Palm oil prices to remain high in short-term, then forecast to decline due to increased production
06/03/2025 (Oils & Fats International) - Palm oil prices are expected to remain high in the short-term but then start declining due to increasing production, analysts told last week’s Palm & Lauric Oils Price Outlook Conference & Exhibition (POC2025).
Speakers at the event held 24-26 February 2025 at the Shangri-La Hotel, Kuala Lumpur, Malaysia, highlighted the pressing need for replanting policies in palm oil plantations across Indonesia and Malaysia stemming from stagnant productivity rates and an increase in diseases affecting ageing palm oil trees.
Despite a record increase in soyabean oil output in October/September 2024/25, there was a global production deficit of vegetable oils, leading industry analyst and executive director of Oil World, Thomas Mielke, said.
The growth in world production of vegetable oils had slowed dramatically and was expected to rise by only 2.1M tonnes in 2024/25, with demand rationing inevitable, he said.
This was set against strong demand growth of 5.9M tonnes in the 10 years ending in 2023/24.
“The challenge for the years ahead is to produce sufficient supplies, in good quality and at reasonable prices in a sustainable way.”
Julian McGill, managing director of Glenauk Economics, said Malaysian output increased in 2024 due to the arrival of additional plantation workers.
However, droughts and disease would result in a slight decrease in Malaysian output to 19.2M tonnes this year, he said.
Although Indonesian output declined in 2024, with better rainfall 2025 will see output growth of 2.2M tonnes, according to McGill.
“Most of the Indonesian recovery will come in the first half of the year, which is important for the outlook for stocks (and prices),” he added.
In addition, the Indonesian government’s plan to increase its biodiesel blending mandate from B35 to B40 this year could also reduce supplies, the more than 2,000 delegates at the event heard.
Speaking at the event, Godrej International director Dorab Mistry said it was time for Indonesia to lift the moratorium on increasing the palm oil planted area and legislate for palm plantations to be expanded sustainably.
Against this backdrop, leading industry figures said that current geo-political global events, including uncertainty over policies by the new US administration, were making it difficult to forecast the outlook for palm oil prices.
“The biggest price factor is going to be tariffs and a trade war,” Mistry said.
Speaking at the event, Bursa Malaysia chairman Abdul Wahid Omar said: “Global agri-commodity markets have been navigating an increasingly complex and volatile landscape, shaped by shifting supply-demand dynamics, geopolitical conflicts, erratic weather patterns and tighter regulatory measures such as the European Union Deforestation Regulation (EUDR).
“Looking ahead, key risks [for palm oil] include competition from other vegetable oils, weaker demand from main markets such as China and India, and unpredictable weather conditions, all of which could significantly impact palm oil trade.”
However, it was generally agreed among trade figures that palm oil was losing its competitiveness to other edible oils, such as soyabean oil.
“From being the cheapest and most competitive vegetable oil, palm rose to become a premium priced vegetable oil [in 2024],” Mistry said.
Mistry said he expected palm oil futures to trade between MYR4,000-4,600 (US$903-1,038)/tonne until 31 March 2025 but then to slide following an uptake in palm oil production.
“After Ramadan I expect a significant pick up in palm production and a slide in palm prices which will eventually make palm once again competitive,” Mistry added.
McGill said he expected palm oil prices to weaken in the first half of the year to reach MYR4,000-4,200 (US$903-948)/tonne by July, after which they would rebound.
Palm oil’s price premium over soyabean oil is temporary, according to Mielke.
“Palm oil’s price premium vis-à-vis soyabean oil will diminish in the next one to three months,” he said, adding that prices of the four major oils – palm, soyabean, sunflower and rapeseed – would continue to be volatile but would “fluctuate in a relatively narrow range”.