Biofuels and Commodity Markets - Palm Oil Focus
In the last few years, demand for ethanol and biodiesel derived from grains, vegetable oils, sugar and other crops or derived products has risen sharply, reaching a level where the entire agricultural sector and its markets are being affected.
The assessment of the consequences of rising biofuel demand for agricultural production, trade in agricultural commodities and agro-based industries has moved to the centre of attention. This paper aims to shed some light on the implications of growing biofuel demand in one particular area, the global palm oil economy. First, general factors determining the sector's past development as well as its medium term outlook are presented. Then information on the commodity's potential as fuel or feedstock for biodiesel production is provided. The main repercussions of current trends in European Union biofuel production on the palm oil sector are discussed and the commodity's prospects as biofuel feedstock at both the domestic and global level are reviewed. In this context, also the issue of sustainability in oil palm cultivation is looked into.
