Palm Oil Market Analysis
The consumption trend in India is marked not just by rising overall consumption, but by changing patterns of consumption as well. The consumer trend of vegetable oil market in India during the early 1970s was dominated by groundnut oil (53% of consumption till 1975), rapeseed oil (25%) and cottonseed oil (9%). Palm oil, soya bean oil and sunflower oil together accounted for less than 4% of the total consumption. But now, imported oils, mostly palm oil and soya bean oil, account for most of the growth in consumption. Together, these non-conventional imported oils now account for more than half the oil consumed in India, filling a gap arising from increasing demand and static domestic oilseed production. Risk management techniques are critical for crude palm oil (CPO) stakeholders such as importers, refiners, traders, and stockists.
Factors Influencing the Palm oil market
- Indonesia and Malaysia are the major producing and exporting nations. Adverse weather conditions for palm output have an effect on the prices. Wide fluctuations in the currencies of Indonesia and Malaysia also affect palm prices.
- Indonesian and Malaysian government policies related with export tax have an effect on the prices.
- Since soya oil competes with palm oil in the global vegetable oil market, hence global production, consumption and ending stocks of soya bean and other oilseeds have direct bearing on prices.
- Crude oil movement also affects prices, as significant rise in energy prices lead to demand for alternate fuels like biofuel. Vegetable oils are also used in the production of biofuel.
- Currency movement of source country and destination country.
- Ending stocks of soya oil- For example, bad weather such as drought in soybean producer countries like the US, Brazil and Argentina will lower the production of soybean oil therefore affecting soybean oil prices that will help increase palm oil prices.
- Domestic oilseed production in Indonesia & Malaysia depending on weather conditions and amenities available.
- Policies, particularly import duties-Australia for example had proposed a bill to enforce labeling palm oil as product ingredient instead of vegetable oil. If this bill was passed, consumers who believe that palm oil is bad because palm oil plantations have contributed to deforestation could easily avoid products that contain palm oil. This could lead to low demand for palm oil-based products thus affecting the price of crude palm oil market.
- Well-being of final consumer