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The end of cheap palm oil? Output stalls as biodiesel demand surges
Used in everything from cakes and frying fats to cosmetics and cleaning products, palm oil makes up more than half of global vegetable oil shipments and is especially popular among consumers in emerging markets, led by India.
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A man unloads palm oil seeds from a pickup truck after bringing them from a plantation to sell at a market in Sepaku, East Kalimantan, on July 10, 2024. (AFP/Yasuyoshi Chiba)
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rices of cooking oil could be buoyed up for years by stagnating production and a biodiesel push in top producer Indonesia that are making traditionally cheap palm oil costlier, eliminating an advantage that also curbed prices of rival oils.
Used in everything from cakes and frying fats to cosmetics and cleaning products, palm oil makes up more than half of global vegetable oil shipments and is especially popular among consumers in emerging markets, led by India.
After decades of cheap palm oil, thanks to booming output and a battle for market share, output is slowing and Indonesia is using more to make biodiesel, respected industry analyst Dorab Mistry said.
"Those days of $400-per-ton discounts are gone," added Mistry, a director of Indian consumer goods company Godrej International. "Palm oil won't be that cheap again as long as Indonesia keeps prioritizing biodiesel."
Indonesia increased the mandatory mix of palm oil in biodiesel to 40 percent this year, and is studying moving to 50 percent in 2026, as well as a 3 percent blend for jet fuel next year, as it seeks to curb fuel imports.
The biodiesel push will reduce Indonesia's exports to just 20 million metric tons in 2030, down a third from 29.5 million in 2024, estimates Eddy Martono, chairman of Indonesia's largest palm oil association, GAPKI.
Jakarta's biodiesel mandate, coupled with lower production because of floods in neighboring Malaysia, has already lifted palm oil prices above rival soy oil, prompting buyers to cut purchase.
