Crude Palm oil is a type of vegetable oil that is produced by processing the palm fruits. The oil palm tree grows most abundantly in Indonesia and Malaysia. Around 85 per cent of the palm oil consumed globally comes from these two countries. The production of palm oil has doubled since 1995. Crude Palm oil is now primarily used in the production of energy. The processing cost of crude palm oil is much lower than other forms of biodiesel. This is why palm oil is used regularly in manufacturing bio-fuels. Crude palm oil price varies at around INR 557 per 10 kgs. Crude palm oil price in India depends on the overall consumption of palm oil, as well as the emerging patterns of consumption. The Chicago Mercantile Exchange offers two kinds of palm oil futures. The crude palm oil future tracks the price of unrefined palm oil, while the palm olein tracks the price of refined oil.
Crude palm oil became an important commodity internationally in the 1700s. The British industrial revolution was fuelled by palm oil which was used to make industrial lubricants, candles and other items of everyday use. In the current times, we need palm oil in the production of everything from food items to detergents to cosmetics. By 2021, the global market for the trade of palm oil is predicted to surpass $90 billion. This is why crude palm oil plays a major role in world trade.
Crude palm oil is rich in vitamins E, D and K and carotenoids. It has a lengthy shelf-life because it is highly resistant to oxidation. Crude palm oil is used in food items like margarine, non-dairy creamers, cookies, ice cream, and cereals. Candles, personal care items, cosmetics, water treatment products, bactericides, pharmaceuticals, and lubricants are also produced using crude palm oil.
Factors Affecting Prices
Crude palm oil price depends on factors like- supply, competing oils, weather conditions, environmental concerns and the demand for biofuel. Since the majority of palm oil comes from Indonesia and Malaysia, government policies and domestic consumption rates by these countries can influence the price. The climate of Indonesia and Malaysia is prone to heavy rains, which can delay the harvest, and create a shortage of supply which can increase prices.
Crude palm oil competes with other edible seed oils in the market. The demands for these oils fluctuate, which affect the crude palm oil price. Changing perception about health benefits and risks can also impact the demand for palm oil and prices. The production of palm oil has resulted in deforestation in a major part of Indonesia since the cultivation of the crop requires large plots of land. This has negatively affected the biodiversity of these countries. Because of this, the production of palm oil has received criticism, which can affect prices. The use of palm oil in the production of biofuel is steadily rising, which can again impact the prices. Since the crude palm oil price today is dependent on so many factors, it fluctuates daily.
Why Invest in Crude Palm Oil?
There are numerous reasons to invest in palm oil. These are, inflation hedge, the promise of demand growth and diversification of a portfolio. Inflation might result in the loss of purchasing power. Furthermore, during inflation, the price of food items generally rise. Hence, investing in palm oil might provide protection against loss of purchasing power and profits during periods of inflation. Three of the major importers of palm oil are fast-growing countries, whose demand for food will increase as population increases. Crude palm oil price will also likely rise due to this. Most merchants generally invest in stocks and bonds, and investing in palm oil is an excellent way to diversify the portfolio.
If you wish to benefit from the crude palm oil price, you should invest in other staple crops like wheat, corn, soybean and barley. The scarcity of supply and the lower production rates makes experts optimistic about crude palm oil prices. Emerging health trends might affect the consumption of palm oil and its prices. On the other hand, increasing demand for bio fuel might have a positive impact on crude palm oil price. Crude palm oil Futures are derivative instruments which track the price of palm oil, and you can use to place bets on crude palm oil prices.