Global Palm Oil Industry Overview: Indonesia is in Lead

The global palm oil industry is one of the most important contributors for GDPs and exports earnings in many developing countries in Asia, Africa, and South America. Palm oil is one of the most produced and widely consumed vegetable oils around the world, with significant usage in food, cosmetic, hygiene products, biofuel, and a variety of other sectors. In recent years, Indonesia has been dominating the global palm oil industry with the world’s largest palm oil production and surging palm oil exports.


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Global Palm Oil Industry Overview


Despite the negative issues sometimes linked to palm oil production, such as rainforest deforestation, habitat degradation, and human rights abuses, the global demand for palm oil is still growing, while Indonesia aims to increase the yield of existing plantations through intensification methods. According to the latest report from USDA, the global palm oil production totaled 58.8 million tonnes in FY 2016-2017, and this figure is expected to reach 62.88 million tonnes in 2017-2018, representing a 6.94% growth in palm oil production around the world.


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When it comes to market value, market research company Zion reports that the global palm oil market was valued at USD 65.73 billion in 2015, is expected to reach USD 92.84 billion in 2021 and is anticipated to grow at a CAGR of 7.2% between 2016 and 2021. Indonesia has remained the world’s number one producer and exporter of palm oil since 2006, followed by Malaysia in second place. These two countries reportedly produce nearly 90% of the world’s palm oil. In Indonesia, roughly 3.7 million people are believed to be employed in the palm oil industry. This bodes well for profits for Indonesian palm oil companies.


Indonesia Is the Largest Producer and Exporter of Palm Oil Worldwide


The palm oil industry in Indonesia is one of the fastest growing sectors over the last 20 years, mainly driven by increased global demand and higher yields. According to recent data from Index Mundi, Indonesia produced 36 million tonnes of palm oil in 2016, accounting for over 62% of the world’s palm oil production in that year. Over 3.7 million people are currently employed in Indonesia’s palm oil industry. In terms of agriculture, palm oil is the most important industry of Indonesia contributing between 1.5 – 2.5% of the nation’s GDP.

Meanwhile, the export of palm oil is also an important foreign exchange earner for Indonesia. In 2016, Indonesia exported over $14.4 billion worth of palm oil to the global market, representing over 51.6% of the world’s total palm oil exports in that year. Some of the largest export destination countries are China, India, Pakistan, Malaysia, and the Netherlands.


To tackle the negative impacts caused by palm oil production, the Indonesian government have already committed to reducing deforestation, restricting additional exploitation of peat land and primary forests for palm oil plantations, and adopting sustainable production methods. Indonesia’s deforestation rate is half of what it was in the 1990s and will continue to go down. Indonesia today protects 106 million acres of forests against deforestation. Indonesian palm oil production statistics continues to look promising, now that sustainable palm oil is a key government focus.


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