Determinants of trade in the palm oil industry between exporting and importing countries: A gravity model analysis in Asia, Oceania and Africa

Abstract

Background: The global palm oil industry plays a strategic role in international agricultural trade, particularly for developing economies that depend heavily on crude palm oil (CPO) exports as a major source of foreign exchange. Aim: This study aims to analyse the determinants of bilateral CPO exports from major producing countries to importing countries in Asia, Oceania and Africa. Setting: The study is conducted at the bilateral country level, covering 10 leading palm oil exporting countries and a wide range of importing countries across Asia, Oceania and Africa over the period 1995–2023. Method: This study employs a structural gravity model using panel data with a Poisson Pseudo Maximum Likelihood (PPML) estimator to control for multilateral resistance and unobserved heterogeneity. Results: The findings show that conventional gravity variables remain important determinants of bilateral CPO exports; however, their effects differ substantially across regions and income groups. Beyond traditional economic factors, carbon emissions and land-use change emerge as significant environmental determinants, highlighting the heterogeneous role of environmental conditions in shaping international palm oil trade. Conclusion: The findings demonstrate that, beyond traditional economic drivers, environmental conditions play an increasingly important role in shaping global palm oil trade patterns. This highlights the necessity of incorporating environmental considerations into analyses of resource-based commodity trade. Contribution: This study extends the structural gravity literature by integrating environmental indicators into a commodity-specific gravity model and by providing new empirical evidence on heterogeneous CPO trade patterns across regions and income groups within South–South trade.

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