Although it's widely debated around the world, the fact is that palm oil expansion is significantly smaller than soybean expansion in global statistics.
Image credit: Lathus.
In what may signal a structural shift in the global edible oil market, the 2023/24 season is witnessing a marked deceleration in the production of vegetable oils and animal fats, especially palm oil—a commodity that has long underpinned the sector’s expansion.
According to the Oil World Annual 2024, global output of 17 key oils and fats is projected to reach 259.8 million metric tons this season. While this represents an increase of 5.8 million tons or 2.3% from the previous year, it falls significantly short of last season’s 9.0 million ton (3.7%) growth.
Global oil market grows vulnerable
This slowdown is driven primarily by a stagnation in palm oil output—the world’s most consumed vegetable oil, accounting for over 31% of global supply. The decline in production momentum also extends to sunflower and rapeseed oils, both of which have posted losses during the April–September 2024 window. The only bright spot in the current supply landscape is soybean oil, which has experienced a notable production surge.
But even that uptick may not be enough.
From April through September 2024, the global oil market is expected to tighten further as production gains wane compared to the October–March period. Soybeans, currently more plentiful than other oilseeds, have stepped in to fill some of the supply vacuum, but the reliance on soybean oil is deepening, making the market more vulnerable to shocks in this single commodity.
Adding to the complexity is a subtle but impactful shift in the oil-processing industry: a transition away from higher-yielding seeds toward soybeans. This adjustment is already limiting potential growth in overall vegetable oil supply and can only be offset—partially—through price mechanisms that boost production incentives while curbing demand.
Animal fats, meanwhile, tell a different story. Less responsive to price movements, the supply of tallow and lard hinges more on meat sector dynamics than on oil markets. High prices have enabled more efficient extraction from carcass rendering, leading to an above-average increase in beef tallow production—estimated at 0.2 to 0.3 million tons this season. Yet, demand for tallow remains robust, pushing market prices higher as a form of consumption control.
Despite these supply-side challenges, consumption is not letting up. Global demand for oils and fats is growing at an accelerated pace of 3–4% this season—outstripping supply gains and applying upward pressure on prices. Earlier in the season, prices of major vegetable oils remained subdued due to sluggish import demand and an unexpected export surge of sunflower oil. However, this temporary deflationary trend is unlikely to hold.
From 2003/04 to 2023/24: The Changing Landscape
Over the past two decades, the structure of global oil and fat production has undergone notable transformation. In 2003/04, global production stood at just 130.8 million tons. Palm oil then accounted for 23.1% of the mix, compared to 31.5% today—a clear marker of its meteoric rise. Soybean oil, relatively stable at around 23.5–23.9%, has remained a consistent pillar. However, "other oils and fats," which once represented over 30% of global output, now comprise only 19.1%, reflecting a consolidation of supply into fewer, high-volume oil types.
This narrowing of the global oil base has made the market more sensitive to regional production shocks, particularly in Southeast Asia (for palm oil), South America (for soybean oil), and the Black Sea region (for sunflower and rapeseed oil).
As the 2023/24 season progresses, market participants will be watching closely. Will supply chain flexibility and pricing mechanisms be enough to ease the growing pressure on stocks? Or are we heading toward a new equilibrium—marked by tighter markets, higher prices, and increased volatility?
In either scenario, one conclusion is becoming harder to ignore: the global edible oil sector may be entering a post-boom phase. And what follows next will be defined not just by production figures, but by how resilient—and adaptable—this $200 billion market really is.
-- Rangkaya Bada
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