Increased demand for palm oils is evident in several countries, in part due to the demand for biodiesel production
Editor’s note: This article has been updated to correct information that original said China was also one of the world’s largest producers.
Winnipeg — Palm oil may be grown halfway around the world in conditions much different than the Canadian Prairies, but the outsized influence of the crop on world oilseed markets makes it an important factor to watch when considering canola prices.
Indonesia and Malaysia are the world’s largest producers of the crop, with futures traded on the Bursa Malaysia Derivatives (BMD) providing the global price benchmark.
Read Also

Farming Smarter receives financial boost from Alberta government for potato research
Farming Smarter near Lethbridge got a boost to its research equipment, thanks to the Alberta government’s increase in funding for research associations.
Palm oil futures are trading at their highest levels in three years, partially on the back of rising demand for biofuels, but also due to increased cooking oil usage in India and China.
Indonesia is set to increase its domestic biodiesel blending rate to 30 percent this month, up from 20 percent.
Total world palm oil production in 2018-19 was estimated at 73.9 million tonnes by the United States Department of Agriculture. That number is forecast to rise to 75.7 million tonnes in 2019-20.
By comparison, the USDA estimates world canola and rapeseed oil production in 2018-19 at 27.4 million tonnes. World soyoil production came in at 55.7 million tonnes in 2018-19.
Palm oil is also higher yielding than other vegetable oil crops. An average Canadian canola field will yield roughly 1,100 litres of canola oil per hectare. Meanwhile, palm oil nets roughly six times that amount of oil in the same space. Soybeans only yield 450 litres of oil per hectare.
Palm oil accounts for the majority of global vegetable oil exports, with the 52.8 million tonnes exported in 2018-19 representing 61 percent of total world business. The largest consumers are China, the European Union, India, the U.S., and Indonesia.
While Canada does not crack the top 10 for palm oil usage, the country has increased imports sharply over the past 20 years.
Canada produces more than enough canola oil to meet its domestic vegetable oil needs, but the country now imports more than 100,000 tonnes of refined palm oil per year valued at over C$100 million, according to Statistics Canada data. That compares with the early 2000s when palm oil imports typically came in under 10,000 tonnes on an annual basis.
Similar increased demand patterns can be seen elsewhere around the world. In addition to biodiesel production, shifting consumer dietary preferences and labeling requirements contributed to increased palm oil usage in the food sector.
Palm oil is solid at room temperature, making it an easy alternative for trans-fats in food production. It is also better suited to large-scale deep frying than other fats. Efforts to ban trans-fats in Canada have been ongoing since the early 2000s, with the grace period for the complete ban that went into place in 2018 ending in 2020.
While it may be healthier from a trans-fat perspective, palm oil production has faced criticism due to concerns over deforestation and climate change. However, efforts to increase the sustainability of the crop are also underway. The Roundtable for Sustainable Palm Oil (RSPO) currently certifies about 20 percent of the global crop as sustainable.
How the global perspective on palm oil shifts going forward will be an important factor in determining the global vegetable oil markets, including canola.
One immediate issue facing palm oil is a potential decline in European demand. The European Union is one of the top three importers of palm oil, mainly for use in biodiesel production, but the EU intends to ban the use of palm oil in making renewable fuels in order to help protect the rainforest. Meanwhile, Indonesia has filed a lawsuit at the World Trade Organization arguing that stricter European limits on palm oil usage in biofuels would be discriminatory.