Palm oil comprises some 40% of major vegetable oil production globally,  earning it the title of the world’s most plentiful vegetable oil). Other veg oils include rapeseed oil and sunflower oil, while  another major product soybean oil, makes up around 35% of global supply (source: Reuters).

Soybean oil was once the most prevalent vegetable oil worldwide, but from around 2004/2005 onwards, production of palm oil started to surpass that of soybean oil. Combined, both palm oil and soybean oil comprise more than 60% of edible oil supply globally. Other vegetable oils, such as canola and sunflower oil, play important but primarily supportive roles in meeting global demand (source: Agriculture.com).

In non-food applications, palm oil and soybean oil is used as a component in cosmetics, soaps, detergents, cleaning products and animal feed. Both palm oil and soybean oil can be processed into biodiesel, a renewable fuel. Soybean oil also has industrial applications which include drying oil in paints, printing inks and other coatings. It also used in lubricants (eg. crankcase oils, drip oils, and wire rope lubricants) and has applications in pharmaceuticals (eg capsule fillers) and animal feed.

In food applications, palm oil used for cooking, frying, baking, and in food manufacturing, such as for ice cream, confectionery, and peanut butter and margarine. Similarly soybean oil is common ingredient for cooking, frying, baking, and in products like salad dressings and mayonnaise. Soybean oil is generally considered healthier due to its higher proportion of unsaturated fats while palm oil is considered more stable for high-heat cooking due to its higher saturated fat content.

While they are close substitutes, soybean oil and palm oil are not perfect substitutes for one another.

Price Divergence in Palm Oil & Soybean Oil
Research from Agriculture.com showed that since 2020, soybean and palm oil prices started to diverge more often and for longer periods. In late 2024, palm oil futures prices exceeded soybean prices for the first time since the 1990s. While some common dynamics remain part of price behavior after 2020, the research suggests the underlying economic forces driving vegetable oil supply and demand may have shifted. The tight connection between soybean oil and palm oil prices has fundamentally changed. A larger portion of palm oil production now stays in Southeast Asia to meet domestic biodiesel and food demand. Barring major supply shocks, palm oil has less effect on global vegetable oil prices than in the past. Market dynamics in the global vegetable oil market are increasingly complex. Increasingly, farmers, millers and biofuels producers need to be mindful of both broad global shocks and more local, product policy shocks.