Palm Oil Sectoral Growth in USA, Mexico and Haiti

1. USA

US is a major market for oils and fats. The consumption of oils and fats have been increasing steadily over the past three years. In 2020 US palm oil consumption amounted to 1.4 million tonnes or about 6% of the total oils and fats consumption. The US palm oil imports have been increasing steadily from 2016 to 2019. Last year palm oil import constituted about 32% of total oils and fats imports.

Palm oil demand is expected to remain good in the coming years, supported by strong purchasing power and growing population. For several years, Indonesia and Malaysia have been the main suppliers of palm oil to the US. Despite the availability of palm oil from the South and Central America, these two countries remained as the preferred suppliers of palm oil, mainly due to the price competitiveness of the exports as well as the product quality and sustainability.

There are two key market sectors that may possibly contribute to the demand growth for palm oil in the US. One of the potential growth markets is the demand for palm shortening in the Asian catering and restaurant businesses. Consumers interests in Asian cuisines, such as Thai, Korean, Vietnamese, and Japanese, are increasing in the US.  The East Coast of United States is a major market for shortening/frying fat due to the high number of food related businesses. The industry includes both quick-service and full-service Asian restaurants. According to industry data, between 1999 and 2015, sales of Asian food segment in the US rose 135 percent, beating Latin and Middle Eastern cuisines. The growth in the Asian population in the US is another contributing factor in the growth in Asian cuisine. According to the report published by Pew Research Center report in 2017, there were approximately 20 million Asian-Americans in the United States, an increase of 72%, since 2000. The Asian population is now the fastest-growing population group in the US.

Secondly, the growing usage of vegetable oils such as palm oil in non-food uses is expected to further support the demand growth for palm oleochemicals. One such market segment is the beauty and personal care products market. Growing demand for sustainable and biodegradable products to reduce reliance on petrochemicals, is also apparent in the US cosmetics industry. According to industry estimate, in 2019, the revenue of the US cosmetic industry is estimated at around 49.2 billion U.S. Dollars. The key reason for this high growth is the demographic shift in the young consumer market (Grand View Research, 2019). To fit their social media looks, the young generation continues to spend a considerable amount of money on skin care and other personal care items. Even though the personal care products market has witnessed a decline in the wake of the pandemic, the impact is not as severe as seen in other industries. Despite a decrease in discretionary spending, the retail segment has seen a change in consumer behaviour toward healthy and reliable goods. The expansion of the cosmetics market in the US may stimulate demand growth for palm-based oleochemicals.

2. Mexico

Mexico is a net importer of oils and fats. Current domestic productions of oils and fats are insufficient to meet the demand of the large Mexican population of 128 million. In 2020, Mexico imported about 1.3 million MT of oils and fats. Palm oil is the main import amounted to 547,000 MT which constituted roughly 41% of the total oils and fats imports.

Source : OilWorld

The major suppliers of palm oil to Mexico are Guatemala and Costa Rica followed by Colombia. Palm oil imports from Indonesia and Malaysia are quite small. In 2019, more than 50% of Mexican palm oil import come from Guatemala (164,000 MT) and Costa Rica (118,000 MT). On the other hand, import of Malaysian and Indonesian palm oil is only at 17 MT and 44 MT respectively (Oil World). Guatemala and Costa Rica have logistics and freight cost advantages in the Mexican market due to their near proximity to Mexico, cross-cultural similarity and close economic links.

Mexico has a large food processing sector, with a market value of USD135 billion and a growth rate of 4%, supporting demand for oils and fats such as palm oil. According to Euromonitor, Mexico’s processed food market is expected to grow to USD52.6 billion in 2020, making it the world’s 11th largest market. Consumers’ shift to more health-conscious food options, as well as their demand for edible oils that can offer a healthy option, is a recent interesting trend. Since companies started removing trans-fats from their recipes, palm oil has become increasingly essential for the food processing industry. A number of snack food firms have turned to palm oil in the manufacture of their products. These shifts in customer preferences are likely to open up new opportunities for edible oil producers and expand the palm oil market in Mexico.

3. Haiti

In Haiti, palm oil and soybean oil are the most widely used edible oils. 80% of the total oils and fats import consists of palm oil at 144,000 MT in 2019. Palm oil is the most cost effective oil in the market, used mainly for deep frying where price influences consumer preferences.

Source : OilWorld

Haiti has one of the highest levels of food insecurity in the world (United Nations). The agricultural sector is important for Haitians’ livelihoods and food security, but it is plagued by environmental degradation, soil erosion, underinvestment, and low productivity. Haiti is unable to meet domestic food demand and must depend on imports for a significant portion of its agricultural products. The relocation of Haiti’s rural population to the major cities, as well as a lack of agricultural capitalization have hindered the development of food crops. As a result, the country is vulnerable to price fluctuations and inflation where consumer prices for major food products are much higher than in the Latin America and Caribbean region, making them unaffordable for most of the Haitians.

Another major barrier to food supply is Haiti’s poor internal infrastructure, which makes transporting food within the country difficult. Natural hazards such as tropical rains, floods, landslides, drought, earthquakes, and hurricanes have compounded these problems over the last two decades. On the 2019 Climate Risk Index, Haiti is fourth among the countries most affected by extreme weather events (United Nations).

Yet, Haitians in urban and popular neighbourhood areas have a good understanding of and appreciation for the relative nutritional ranking of foods. The huge demand for prepackaged ready-to-eat foods that has resulted from urbanization over the last half-century will continue to rise. These trends in Haiti represent opportunities for palm oil market expansion into the country, as can be seen from Malaysian palm oil import into Haiti that grew at CAGR 20% for the past five years.

MPO Import by Haiti :

2016 2017 2018 2019 2020
Import (MT) 6,097.01 12,608.28 9,873.87 11,271.48 12,743.41

Source : MPOB

Prepared by Zainuddin Hassan and Nur Adibah Mohd Razali

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