Palm oil competes directly with other oils and fats in most of its applications and demand is therefore determined by its competitive position within the overall world market for these products.
There are three main categories of oils and fats: vegetable oils, marine oils and animal fats.
Although, technically, most oils and fats are interchangeable, processing costs and specific end-use requirements limit the range within which oils and fats are actually substituted. This leads to price premiums and discounts within the market. In general, oils derived from coconut, palm kernel, groundnut and cottonseed tend to be the most highly priced.
Palm oil, together with soybean, rape and sunflower oils, falls into the medium-priced category, and sells at a premium over marine oils, generally the cheapest of the oils. Palm oil, soybean oil, rapeseed oil and sunflower oil together form the most important constituents by volume within the overall market with palm oil normally being priced at a discount to the other three oils.