Palm oil is an inexpensive and highly versatile vegetable oil derived from the fruit of the oil palm tree. It can be found in half of all consumer goods in Western grocery stores, from chocolate, ice cream, and baked goods to soaps, lotions, and detergents.
Palm oil is the highest-yielding vegetable oil crop as well as the most actively traded vegetable oil in the world. As a petroleum alternative, it can power vehicles, heat homes, and manufacture plastic.
And with annual sales of around $50 billion, palm oil is also a big business, albeit one with oversized risks.
Over the past 15 years, palm oil plantations in Indonesia and Malaysia have expanded, tripling their production. The two countries now produce around 85% of the global supply. From one million hectares (ha) in 1990, Indonesia’s oil palm estate grew to 21 million ha in 2015. Now oil palm concessions lease more than 10% of the nation’s total land area.
After falling 4.8% in 2015–2016, the first decline in 18 years, due to El Niño and related climate change effects, global palm oil production is expected to increase by 7.3%, to 63 million tons, in 2016–2017, according to FitchGroup’s BMI Research forecasts.