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  • How big is the palm oil industry in 2021?
  • The palm oil sector grew to a market value exceeding USD 50 billion in 2021 and is projected to expand at a compound annual growth rate (CAGR) of at least 4%, reaching USD 65 billion by 2027 (Research and Markets, 2022). More than 7 million smallholders globally cultivate oil palm as their main form of livelihood (RSPO, 2022b).
  • Should palm oil be sold on the domestic market?
  • As a result, local producers have more favourable conditions to sell palm oil on the domestic market, as those who sell to the export market and receive higher prices must pay a fee to the fund while those selling exclusively to the domestic market receive compensation (Brounen et al., 2021; Fedepalma, 2021).
  • How do palm oil prices intersect with sustainability?
  • Therefore, examining how palm oil prices intersect with the sector’s sustainability is paramount. As with other commodity markets, palm oil prices are largely correlated with shifts in supply and demand and with price movements of competing products, such as other vegetable oils (e.g., sunflower and soybean oil) or biodiesel.
  • Why is the demand for palm oil low?
  • Demand is low because many buyers are unwilling to pay or negotiate higher prices than the market for certified palm or kernel oil. As already mentioned, about 36% to 50% of VSS-compliant palm oil was sold as conventional, without premiums, from 2019 to 2021 (Bloomberg, 2019; RSPO, 2023b).
  • What are the challenges faced by the palm oil industry?
  • Overall, the palm oil sector is subject to a complex set of social, political, and economic challenges, while external factors add uncertainty in the market and volatility in the prices along the chain.
  • Is palm oil production VSS-compliant?
  • It uses 2019 data for palm oil production that is VSS-compliant, given that this was the most current data available when we conducted the analysis. The report also examines prices and margins in the palm oil sector, looking at how VSSs contribute to increasing farm prices.