Palm-oil market

Palm is one of the world’s major vegetable oils. Every year, the world produces and consumes over 200 million tonnes of vegetable oil and, in recent years, palm oil has become the largest individual contributor to the world’s vegetable-oil requirements, accounting for approximately 40% of the total, after including its complementary product, palm-kernel oil. Unlike the other major oils (soya, rapeseed, and sunflower), palm is a permanent tree crop, and this is one of the reasons behind it being the most productive of the major oils based on land use. On average, around the world, palms can produce approximately three tonnes of crude palm oil per mature hectare of land cultivated. Whilst Indonesian yields were down slightly in 2024 (discussed further below), because of the efficient operation of its high-quality estates and mills, the Group was able to produce approximately five tonnes of CPO from each mature hectare.

During 2024, Indonesian palm producers, particularly across Sumatra and Kalimantan, felt the effects of a period of dry weather which occurred in the second half of 2023 (and the Group was not immune to this – see the ‘crop’ section on page XX for further details). This resulted in some stress to oil-palm plantings at the time of the dry weather, but this had the delayed effect of restricting the weight of ffb harvested in 2024 and, in some cases, it also disrupted the natural sequence of palm pollination. There was some evidence of this in the first half of the year but, partly because of the delayed effect and partly because of the normal seasonality tending to favour the second half of the year, the countrywide impact was more acute in the second half.

Based on latest estimates, overall CPO production in Indonesia was down 6% in 2024 to 45.5 million tonnes, and global production was down by 3% to 79.3 million tonnes. Despite this, palm-oil consumption continued to increase, keeping prices firm. Prices increased notably in the second half of the year as the production shortage became more apparent. Also supporting prices was an increase in consumption in Indonesia itself, partly due to an increase in the amount used in local biodiesel, further restricting the amount available in export markets.

Palm-kernel oil

The Group’s mills produce two main products, crude palm oil and palm kernels, in a ratio of approximately five tonnes of CPO for every tonne of palm kernels (“PK”). The Group does not produce its own palm-kernel oil (“PKO”), rather it sells its PK to outside crushing facilities. However, inevitably, the price the Group receives for its PK is connected to the wider PKO market.

At the start of 2024, the PKO market was characterised by high inventories and low prices, reflecting relatively weak demand in the previous 12 months, predominantly in the food and oleochemical sectors. As the year progressed, production levels for PKO inevitably reflected a similar pattern to those for CPO, given that they are complementary products from the same source. With restricted production, falling inventory levels, and some increases in demand, particularly in domestic markets, prices increased, once again most noticeably in the second half of the year. By the end of 2024, the price of PKO, and by extension the price available to the Group for its PK output, was approximately double the price prevailing at the start of the year.

Information about the latest crude palm oil price