Palm oil has been undisputedly the cheapest edible oil across the globe for decades. It has been popular due to its high productivity per hectare, i.e. it requires less land to grow more crops of palm trees. Also, as compared to other oils like soybean or sunflower oil, palm oil has also been a cost-effective option. Therefore, you can see palm oil to be one of the main ingredients in processed foods, kitchen cooking, and even as a biofuel.
As per reports, palm oil was traded at a discount of $782 per ton to soybean oil in November 2022, which is now reflecting spiked prices. Countries like Indonesia and Malaysia, which are the largest producers of palm trees, accounting for more than 85% of the global supply of palm oil have witnessed a shrink in production.
While factors like climate, low labour costs, and cheap land were accounting for the large production has now reportedly been decreased due to the reluctance of stakeholders to cut older trees and the younger trees take 5-6 years to produce oil. Due to this, the prices of palm oil have spiked to 10% this year while soybean oil prices have decreased by 9% in countries like the US.
Reports also suggest that large Indian consumers like retail food factories that sell processed food like chips, and biscuits, or restaurants that serve pizza, and ice cream, are not likely to look for alternatives thanks to its versatility. Since the maximum demand for palm oil hits in the festive season, after the festivals are over, the palm oil market is likely to lose its market share to the soybean and sunflower oil market in India.