A Global Overview of Vegetable Oils, with Reference to Biodiesel

IEA Bioenergy Task 40 commissioned a study on a global overview of bio-oils (vegetable and palm oil) to: i) assess major producers and consumers of vegetables oils, ii) main emerging markets, iii) analyze main policy drivers, iv) assess future trends (palm, soybean, rapeseed oils).

The demand for vegetable oils has increased rapidly in the past decade, catapulted by a combination of factors, including: i) increasing demand sparked off by higher consumption for edible oils, particularly in emerging countries such China and India caused by, among other things, population growth, improving living standards and changing diets; ii) the development of the biofuels industry (and more specifically biodiesel) around the world, particularly in the EU, USA, Brazil, Argentina, China and India, iii) price increases which have been due to varying factors e.g. increase in oil prices, low stock worldwide, droughts, and speculation, iv) changing weather patterns which can have major geographical impacts and can be, potentially, quite large.

There are two major markets for vegetable oils: i) food which represents over 80%, and ii) industrial uses including biodiesel. The main driver for expansion is still the growing demand for edible oils for the food market, although an important part of this demand comes from the biodiesel sector.

In recent years important new actors and trends in supply and demand have began to emerge e.g. i) China is rapidly emerging as the world leading importer of vegetable oils, ii) Indonesia, Malaysia and Argentina dominate the exports market, representing approximately 75%, iii) Brazil is also becoming one the world’s largest exporters of soybeans1, next to the USA, iv) Argentina, whose share of this market is growing rapidly, is rapidly becoming one of the world’s top producer and exporter of soybean (meat and oil).

Biofuels have largely been blamed for most of the increases in food prices. The reasons, however, are many and complex, with the major impact coming from the increases in oil costs and speculation on agricultural commodities. It has been shown that the cost of the raw material plays a comparatively small role in the retail of food in developed countries since price increases are largely determined by commercial and other issues rather than by raw material.

The vegetables oil market is bound for major changes, and will face substantial challenges and opportunities. Improving living standards in emerging economies, population growth together with changing diets and the expansion of biodiesel, are new trends that will have a major impact in the future development of this sector. This market has very different features e.g. the Chinese market is characterised primarily by large imports, where in India it has been a rapid increase in production and demand of the domestic market. Indonesia and Malaysia, the traditional palm oil producers and exporters, have major expansion plans as they face increasing competition from other countries, such as Thailand and possibly from Colombia.

Traditional producers of soybean like the USA and Canada, face even greater competition from countries such as Argentina and Brazil.

Finally, this report concentrates in countries as major producers, consumers and exporters of vegetable oils. The authors are fully aware that the vegetable oils market is dominated by a handful of multinational agricultural and trade companies such as Monsanto, Cargill, ADM, Nidera, among others, rather than by countries. An analysis of this nature, however, will require considerable additional work given the economic, social, environmental and political issues involved, and therefore would be beyond the scope of this study. Download study