It is, however, not likely that the CPO price will surpass the USD $1,000 per ton level soon as demand from China, Europe and India has still not fully recovered. In 2011, the palm oil price had reached USD $1,119 per ton. One year later it weakened to USD $800 per ton.

Global production of palm oil has eased due to a decline in palm oil output in Malaysia, the world's second largest palm oil producer, as a result of climatic conditions as well as aging palm trees. Moreover, last year, Indonesian and Malaysian palm oil companies limited their production numbers to support the weakening global palm oil price. Palm oil production is expected to decline further in July and August because of dry weather conditions.

Global increase in CPO demand can be concluded from recent Indonesian export numbers. Export of Indonesian palm oil increased to 1.82 million ton in May 2013, up from 1.49 million ton in April 2013. This increase was also due to bad soybean harvests in both the United States and South America (particularly Argentina), brought on by heavy and prolonged rainfall. Lack of soybean oil has thus been replaced by palm oil.  

Various analysts believe that in the next two years prices of several commodities, such as palm oil, rubber and cocoa, will recover due to increased global trade.

Indonesia and Malaysia dominate the world's production and export of palm oil. Together, these two countries account for over 86 percent of the globe's palm oil production. About 75 percent of Indonesia's palm oil output is exported to foreign markets.

Indonesia's Palm Oil Production and Export

    2007   2008   2009   2010   2011   2012   2013¹
(million metric tonnes)
  16.8   19.2   19.4   21.8   23.5   26.5   28.0
(million metric tonnes)
   n.a   14.2   15.5   15.6   16.5   18.1   21.0
(in USD$ billion)
   n.a   15.6   10.0   16.4   20.2   21.6  

¹ indicates forecast
Source: Indonesian Palm Oil Producers Association (Gapki)