Oil Palm Industry Economic Journal Vol. 11 (2) September 2011 p. 13-25

World Palm Oil Supply, Demand, Price and Prospects: Focus on Malaysian and Indonesian Palm Oil Industries

Ramli Abdullah
Received:    Accepted:    Available Online:


The oils and fats sector had shown that both its production and consumption had increased at almost the same rate in the past. Any differences between them will indicate either an oversupply or shortage situation of oils and fats in the world; oversupply occurred when production exceeded consumption and shortage when the situation was reversed. Thus, world production and consumption of oils and fats in 1976 were 45.9 and 47.3 million tonnes respectively (shortage) while in 2010 both were at about 171.2 million tonnes (almost equilibrium). Among the 17 oils and fats, palm oil has expanded the most in the production and consumption of the oils and fats. It began as one of the minor oils being produced and consumed in 1976 (1.6% and 6% of the world production and consumption of oils and fats respectively) and gradually surged to become the largest produced and consumed oil in 2010 (both at about 28% of the world production and consumption of oils and fats). Palm oil will continue to be the main oil produced and consumed due to its high productivity, cheaper price and healthiness. Its production in Malaysia is expected to be about 18.33 million tonnes while Indonesia will produce about 24.91 million tonnes in 2011. As Malaysia has a constrain to expand its oil palm area due to lack of suitable land, increase in future production is expected to be through increase in its productivity. Palm oil price is associated closely with its main competitor, soyabean oil, and lately crude petroleum price also had an influence. However, there are other factors that need to be considered in evaluating price of palm oil. Taking them into consideration, price is projected at RM 3217 t in 2011 with the first half of year being higher than the second half.

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