Palm Oil

Palm oil today is by far the most important source of vegetable oil in the world, having overtaken soybean-oil in 2006. The oil palm grows predominantly within a 5-10 degree belt from the Equator. Indonesia and Malaysia dominate with close to 90% of world output. Growing area, though much more modest, has also expanded in West Africa and Central America. Indonesia and Malaysia will remain the major producers for the foreseeable future.

Oil palm is a very productive crop, with yields of oil per hectare per annum that are much greater than for other oil crops. The high yield of the oil palm means palm oil requires less area than competing oil crops and makes it a very attractive source of income for smallholder farmers, with the added attraction that it is harvested year round, thereby smoothing the incomes of farmers over the year.

Different Palm Oils

The oil palm produces two chemically distinct oils – crude palm oil (CPO) and palm kernel oil (PKO):

Palm kernel oil (PKO)

Palm kernel oil (PKO) is the primary feedstock for the production of natural fatty alcohols, which are widely processed into products such as shampoos and liquid detergents. In addition, palm kernel oil is used in specialist food applications.

Crude palm oil (CPO)

Crude palm oil (CPO) is transformed into a variety of different products, including biodiesel, refined palm oil for frying and specialist usage in confectionary, baking and spreads. The versatility of palm kernel oil and palm oil means that they are found in a vast variety of different consumer products.

How is Palm Oil Grown?

The production of oil palm is split between plantations and small holders, and plantations are required to include land for smallholders in many countries. The contribution to palm oil production from smallholders differs depending on the country. In South East Asia, roughly 60% of the palm oil comes from the larger plantation companies (privately owned estates) and 40% from smallholders.

Oil palms produce fresh fruit bunches (FFB) which are harvested at intervals that are ideally 7 to 10 days in duration throughout the 20-25 years of the economic life of the palm after the oil palms reach the age of 3-4 years. As there has been limited success in mechanisation to date, oil palm cultivation and harvesting is very labour intensive, which is a major financial disadvantage.

Benefits of Palm Oil

Importantly palm oil does not require artificial hardening, via hydrogenation, for use as a food in hard fat applications. Since hydrogenation creates trans-fats, which are considered unhealthy and have stringent incorporation limits in many markets, palm oil is widely used as a naturally hard fat in food products. Therefore, palm oil is currently important in the production of confectionery, snack foods and many baked goods in countries, particularly in markets where products are required to be trans-fat free.

India is the largest consumer of palm oil almost all of which is imported. Among high-income consumer markets, only the EU (ranked third) and the US (ranked tenth) appear in the top ten palm oil consumers. All high-income countries together consume one sixth of world palm oil output. The remaining five sixths are consumed by middle and low income countries. Asia alone consumes two thirds of the world’s palm oil supply.

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