Knowledge

Palm oil trade glossary

Every term a palm product buyer meets — incoterms, fractions, quality specs, pricing benchmarks and sustainability claims — in plain English.

Trade & shipping

FOB (Free On Board): The seller's price includes delivering the goods loaded on the vessel at the origin port; freight, insurance and everything after loading are the buyer's cost and risk.
CIF (Cost, Insurance & Freight): The seller's price includes ocean freight and marine insurance to the named destination port — e.g. 'CIF Mundra' means delivered to Mundra port, insurance included. Risk still passes at loading.
CFR (Cost & Freight): Like CIF, but the buyer arranges insurance. The seller pays freight to the destination port.
Incoterms: The standard international rules (FOB, CIF, CFR, etc.) that define exactly which costs, risks and duties the buyer and seller each carry in a trade.
Flexitank: A disposable food-grade bladder fitted inside a standard 20-foot container, carrying roughly 20–24 tonnes of liquid oil — the workhorse of mid-size palm oil shipments.
ISO tank: A reusable stainless-steel tank container for liquids; cleaner handling than flexitanks and re-usable, at higher cost.
Letter of Credit (LC): A bank instrument guaranteeing the seller payment once shipping documents matching the agreed terms are presented — the standard payment security in palm trade.
PORAM: The Palm Oil Refiners Association of Malaysia. Its standard contract terms and product specifications are the de-facto reference for refined palm product trades.
Shipment month: The calendar month in which the seller must ship the goods; forward offers are quoted per shipment month.

Products & fractions

CPO (Crude Palm Oil): Unrefined oil pressed from the palm fruit's flesh — the benchmark commodity of the whole industry.
CPKO (Crude Palm Kernel Oil): Oil crushed from the kernel inside the palm nut. A lauric oil, chemically closer to coconut oil than to palm oil.
RBD: Refined, Bleached and Deodorised — the standard food-grade refining sequence. RBD palm oil/olein/stearin are the common traded grades.
Fractionation: Slow cooling and filtering that splits an oil into a liquid fraction (olein) and a solid fraction (stearin), each with different melting behaviour and uses.
Palm Olein: The liquid fraction of palm oil — the world's most used frying and cooking oil. 'IV56' / 'IV58' grades and double-fractionated 'super olein' stay clear in cooler climates.
Palm Stearin: The solid fraction of palm oil — the hard fat used in shortenings, margarine, vanaspati, soaps and oleochemicals.
PMF (Palm Mid-Fraction): A middle cut from double fractionation, prized in cocoa-butter-equivalent formulations.
PFAD (Palm Fatty Acid Distillate): The free-fatty-acid stream removed while deodorising palm oil — a key feedstock for biodiesel, soap and vitamin-E extraction.
PKFAD: The same distillate by-product, from refining palm kernel oil.
CBS (Cocoa Butter Substitute): A sharp-melting lauric fat made from palm kernel stearin (often hydrogenated) that behaves like cocoa butter in coatings without tempering.
CBE / CBR: Cocoa Butter Equivalent (compatible with cocoa butter in any ratio, made from palm mid-fractions and exotic fats) and Cocoa Butter Replacer (partially compatible non-lauric hard fat).
Shortening: A 100%-fat bakery ingredient built from palm fractions, texturised for doughs, biscuits, creams and frying.
Vanaspati: A grainy, ghee-like cooking fat made from interesterified or hardened palm blends, widely used across South Asia and the Middle East.
Hydrogenation: Hardening an oil by adding hydrogen over a catalyst — raises melting point and stability. Fully hydrogenated palm products (HPO, HPS) contain no trans fats.
Interesterification: Rearranging fatty acids among triglycerides (enzymatically or chemically) to tailor melting behaviour without hydrogenation.
Lauric oils: Oils rich in lauric acid (C12) — palm kernel and coconut. Sharp melting, excellent foaming in soaps; distinct market from palm oil itself.
Oleochemicals: Industrial chemicals made by splitting fats: fatty acids (e.g. stearic acid), fatty alcohols, methyl esters and glycerine.
Stearic acid: A saturated C18 fatty acid produced from palm stearin; used in soaps, candles, rubber processing, cosmetics and PVC.
Glycerine (glycerol): The sweet, viscous by-product of fat splitting and biodiesel production; purified for pharma, food and personal care.

