The World's Biggest Producers Of Palm Oil Are Running Out Of Land

The world is hungry for palm oil, but as the biggest producer countries run out of viable land for planting palm trees, the production landscape is shifting.

The best growing conditions for palm trees exist in a tight band around the equator, limiting the number of places the crop can be successfully farmed, according to Tan Ting Min, Head of Malaysia Research at Credit Suisse in Kuala Lumpur.

In a recent report, “Asia Palm Oil Sector: A Year of Two Halves,” Tan wrote that although nearly 5 million hectares of palm trees are already planted in Malaysia, only between 200,000 and 300,000 are likely to be available in the future. Indonesia, the world’s largest palm oil producer, is planting less than half of the new field acreage it was in 2003. Together, the two countries supply 85 percent of the world’s palm oil.

At the same time, demand for the relatively cheap oil keeps rising. Global demand for vegetable oils has been growing steadily by 3 to 4 percent a year for the last 30 years, Tan said. Malaysia currently accounts for 39 percent of global palm oil production and 44 percent of total exports, according to the Malaysian Palm Oil Council. But global demand for palm oil has been growing at an 8-percent-a-year clip, Tan says, and the cheapest oil by bulk has taken market share from other types of vegetable oil. The vast bulk of palm oil is used for food, especially as cooking oil.