The consumption trend in India is marked not just by rising overall consumption but by changing patterns of consumption as well. The consumer palm oil trend of the vegetable oil market in India during the early 1970s was dominated by groundnut oil (53% of consumption till 1975), rapeseed oil (25%), and cottonseed oil (9%). Palm oil, soya bean oil, and sunflower oil together accounted for less than 4% of the total consumption. But now, imported oils, mostly palm oil and soya bean oil, account for most of the consumption growth. Together, these non-conventional imported oils now account for more than half the oil consumed in India, filling a gap arising from increasing demand and static domestic oilseed production. Risk management techniques are critical for crude palm oil (CPO) stakeholders such as importers, refiners, traders, and stockists.
Factors Influencing the Palm Oil Market
International factors
- Indonesia and Malaysia are the major producing and, for example, hurting nations. Adverse weather conditions for palm output affect prices. Wide fluctuations in the currencies of Indonesia and Malaysia also affect palm prices.
- Indonesian and Malaysian government policies related to export tax affect prices.
- Since soya oil competes with palm oil in the global vegetable oil market, global production, consumption, and ending stocks of soya bean and other oilseeds have a direct bearing on prices.
- The crude oil movement also affects prices, as the significant rise in energy prices leads to demand for alternate fuels like biofuel. Vegetable oils are also used in the production of biofuel.
Domestic factors
- Currency movement between the source country and the destination country.
- Ending stocks of soya oil: For example, bad weather such as drought in soybean producer countries like the US, Brazil, and Argentina will lower the production of soybean oil, therefore affecting soybean oil prices, which will help increase palm oil prices.
- Domestic oilseed production in Indonesia and Malaysia depends on the weather conditions and amenities available.
- Policies, particularly import duties—Australia, for example—had proposed a bill to enforce labeling palm oil as a product ingredient instead of vegetable oil. If this bill was passed, consumers who believe that palm oil is bad because palm oil plantations have contributed to deforestation could easily avoid products that contain palm oil. This could lead to lower demand for palm oil-based products, thus affecting the price of the crude palm oil market.
- Economy
- The well-being of the final consumer