Palm oil is one of the most productive oil-bearing crops that is grown in the world today. Although it only comprises 5% of the total vegetable oil crop plantations in the world today, it is responsible for 36% of the vegetable oil production which occurs. The yields produced from the oil palm are up to 10 times higher than other oil-bearing crops.
Thailand is the third-largest palm oil producer in the world today, despite the fact that is annual output of 2 million tons is just 1.2% of the global total. 85% of the palm oil plantations which are planted are located in the southern part of the country. About 4.7 million rai are planted, offering the capability of producing up to 11 million tons of product.
Indonesia and Malaysia continue to be the global leaders for the palm oil market, responsible for 85% of the world’s production of the product and more than 90% of the available exports. Because of this dynamic, the Thailand palm oil industry is at the mercy of the two large producers for pricing and market availability.
Interesting Thailand Palm Oil Industry Statistics
#1. The variety of palm which is planted in Thailand produces fewer oil yields than the varieties which are planted in Malaysia and India. The average palm in Thailand produces a yield rate of 17% or below, while the average palm in the two leading nations achieves a rate above 20%. (Krungsri Research)
#2. Farmers who work with the Thailand palm oil industry have relatively small plantations they work, averaging about 20 rai each, which is equivalent to about 8 acres. 80% of the plantations are of this size or smaller. (Krungsri Research)
#3. About 6.18 million liters of biodiesel are produced because of the oil palm industry in Thailand, supporting employment opportunities in 13 biodiesel plants. About 28% of the oil produced by the industry is directed toward these efforts. (Krungsri Research)
#4. 60% of the fresh palm oil produced by the industry in Thailand is sent to one of 18 refinery plants which have an annual production capacity of 2.4 million tons. About 5% of the refined products are palm fatty acids that are used by the chemical industry, while the remainder is used as refined palm oil. (Krungsri Research)
#5. 60% of the refined products become refined palm olein, while 30% becomes refined stearin, and 10% becomes refined, deodorized, or bleached products, such as non-dairy creamer. (Krungsri Research)
#6. 87% of the fresh oil palm that is harvested by the industry in Thailand comes from fresh fruit bunches. Loose fruits account for the remainder of what the industry produces each year. (Krungsri Research)
#7. There are 137 mills currently operating in the Thailand palm oil industry, producing up to 23 million tons of palm oil each year. (Krungsri Research)
#8. Only 2% of the palm oil taken from the mills is sent to the export market. From that figure, 68% is purchased by Malaysia and 12% is purchased by Cambodia. (Krungsri Research)
#9. 86.6% of the sales achieved by the Thailand palm oil industry occur in the domestic market. 48% of those sales come from biodiesel products, with 32% used in direct consumption as cooking oil. (Department of Internal Trade)
#10. 20% of domestic purchases are used by other industries for their manufacturing needs. 30% of this segment is used by the instant and snack noodle industry in Thailand. 20% is used for soap products, while 15% is used to make non-dairy creamers. (Department of Internal Trade)
#11. Since 2009, the percentage of total domestic consumption for biodiesel within the industry has risen from 32% to 48%. (Office of Agricultural Economics)
#12. Farm gate prices for Thai palm oil reached a peak of 9 THB per kg in January 2011. Since then, the pricing structure has remained the same, averaging about 6 THB per kg, since 2008. (Office of Agricultural Economics)
#13. Since January 2014, the price of Thai palm oil products has been higher than the global average of those products. (Department of Internal Trade)
#14. Demand for crude palm oil in 2016 totaled 1.86 million tons, which was down 1.3% from the year before. Consumer demand slumped by almost 8% because of a shift to cheaper bottled soybean oil products. (Department of Internal Trade)
#15. The biodiesel industry continues to strengthen its demand for crude palm oil products, increasing their consumption in 2016 by over 900,000 tons. (Department of Internal Trade)
#16. In 2010, the MPI for crude palm oil was 164.34, but in 2016, it dropped to just 62.93. The refined palm oil MPI also dropped from 164.34 in 2010 to 121.54 in 2016. (Office of Industrial Economics)
#17. 70% of the palm oil which is produced by the industry comes from small-scale farmers. That structure forces many farmers to drain peatlands to grow the crop, which makes the forests more susceptible to fires each year. (Mongabay)
#18. About 700,000 hectares are currently reserved for palm oil plantations in Thailand. The industry is hoping to increase the amount of oil produced by 50% before the year 2023. (Mongabay)
Thailand Palm Oil Industry Trends and Analysis
Pricing within the Thailand palm oil industry has been severely affected by an ongoing pattern of drought caused by El Nino and expansion efforts within the Malaysian and Indonesian markets. Assuming that the regular weather pattern returns within the next 3 years, the new plantations should begin to bear fruit on the global stage.
This increase in availability will increase inventories, but it will still not meet the expected global demand for palm oil. Crude palm oil prices are expected to continue rising, which means the industry in Thailand will look to create more biodiesel products for export than refined palm oil items.
Palm oil is also one of 23 Thai products which are classified as being sensitive, which means government protections for the sector are available without risks of imports from their two primary competitors.
The goal is to increase oil consumption by 3% each year, effectively doubling the domestic use of palm oil for alternative energy products by 2036. Much of this depends on stability within the market, no disruptors trying to make an impact, and improvement in weather conditions. If all three of those elements are not present, then the industry may continue to struggle.