Kuala Lumpur: Palm oil prices may face downward pressure beyond the first quarter of 2025 as production recovers and delays in Indonesia’s biodiesel program impact demand, analysts report. This comes despite a recent drop in stockpiles to their lowest level in 19 months, reported The Edge Malaysia.
According to TA Securities, crude palm oil (CPO) production is expected to recover gradually from the second quarter of 2025, driven by improved weather conditions and better labour availability. By the year’s end, output could potentially reach 20 million tonnes. At the same time, record global soybean supplies from Brazil and Argentina, whose export seasons run throughout the year, are expected to weigh on CPO prices.
CPO prices surged 20% last year amid supply concerns and fluctuating inventories. The benchmark third-month delivery was trading at RM4,482 on Monday. However, current CPO prices are commanding a premium over soybean oil, a reversal from the average discounts seen in the past three to five years.
Indonesia’s rollout of the B40 biodiesel program, which mandates a 40% blend of palm oil with diesel, may face delays due to operational and cost challenges, according to BIMB Securities. The program is likely to be implemented in phases rather than all at once. These delays, coupled with a widening price gap between palm oil and gas oil, could weaken CPO demand, with prices expected to range between RM3,500 and RM4,500 per tonne from the second quarter onward.
December exports fell nearly 10% to a six-month low of 1.34 million tonnes, primarily due to uncompetitive CPO prices and the challenges of storing palm oil during winter, according to Public Investment Bank. Production also dipped, impacted by flooding, leading to a reduction in Malaysian stockpiles to 1.71 million tonnes in December, as reported by the Malaysian Palm Oil Board.
CIMB Securities predicts a further 16% decline in exports for January, as buyers shift to cheaper alternatives like soybean and rapeseed oils due to CPO’s price premium. Uncertainty over U.S. biodiesel policy is also likely to keep soybean oil prices weak.
Hong Leong Investment Bank suggests that Malaysian palm oil stockpiles could continue to decline in January, driven by seasonally lower exports during winter and reduced price competitiveness against other edible oils.
While palm oil production is set to rebound later in 2025, the combination of high prices, delayed biodiesel mandates, and competition from alternative oils may keep prices under pressure.
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