Palm oil is an edible oil that is primarily derived from palm trees. It is scientifically referred to as Elaeis guineensis. As they can thrive in humid climates with ample water supply, palm oil trees flourish well in rainforests. There are two kinds of palm oils available, namely crude palm oil that can be taken from the fleshy fruit and palm kernel oils extracted by crushing the kernels or stones inside the fruit. The palm oil trees are indigenous to Africa.
The palm oil is naturally dark red due to the high beta-carotene level, and it should not be mistaken for palm kernel oil derived from the kernels of the palm tree or coconut oil extracted from the coconut kernel palm.
Palm oil can be a widely used ingredient for cooking in tropical regions that include Africa, Southeast Asia, and areas of Brazil. Its usage in the food industry commercially across the world is aided by its low cost and the excellent oxidative durability (saturation) present in the product employed for frying.
Major palm oil producers
Indonesia and Malaysia are the two main producing and exporting palm oil nations. Around 85% of all palm oil is made in these economies. Thereby, any factor affecting these economies may result in disruption in the global supply chain of palm oil. Large fluctuations in currency exchange rates of Indonesia and Malaysia also affect the prices of palm. In dry periods or severe rainfall that causes floods, palm oil production could also be affected, and, so are the costs.
India is among the biggest importers of Crude Palm Oil, and Mumbai is one of the leading trading hubs. The most extensive derivatives market globally for Crude Palm Oil is Bursa Malaysian Derivatives, and it is traded on the futures market for commodities via MCX and NCDEX within India.
The variety of palm oil could be the most crucial factor in its value, resulting in the rise of the industry of palm oil cultivation.
What are the uses?
It is a great ingredient to cook and can also be added to various ready-to-eat foods available in the local supermarket. It’s earthy and savory in flavor. Unrefined palm oil is one of the main ingredients of Nigerian Congolese cuisines, and they are perfect for curries and other spicy foods. The flavor is similar to the taste of carrot or pumpkin. Because of its very high level of smoke, at least 450°F (232°C), refined oils (Palm) are an excellent choice for sautéing or frying because it’s stable even at high temperatures.
It is often used in peanut butter or other nuts. It is also employed in toothpaste, cosmetics, shampoo, soap, and many other products that are not food-based. It is utilized to create biodiesel, an alternative energy source.
One can find refined palm oil in nut butter and other foods, including:
- Bars of protein and diet food
- Coffee creamers
In April 2022, Indonesia has put a ban on the export of palm oil. Indonesia is the world’s largest manufacturer of palm oils; therefore, the ban will have a considerable impact on the global market. This could affect the cost of daily goods like cooking oil as food costs are already decreased.
What was the reason Indonesia was astonished? According to the Indonesian Palm Oil Association, palm oil production fell in 2021 compared to 2020, even though it was evident that the need for oil from palms across the world increased. If the demand increases and supply falls or remains steady, and everything else remains the same, prices will rise. This is actually what happened. In April 2020, Indonesian coconut oil cargo was sold for around US$ 545 in the European market. Two years later, the price went up to US$ 1,700.
This has been good for exporters and also the current accounts of Indonesia. The rising global demand for resources that are in abundance in Indonesia, such as coal and palm oil, has helped reduce the gap in recent scenarios. It has also placed the rupiah in an ideal position in the event to happen that U.S. Federal Reserve starts increasing interest rates over the next year. The increase in interest rates has also led to more revenue for the Indonesian Ministry of Finance.
The problem is that this creates dual incentives for the major players. The government’s interest is in making sure that prices remain stable in its domestic market instead of the commercial requirements of palm oil exporters and producers that want to sell the most palm oil possible at the most competitive price that market prices allow. There has to be an agreement, and it’s clear that the government believes palm oil companies’ pursuit of profit from exports will divert resources to the market, thereby making profits margins smaller. This has caused the cost of cooking oils to increase and hoarding and shortages.