s effort to increase the palm oil contents in its biodiesel has resulted in higher domestic consumption. This could lead to a decline in Indonesia’s supply of palm oil to the world markets.

Also, population growth in countries such as India and China – the two major importers of palm oil – could lead to an increase in demand for palm oil, resulting in higher prices.

 

• Weather conditions

The tropical climates of Indonesia and Malaysia make them susceptible for extreme rainfall and flooding. These risks could hamper the harvesting and processing of crops and create supply shortages, which will eventually lead to rising prices.

 

• Substitution by other oils

Palm oil competes with several other oils such as sunflower, rapeseed, soy, and canola, to name a few.

If these commodities can be purchased at more favourable prices, the demand for palm oil will decrease, affecting the price of palm oil negatively.

 

• Impact of palm oil production on the environment

Environmental groups consider palm oil as a product that causes harm to biodiverse tropical forests and Indigenous communities.

This caused a significant backlash amongst customers and environmental groups and a public shift from numerous palm oil products.

 

The uses of palm oil

 

• Biggest consumers in the world

China, Indonesia, India, and the European Union (EU) are the biggest palm oil-consuming countries in the world, with India being the top consumer.

 

• Uses of palm oil

Palm oil (in crude and refined form) is used in a wide range of products, in food as well as non-food products:

 

• In food products

Refined palm oil is used in numerous food products, such as cakes, pastries, margarine, spreads, pizzas, doughnuts, ice cream, potato chips, and confectionery products like chocolate.

In developing countries in Africa and Southeast Asia, crude palm oil is primarily used as a cooking oil.

 

• In non-food products

Palm oil is used in various non-food products. Examples: shampoo, deodorant, toothpaste, lipstick, cosmetics, detergents, soap, candles, pharmaceuticals, and newspaper ink.

Palm oil is also used in lubricating greases, processing of tinplate, and coating iron plates.

It is used in the production of biofuels and after the extraction of the kernel oil, the cake residue is used as animal feed.

 

Did you know?

• Palm oil is called the world’s most hated crop because it is often grown in an unsustainable way, harming Indigenous communities, and destroying the habitat of already endangered species like the pygmy elephant, the Orangutan, and the Sumatran rhino. Also, palm oil continues to be the major driver of deforestation of some of the world’s most biodiverse forests in Southeast Asia.

Green Global Travel quoted the Orangutan Foundation International, saying that between 1 000 and 5 000 Orangutans are killed because of palm oil annually.

Green Global Travel also pointed out that deforestation for palm oil has contributed to ‘the loss of over 8 million acres of vital forests in the South Pacific in just the last 20 years.’

The European Union (EU) is phasing out palm oil biofuels because of concerns over deforestation. Contrarily, Indonesia is working to increase the palm oil contents in its biodiesel, marketing it as ‘Green Diesel.’ The country is also developing other palm-based biofuels.

• The palm oil industry is also notorious for the forcible removal of locals from their homes in order to make space for oil palm trees.

Other issues remaining are the exploitation of labourers and child labour.

• Palm oil was first used to colour margarine yellow, but it has become a perfect main ingredient, because of its ability to stay firm at room temperature and to melt in the mouth, just like butter.

 

Note: This article does not constitute investment, financial, or trading advice. Please obtain the advice of a professional and regulated commodity broker before making trading and investment decisions.