Malaysia’s palm oil industry is on a roll. It’s the country’s third biggest export worth $9.8b in 2020, up 18% year on year. Significantly ‘processed’ palm oil, which is more valuable than ‘crude’ accounts for over 70% of exports.

palm oil plantation SE Asia

India is Malaysia’s largest export market, followed by China. 

Palm oil is widely used in the cosmetic and food industry for example cooking oil and spreads. Palm oil has several USPs, it’s resistant to oxidisation extending shelf life; it’s also stable at high temperatures giving fried products a crispy texture. And its odourless and colourless.

It’s no surprise that the industry attracts close Government supervision. The Malaysian Palm Oil Board oversees research, regulation and promotion. The MPOB also sets an export tax levy – currently 8% – on crude palm oil.

However, the palm oil industry is not free of controversy. The biggest issue is deforestation and climate change.

In neighbouring Indonesia at least 81% of forested land cleared to produce palm oil is said to be illegal, according to Watchdog Forest trends. Surveys have shown that deforestation has increased across SE Asia during the pandemic.

palm oil deforestation impact

Global stocks of palm oil are tight currently, and a shortage of migrant workers in Malaysia’s plantations linked to Covid-19, has pushed up global prices.

Given concerns, at least in the West, about sustainability, not to mention the scale of palm oil industry – $61b – one would expect to see more alternatives to palm oil emerging. 

There are a few but none close to commercialisation.

C16Bio sciences is one startup researching single cell alternatives based around algae or yeast. However, the company is at early stage funding (series A, $24m) with just 20 employees. Lanzatech is another. 

Perhaps if MPOB is wise, it will take a close interest in such biotechs?

In the meantime palm oil futures are up nearly 100% on the same period last year.