The importance of the establishment of palm oil logistics in the United States in supporting MPO market expansion.

With a population of around 330 million people, the United States is the ultimate market for oils and fats exporters. The consumption of edible fats and oils, including palm oil, has undergone considerable change in the U.S. over the past decade. Several factors, including consumer awareness of nutrition and health attributes of various fats and oils, dietary guidelines, and legislation in the form of nutrition labeling of saturated and trans fats helped shape the consumption patterns in the U.S.

The U.S. is also the largest importer of palm oil in North America. According to the statistics published by the U.S. Census Bureau analyzed by World City, U.S. palm oil imports increased 17.9 percent from $155.92 million to $183.86 million during the first two months of 2021 compared to the same period the previous year. Indonesia, Malaysia, and Ecuador were the top three exporters of palm oil to the U.S.

Last year palm oil imports from Malaysia constitute 34 percent of the total imports. Among the factors which support the demand and consumption of palm oil in the U.S. are competitive palm oil prices and the functional applications of palm oil in the food sectors.

U.S. palm oil imports market share, Jan-Dec 2020 (Total 1.44 Mn T)

Source: WorldCity, U.S. Trade Numbers, U.S. Census Bureau
Note: This data is based on shipment arrivals in the U.S. from Jan-Dec 2020 and may differ from the data published by MPOB for MPO exports to the U.S. from Jan-Dec 2020

However, the U.S.  is a huge country, very spread out geographically and this poses considerable challenges to exporters in establishing extensive and effective distribution channels. The market landscape also creates intense competition. In other words, the U.S. market is very demanding and requires a considerable amount of preparation, groundwork, and long-term consistency.

One of the most important things that a Malaysian palm oil exporter who wishes to establish a market presence and expansion in the United States of America must take into consideration is how to ensure that their products are distributed efficiently.

The establishment of strategically located product storage and distribution facilities is an important factor when exporting palm oil products to the U.S. The availability and structure of the distribution channels will have a major influence on the market expansion. Outsourcing of the distribution functions to a network of dealers, brokers, and agents who do the selling for the palm oil exporters is particularly advantageous if the exporters lack deep industry connections and the understanding of the domestic distribution network system.

The lack of a storage and distribution network may hinder the market potential and consumer outreach for Malaysian palm oil in the U.S. The export data released by the Malaysian Palm Oil Board (MPOB) revealed that Malaysia’s palm oil exports to the US remained constant over the past three years.

The establishment of palm oil storage and distribution facilities on the East Coast of the U.S. may pave the way for the market expansion and growth of the Malaysian palm oil market in the region. An extensive network of highway, railroad, and waterway systems within the East Coast makes this area suitable for oils and fats distribution network centers, making it the primary destination for palm oil imports. Currently, about 80% of all palm oil imports landed on the East Coast of the United States. According to the report published by the WorldCity research group, in 2020, the top two ports of entry for palm oil on the East Coast were the Port of Savannah and Port of Newark. Currently, these ports have the facilities to handle palm oil shipments. There are opportunities for Malaysian companies to establish palm oil handling and redistribution centers at these ports.

U.S. Top 5 Port of Arrival for Palm Oil Import (2020)

No US Arrival Port Palm Oil Arrival (%)
1 New Orleans 42
2 Savannah 27
3 Stockton 10
4 Newark 9
5 Richmond 4

Source: WorldCity, U.S. Trade Numbers, U.S. Census Bureau

The New Orleans Port is also an important re-distribution point for palm oil products. The port connects all modes of transportation (ocean, barge, rail, and truck) and links ocean-going vessels to the Gulf of Mexico, Caribbean Sea, Atlantic Ocean, and Panama Canal. It is also an important regional port for imports of bulk commodities like coffee and edible oils such as palm oil and coconut oil. Due to its strategic location, agricultural and edible oils import that transit through New Orleans come from all over the world, which includes Malaysia, Indonesia, Brazil, Canada, and Mexico.

The East Coast of the U.S is the most populous region in the country, which supports potential demand and consumption for oils and fats, including palm oil, from the bakery, snack food, and foodservice market segments. According to the data published by Dataweb.usitc.gov, from Jan-Nov 2019, the import of palm oil for consumption by New Orleans, New York, and Savanna amounted to 1,089,690 tonnes or approximately 76 percent of the total imports during the review period. The establishment of a palm oil storage and distribution network in this part of the country may contribute to the expansion of the palm oil market in the United States.

Prepared by Zainuddin Hassan 

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