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Oils and fats industry overview

Palm oil has been around for more than 100 years and remains a versatile commodity. Today, it dominates in terms of global production, trade and consumption of oils and fats; clearly, its widespread appeal is due to diverse applications across the food and non-food sectors.

About 235.2 million tonnes of oils and fats were produced worldwide in 2019; palm oil contributed the highest percentage at 32.2%. It was the most traded commodity, with a 56.5% market-share. Of the 237.6 million tonnes of oils and fats consumed, palm oil accounted for 33.1% (Figure 4).

Figure 4: Global oils and fats industry, 2019

Oils and fats production                      Oils and fats exports
Oils and fats consumption

During my travels throughout Europe – where sunflower and rapeseed are the dominant vegetable oils – I could often tell that consumers and policy makers are still unaware of the importance of palm oil to other parts of the world, where rapid development is propelling the use of the commodity.

For example, Asia’s economic growth is projected to expand at a rate of 5% in 2019 and 5.1% in 2020. It will be the fastest-growing major region, accounting for more than two-thirds of global growth in 2019. According to the International Monetary Fund, China will account for 39% of global growth, with India at 16% and the Association of Southeast Nations at 10% (Figure 5). 

Figure 5: Asia as a global growth engine

Population growth is another driver of food production. The global population is expected to increase by 11% or by 842 million people between 2017-19 and 2029. The OECD-FAO Agricultural Outlook 2020-29 states that the Asia-Pacific region will continue to shape the demand for food, being projected to account for 53% of the global population in 2029 (Figure 6). The region now contributes most to agricultural production – almost half of the global output. Europe and Central Asia and the Americas are responsible for 45%.

Figure 6: Demand for key commodities and food availability in Asia Pacific

Source: OECD – FAO Agricultural Outlook

Amidst the expected rise in the global population, food insecurity remains a real worry. Poverty is the root cause of hunger and malnutrition in many parts of the world. An additional 17.2% of the world population, or 1.3 billion people, have experienced food insecurity at moderate levels, meaning they did not have regular access to nutritious and sufficient food. The combination of moderate and severe levels of food insecurity affects an estimated 26.4% or 2 billion people globally.


Figure 7: Global food insecurity

Source: FAO

Advantages of palm oil

Palm oil is credited with lifting millions of people out of poverty in producer countries. Many people have gone from borderline starvation to realising economic well-being, better health and stable food security because of the palm oil industry.

Malaysia’s success with its palm oil sector is a true story, supported by facts. The country is proud of what the industry has accomplished – billions of Ringgit in export earnings; jobs for almost three million people; the alleviation of poverty; and a higher standard of living for small famers and their families. Palm oil is the third-largest contributor to the country’s external trade after electrical and electronic products, and crude petroleum and its products (Figure 8)

Figure 8: Malaysia – external trade, 2019

The oil palm is the world’s most efficient oil-bearing crop in terms of land utilisation, efficiency and productivity. A single hectare can produce up to eight times more oil than other oilseeds (Figure 9). The oil palm uses significantly less land per hectare than competing oilseed crops, including sunflower, canola and rapeseed. The oil palm yields 4-10 times more oil per hectare of land, and requires far less pesticide and fertiliser compared to rapeseed and soybean.


Figure 9: Efficiency of oil palm vs other major oilseeds

No competing oil comes close to the oil palm’s yield or sustainability. A high yield is what would feed the greatest number of hungry people on the smallest ecological footprint. That is why the oil palm industry has focused on yield improvement rather than land expansion.

Given this, a report by the International Union for the Conservation of Nature has concluded that boycotting palm oil would merely shift demand to other oils. This could worsen environmental problems because more land would be required for replacement oils to meet global demand.

With only 0.4% of the world’s population, Malaysia produced 9.4% of the global vegetable oils and fats output and accounted for 30.3% of the export trade in oils and fats in 2019. All this has come from a small area of 1.8% of the 291 million ha under the world’s 10 major harvested oilseed area (Figure 10).

Figure 10: Harvested area of world’s 10 major oilseeds, 2019 (mil ha)

Source: Oil World

Despite the undisputed facts, the industry is often mis-characterised by policy makers and NGOs who seek to serve their own agenda. But it is necessary for the industry to continue sharing the facts and a perspective that many probably don’t often hear or don’t want to hear.

We need to find ways to make our voice better heard – it’s not always about being loud, but about being consistent and persistent, and to repeat the facts. What can the industry do?

  • We could assemble the best minds to help formulate advice and recommendations to correct misinformation. This will be challenging as there will be many differing views; so, for a start, it would be useful if a consensus is reached.
  • It is essential to ensure the facts are based on evidence. Consumers must have the right information to make better decisions and to avoid becoming confused. A fact checker could be established where information can be easily verified. A successful response to misinformation would require a coordinated multi-stakeholder effort.
  • The industry should speak with a single voice to relay clear messages and without adding to information overload. Consumers are already exposed to thousands of different messages that compete for their attention. Merely stating scientific facts is not going to attract their attention. It would be more effective to speak in ordinary, easily understood terms.
  • There is a need to work from reality. Many in the West can’t distinguish between the oil palm (the tree) and palm oil (the oil). Many have never seen an oil palm tree or used palm oil directly. After all, the crop is not grown in their country – they are more familiar with sunflower, rapeseed, soybean or the olive.I’ve never forgotten a situation years ago in Australia, when we were called before the Senate to respond to issues affecting palm oil under the Truth in Labelling Bill. I had expected the learned Senators to have done their homework prior to asking us questions, as they were considering legislation that would affect the livelihood of oil palm famers in Malaysia.I was surprised when we were asked to send photographs of an oil palm tree as they had not seen one before. They could not figure out how the fruit is harvested and how the oil is produced. It was a frustrating time for us, but it provided a reality check about the ignorance that exists.
  • Be prepared for the possibility that new elements of disinformation will be circulated. This is common with campaigns that need to keep followers in tune with so-called new information.

Lazy thinking is unlikely to end any time soon. But a key role for the palm oil industry is to protect the good name of the commodity. No one can do this better for us than ourselves.

Belvinder Sron
Deputy CEO, MPOC

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