Posted on 23 May 2019
According to a new report by EMR titled, ‘LATAM Palm Oil Market Report and Forecast 2019-2024’, the LATAM palm oil market reached nearly 4 million metric tons in 2018. The market is expected to grow further in the forecast period of 2019-2024 and will aid the projected growth of the global market in the period, which is forecasted to grow at a CAGR of 1.9%.
The LATAM palm oil market is being driven by the increasing production and domestic demand for palm oil in the major markets in the region. The industry in the region is being aided by various supportive schemes by the governments, especially in major palm oil markets like Colombia, Ecuador, Honduras, and Peru. In Colombia, new drug policies encouraged the replacement of illicit crops like poppy and coca with oil palms in areas like the troubled Catatumbo region of the country. Colombia also requires all diesel being sold in the country to be blended with 10% biodiesel as the country aims to reduce greenhouse gas emissions by 20% by 2030 as a part of their pledge to the Paris climate accord. With palm oil being an essential raw material for biodiesel, the mandate aids the country’s palm industry.
Colombia is the largest palm oil producer in LATAM. The industry accounts for 6% of the country’s total GDP. It is also a leading producer of the oil, globally, falling just behind Indonesia, Malaysia, and Thailand. In 2017, Colombia’s production of palm oil saw a hike of 42%, following the reduced output in 2016 due to El Nino. The country produced almost 1.6 million metric tons of crude palm oil in 2017 with a majority of the output being exported to countries like Spain and Germany. In 2017, exports related to palm oil generated USD 414 million in revenues in Colombia.
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However, the palm oil trade in countries like Colombia might be affected by the EU’s decision to phase out biofuel feedstock grown through unsustainable farming practices. This step was taken by the EU to prevent the rapid, and often illegal deforestation occurring due to the expanding oil palm cultivation. While this step might adversely affect the LATAM palm oil market in the coming years, some countries are looking to switch to a more sustainable way of farming oil palms. Ecuador, a significant palm oil market in the LATAM, is incentivising sustainable palm oil production by creating tax cuts for the exporters of the oil on the condition that they invest the tax returns to help smallholders shift to sustainable farming methods.
Market Analysis by Applications and Regions:
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The key players in the LATAM palm oil market are Wilmar International Ltd., Cargill, Incorporated, Bunge Limited, Archer Daniels Midland Company, and Reforestadora de Palmas del Petén SA (REPSA), among others. The EMR report gives a detailed look into these major players by providing their market share, capacity, and latest developments like plant turnarounds, mergers and acquisitions, and capacity expansions.
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