Palm oil is an edible vegetable oil produced from the flesh of the fruit of the oil palm tree. The oil palm tree is a tropical palm tree that is a native of the west coast of Africa and is different from the coconut palm tree. The fruit of the oil palm tree is reddish, about the size of a large plum, and grows in large bunches. A single seed, the palm kernel, is contained in each fruit. Oil is extracted from both the pulp of the fruit (becoming palm oil) and the kernel (palm kernel oil). About 1 metric ton of palm kernel oil is obtained for every 10 metric tons of palm oil.
Palm oil is commercially used in soap, ointments, cosmetics, detergents, and machinery lubricants. It is also used worldwide as cooking oil, shortening, and margarine. Palm kernel oil is a lighter oil and is used exclusively for food use. Crude palm oil and crude palm kernel oil are traded on the Kuala Lumpur Commodity Exchange.
Prices - The monthly average wholesale price of palm oil (CIF, bulk, U.S. ports) in 2006 rose by +1.0% yr/yr to 29.73 cents per pound but that was still below the record high of 34.09 cents per pound posted in 2004.
Supply - World production of palm oil in the 2005-06 marketing year (latest data available) rose by +5.5% to 35.160 million metric tons. World palm oil production has grown by about 18 times from the production level of 1.922 million metric tons seen back in 1970. Malaysia and Indonesia are the world's two major global producers of palm oil.
Malaysian production in 2005-06 rose +0.4% to 15.260 million metric tons and Malaysian production accounted for 43% of world production. Indonesian production rose +11.4% to 14.980 million metric tons in 2005-06 and Indonesian production also accounted for 43% of world production. Other smaller global producers include Nigeria with 2.3% of world production, Thailand (2.0%), and Columbia with (1.9%).
Demand - U.S. total disappearance of palm oil in 2005-6 (latest data available) rose +36.0% yr/yr to 430.0 metric tons which is a record high.
Trade - World palm oil exports in 2005-06 rose by 6.1% to 27.730 million metric tons, which was a new record high. The world's largest exporters are Malaysia with a 49% share of world exports, followed by Indonesia with a 41% share. The world's largest importers are China with an 18% share of world imports, followed by India (10%), Pakistan (6%), the Netherlands (6%), UK (3%), and Germany (3%).