Palm oil prices plummet due to decreasing demand for biodiesel

Demand for biodiesel in the US and Europe pushed palm oil prices up drastically last year. Prices went so high that palm oil was no longer a viable biodiesel feedstock and a lot of biodiesel refineries in Asia and Australia ceased production. Now the global slow down in consumption has sent palm oil prices plummeting back down to levels not seen since 2006. Will pam based biodiesel production begin again? Or has the market contracted to the point where even if it was produced nobody would buy it?

Malaysia Palm Oil Futures (first contract forward) 4-5 percent FFA, US$ per metric tonne

Malaysia Palm Oil Futures (first contract forward) 4-5 percent FFA, US$ per metric tonne

Graph: Index Mundi

The sad part of all this is the deforestation that has occurred in Asia to make way for palm plantations and the number of people who now depend on palm oil for their income. Palm plantations have been established on the back of high prices and now that the price is diving some of those plantations will no longer be viable. What a waste.  If only biodiesel producers had stayed away from palm oil in the first place.

Oil plantations no substitute for tropical rainforests (Biopact)

Palm oil prices to plunge due to oversupply, lower demand (AFP)

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One Response

  1. It has been bought to our attention that there are two more factors that have contributed to the demise in palm oil prices.

    Germany has recently removed palm oil and soya bean oil from the list of acceptable raw materials for biodiesel. Biodiesel from these materials may be imported, but will no longer get an excise rebate, thus rendering them unviable.

    The US has now stopped the “splash & dash” rort that the being exploited by Malaysian biodiesel producers. This piece of government policy saw palm biodiesel being shipped to coastal USA, where 5% soya bean biodiesel was added thus allowing the companies to claim a subsidy in the order of USD300 per tonne. The biodiesel was then on shipped to Europe, where it gained further European subsidies.

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