Quality specifications

FFA (Free Fatty Acids): The share of fatty acids no longer bound in triglycerides — the headline freshness/quality spec. CPO is commonly traded at 5% max; RBD grades around 0.1%.
IV (Iodine Value): A measure of unsaturation: higher IV means a softer, more liquid oil. Palm olein grades are quoted by IV (e.g. IV56, IV58, IV64).
M&I (Moisture & Impurities): Water plus solid contaminants in the oil — a standard contract limit, typically 0.25% max for CPO.
DOBI: Deterioration of Bleachability Index — a spectroscopic score of how well CPO will refine. Higher (2.3+) is better; low DOBI oil resists bleaching.
Slip melting point: The temperature at which a fat column starts to slip in a capillary — the standard 'melting point' quoted for palm fractions.
Cloud point: The temperature at which a clear oil first turns hazy as crystals form — key spec for oleins destined for cool climates.
CoA (Certificate of Analysis): The lab report accompanying a shipment, stating measured FFA, IV, M&I, colour and other contract specs. Always reconcile it against the contract before paying.
Colour (Lovibond): Oil colour measured in a Lovibond cell (red/yellow units) — refined palm grades are quoted e.g. '3R max'.

Markets & pricing

Bursa FCPO: The crude palm oil futures contract on Bursa Malaysia — the world's palm price benchmark, quoted in ringgit per tonne.
MPOB: The Malaysian Palm Oil Board — the industry regulator whose published daily/monthly prices, production and stock figures are the market's reference data.
Kemendag reference price: Indonesia's Ministry of Trade monthly CPO reference price, which sets the export levy and duty for that period.
POGO spread: The price gap between palm oil and gasoil — when palm is cheap versus diesel, discretionary biodiesel blending demand rises.
Palm–soy spread: Palm oil's discount to soybean oil. A wide discount pulls price-sensitive buyers (India especially) toward palm; a narrow one pushes them away.
Export levy & duty (Indonesia): Charges on Indonesian palm exports tied to the reference price; they fund biodiesel subsidies and materially shift FOB competitiveness between origins.
DMO: Indonesia's Domestic Market Obligation — the share of output producers must supply domestically before exporting.
Basis / premium: The negotiated difference between a physical cargo's price and the futures benchmark, reflecting grade, port, shipment window and certification.

Sustainability & compliance

RSPO: The Roundtable on Sustainable Palm Oil — the main voluntary certification standard for sustainably produced palm oil.
RSPO Identity Preserved (IP): Certified oil kept fully separate and traceable to a single certified source — the strictest, most expensive model.
RSPO Segregated (SG): Certified oil kept separate from conventional oil throughout the chain, but blended across certified sources. The product physically is certified oil.
RSPO Mass Balance (MB): Certified and conventional oil may mix in transport and processing; certified volumes are tracked administratively. Cheaper than SG — the volume claim is real, the physical molecules may not be.
Book & Claim (credits): Buying RSPO credits from certified producers while sourcing conventional oil — supports certified growers without physical supply-chain changes.
MSPO / ISPO: Malaysia's and Indonesia's mandatory national sustainability certification schemes.
EUDR: The EU Deforestation Regulation: palm products placed on the EU market must be proven deforestation-free (post-2020) and traceable to geolocated plots, backed by a due-diligence statement.
Traceability (TTP/TTM): Knowing the origin of oil to the plantation (TTP) or mill (TTM) — the backbone of EUDR and modern sustainability claims.
ISCC: International Sustainability & Carbon Certification — the scheme most used for palm streams entering EU biofuel markets.

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