Sawit Indonesia Revolutionizes the World Vegetable Oil Market

Indonesia’s success in taking the position of world palm oil producer has brought a revolution in world vegetable oil market, marked by the appearance of palm oil as world vegetable oil replacing world soybean oil.

For the first time in the history of the world economy, products from Indonesia brought a revolution to the world market. The product in question is Indonesian palm oil.

Since 2006, Indonesia has succeeded in grabbing an important position in the world economy to become the world’s largest producer of palm oil as well as being the world’s largest producer of vegetable oil. Two titles at once seized Indonesia as the “king” of world palm oil (beat Malaysia) and “king” of vegetable oil world beat US soybean oil.

Palm oil is one of 17 types of vegetable oils of the world. Indonesia’s success in seizing the world palm oil “king” position has brought a revolution in world vegetable oil. Over 100 years, US soybean oil dominates the world vegetable oil market.

In 1965 the world vegetable oil market was dominated by soybean oil with a share of 65 percent. Then followed by European vegetable oils that are rapeseed oil and sunflower oil. The position of soybean oil dominance is still ongoing until 2006.

However, since 2006, Indonesia’s palm oil has brought a change in the world’s vegetable oil market, which is the world’s palm oil shifting soybean oil. By 2016, the share of palm oil in the world’s vegetable oil market reaches 40 percent, leaving soybean oils whose share declines to only 33 percent. Now the world’s vegetable oil consumption is dominated by palm oil and the world’s largest palm oil producer is Indonesia with 54 percent share. This is a world vegetable oil revolution, which Byerlee (2017) of Stanford University calls it a tropical vegetable oil revolution.

The abandonment of soybean oil is not due to decreased soybean oil production or the area of ​​soybean garden is reduced. In contrast, the soybean estates rose sharply from 25.8 million hectares in 1965 to 123 million hectares in 2016. While the world’s oil palm plantations only increased from 3.6 million hectares to 20.2 million hectares in the same period. But the productivity of palm oil is 8-10 times that of oil productivity from soy garden.

The advantages of oil productivity from oil palm plantations, making the price of palm oil is also much cheaper than the price of soybean oil and vegetable oil Europe. In addition, the characteristics of palm oil plantations that produce productive oils until the age of 25-30 years, making the supply of palm oil much more stable and not too influential (compared to other vegetable oils) due to climate change.

The world vegetable oil market revolution (production and consumption) characterized by the emergence of palm oil as the world’s major vegetable oil (replacing soybean oil) has also spread to the world’s downstream vegetable oil products market. As is known, vegetable oils are used for food (oleofood), oleochemicals (soaps, detergents, toiletries, cosmetics, etc.) and biodiesel.

Currently almost 60 percent of the world’s processed food uses palm oil. Similarly, the oleochemical products have also shifted using palm oil. Even the biodiesel of the world even the use of palm oil as raw material increasingly increasing its portion.

Going forward, the world vegetable oil market revolution including its downstream product market will continue to grow even stronger. The production of wait oil from the “king” of world palm oil ie Indonesia is still increasing in the future mainly due to increased productivity. Moreover, downstream technology is also growing continuously, so the palm oil user industry increasingly widespread. Bioavures, biopremium, biopalstics, bio-lubricants from palm oil will soon be present in world markets which will also color the world vegetable oil market revolution.

Indonesia must rise from the world vegetable oil market revolution leader leader to the downstream product revolution. This new position must be seized and will not “fall from the sky”.

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