Material Insights · Understanding the Material World

Food and beverage processing and Palm oil

Palm oil is the largest single vegetable oil, about 35% of world demand, and is semi-solid at room temperature, so food makers use it for frying, baking and spreads; India buys it from a market dominated by Indonesia and Malaysia, and Indian buyers switch towards soybean and sunflower oils when palm loses its price edge.

Food and beverage processing (industry) and Palm oil (commodity): 4 relationships.

How they are linked

1. Frying and solid fats

Physical flow · Strong · Palm oil to food and beverage processing

Palm oil is semi-solid at room temperature and gives fried products a crisp texture, so it suits biscuits, snacks, spreads and frying; the site finds 3 enterprise types in food processing that depend on it, rating it 4 of 5 for commodity traders and 3 of 5 for packaged food makers and refiners.

  • about 35% palm oil's share of world vegetable oil demand, on about 10% of the land
  • about 7.9% of products in Dutch, UK and Australian supermarkets that list palm oil, 2024 sample
  • up to 40% of those products that may contain it under unspecified vegetable oils or oleochemicals

Palm yields more oil per hectare than any other oil crop, which helps explain its large share of world use. The often quoted claim that half of supermarket products contain palm oil looks outdated: a 2025 study of supermarkets in the Netherlands, the UK and Australia found it named on about 8% of products, though up to 40% may contain it under generic names.

Enterprise types that depend on it:

  • Agricultural commodity traders and aggregators: traded vegetable oil (criticality 4 of 5)
  • Flour mills, oilseed crushers, sugar mills and dairies: refining (criticality 3 of 5)
  • Packaged food manufacturers: frying and fats (criticality 3 of 5)

Sources: Material Insights; WWF Central and Eastern Europe; OFI Magazine

2. Two-country supply

Shared risk · Strong · Indonesian and Malaysian supply decisions reach food makers

Oil palms grow in the humid tropics, and Indonesia and Malaysia together produce over 85% of the world's palm oil, so their weather, export levies and biodiesel mandates set the availability and price that food makers face.

  • over 85% Indonesia and Malaysia's combined share of world palm oil supply
  • 7.58 Mt India's palm oil imports, November 2024 to October 2025

India imported 7.58 Mt of palm oil in 2024 to 2025 from a market these two producers dominate, so Indonesian policy on biodiesel blending or export rules feeds into Indian cooking oil costs. Food makers can soften the shock by switching oils, though bakery fats need reformulation.

Sources: WWF Central and Eastern Europe; Outlook Business (PTI)

3. Soft oils

Substitution · Medium · Soybean and sunflower oils can replace palm oil

For frying and cooking, food makers and households can move between palm, soybean and sunflower oils as their relative prices change, though palm's semi-solid texture is harder to replace in bakery fats.

  • about 1.4 Mt fall in India's palm oil imports, from 9.0 Mt in 2023 to 2024 to 7.58 Mt in 2024 to 2025
  • 5.47 Mt India's record soybean oil imports, 2024 to 2025

In the 2024 to 2025 oil year Indian buyers shifted from palm towards soybean oil: palm imports fell by about 1.4 Mt while soybean oil imports set a record. Total edible oil imports were flat at about 16 Mt, but the import bill rose 22% to about ₹1.61 lakh crore on higher world prices.

Sources: Outlook Business (PTI)

4. Import duty

Policy · High in India · India's edible oil duties shape food makers' oil costs

India sets different customs duties on crude and refined edible oils to balance retail prices for consumers against margins for domestic refiners, so each duty change moves the cost of the main fat used by food processors.

  • 20% to 10% basic customs duty on crude palm, soybean and sunflower oil, 2025 cut
  • 10% to 5% basic customs duty on crude palm and soybean oil, from 24 September 2026
  • 32.5% to 27.5% basic customs duty on refined palm and soybean oil, from 24 September 2026

The 2025 cut widened the basic duty gap between crude and refined oils from 12.5 to 22.5 percentage points, favouring crude oil refined in India over imported refined oil. The September 2026 cut lowered both palm rates by 5 points, keeping that gap, and removed duty on crude sunflower oil. With cuts in consecutive years, a food maker's oil cost depends on policy as much as on world prices.

Sources: All India Radio News; Daily Jagran

For investors

Key learnings

  1. Palm oil's price against soybean oil decides how much palm Indian buyers take; in 2024 to 2025 a shift to soybean oil cut palm imports by about 1.4 Mt.
  2. Supply risk is concentrated in Indonesia and Malaysia, which produce over 85% of palm oil, so their export and biodiesel policies matter as much as Indian demand.
  3. Indian duty cuts on crude palm oil, to 10% in 2025 and 5% in September 2026, move cooking oil costs quickly, while the gap between crude and refined duties sets domestic refiners' advantage.

What to track

  • Palm olein discount to soybean oil, landed India: A narrowing or reversed discount signals switching away from palm and lower Indian palm imports (Weekly · SEA, Malaysian Palm Oil Board, trade press)
  • India's monthly palm oil imports and port stocks: Rising stocks ease food makers' input costs; low stocks point to price pressure (Monthly · Solvent Extractors' Association of India)
  • Indonesian palm export levy and biodiesel blending rate: Higher blending or levies tighten export supply and raise palm prices (As announced · Indonesian government, MPOB)

For policymakers

Key learnings

  1. India imports about 16 Mt of edible oils a year, so food price stability depends heavily on foreign oil supply and duty settings.
  2. The differential between crude and refined oil duties is the main tool for protecting domestic refining while keeping retail prices in check.
  3. Shifts between palm and soft oils show that India can change its oil mix within a year when relative prices move, which limits its exposure to any one producing country.

What to track

  • Edible oil import volume and value: A rising bill with flat volume signals imported food inflation (Monthly · SEA, Commerce ministry)
  • Customs duties on crude and refined edible oils: Changes move retail cooking oil prices and refiner margins (As announced · Ministry of Finance, CBIC)
  • Retail prices of palm, soybean and sunflower oil: Shows whether duty cuts are passed to consumers (Daily · Department of Consumer Affairs price monitoring)

India

India imported about 7.6 Mt of palm oil in 2024 to 2025 within total edible oil imports of about 16 Mt, and it adjusts customs duties to manage cooking oil prices, most recently in September 2026.

Sources

  1. Food and beverage processing: materials, Material Insights (2026)
  2. 7 things to know about palm oil, WWF Central and Eastern Europe
  3. New study finds palm oil not in 50% of supermarket products, OFI Magazine (2025)
  4. Edible oil imports up 22% to ₹1.61 lakh crore in 2024-25 market year; volume flat: SEA, Outlook Business (PTI) (2025)
  5. Centre reduces basic custom duty on crude palm oil, crude soyabean oil and crude sunflower oil to 10% to bring down retail prices, All India Radio News (2025)
  6. Centre cuts customs duty on crude, refined edible oils; changes to be effective from tomorrow, Daily Jagran (2026)