Fats and Oils Industry Overview
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Published: April 2012
Fats and oils are used throughout the world for both food applications and industrial uses. They are consumed in butter, shortening, margarine, salad and cooking oils, as well as in animal feeds, fatty acids, soaps, personal care products, biodiesel, paints (made from alkyd resins), lubricants and greases. The sources of fats and oils include edible vegetable oils, palm oils, industrial oils, animal fats and marine oils. Food applications account for the major share (about three-quarters) of worldwide consumption of fats and oils. However, there has been a continued shift from food to industrial consumption, particularly in biodiesel. In Europe, this has been due primarily to increased use of rapeseed oil for biodiesel production. In Central and South America, country mandates have brought about an increase in the use of soybean oil for biodiesel. Also, industrial applications for other oil crops are being further studied and developed. Industrial use of fats and oils is expected to continue to increase in Europe.
Global production of the major fats and oils is led by Asia. Indonesia is the world's largest producer, accounting for over 44% of the world's palm oil production, the major type of vegetable oil produced. China produces a nearly equivalent volume of fats and oils, and is a larger producer of soybean and canola oils. Malaysia ranks third in world production because of its place as the second-largest world palm oil producer. India also produces large volumes of canola and butter. Overall, Asia accounts for over 50% of world fats and oils production.
Similarly, world consumption is driven mainly by Asia, which accounts for 44% of the world total. China and India together make up 32% of the world total. Chinese demand is mainly for soybean oil, followed by canola and palm oils. India is a major consumer of canola oil, as well as palm oil and butter. Both countries expect continued strong growth. Indonesia and Malaysia also contribute to overall consumption, especially in palm oil demand.
The following pie charts show world production and consumption of major fats and oils.
Palm, soybean, canola and sunflower oil are the world's most widely used fats and oils, and together account for 72% of total global consumption. Palm oil is the largest-volume oil used, surpassing soybean oil in the mid-2000s. In 1990, these four oils combined accounted for about 55% of global fats and oils consumption, with soybean oil at 20% of the world total, followed by palm oil with 14%.
Palm oil is produced mainly by Indonesia and Malaysia. Demand for palm oil accounts for over 25% of world demand for fats and oils, and is expected to grow at an average annual rate of more than 5%. The main consumers include India, Indonesia and China, and the rest of Asia; Europe; and Africa. Palm oil use has grown significantly as a result of its lower cost, edible properties, and supply availability.
Soybean oil is the dominant oil used in the United States, accounting for 45% of total consumption. Biodiesel production will continue to drive U.S. growth. Soybean oil accounts for over 63% of total demand in Central and South America, and over 40% of its use is for biodiesel production, especially in Argentina and Brazil. In Europe, soybean oil is used as a cooking oil but growth has been limited in food use and more recently by biodiesel production. Soybean oil use in Asia is also significant (about 20% of the total) and strong growth of 4–5% annually is expected. China is a large consumer.
Overall, world fats and oils consumption is expected to grow at an average annual rate of 3.5–4%, driven mainly by growth in Asia and steady increases in the United States and Europe. In Asia, China and India will continue to experience a growing population and economy, which will result in an increase in per capita demand for fats and oils. In the United States, Europe, and Central and South America, fats and oils demand for nonfood use, particularly biodiesel production, is expected to continue to increase.