Growing palm oil supplies temper global vegetable oil prices

The expansion of palm oil supplies has been a key factor in meeting the rising global demand for vegetable oils, particularly by developing countries like China and India. World prices for other vegetable oils have declined in 2012 along with palm oil, but not as fast. Indonesia and Malaysia are the world’s dominant palm oil producers and exporters, with Indonesia emerging as the largest producer since about 2005, and as the largest exporter in 2011. Growth in Indonesian supplies has been fueled by the expansion of both oil palm growing area and yields. In Malaysia, production growth is constrained by an inability to further expand oil palm growing area and shortages of labor to harvest the crop. Surpluses of palm oil in both Indonesia and Malaysia have placed downward pressure on palm oil prices and generally making it the lowest cost vegetable oil on the world market. This chart appears in ERS’s November 2012 Oil Crops Outlook report.

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