The Star (5/12/2025) - PETALING JAYA: Bearish supply demand fundamentals in the edible oils market could weigh on the price of crude palm oil (CPO) in 2026, according to MARC Ratings.

It projects CPO prices to range between RM3,850 and RM4,250 per tonne in 2026 as compared to RM4,300 per tonne in 2025, underpinned by more favourable weather patterns, recovering yields and a gradual normalisation in global production of edible oils.

The ratings firm said other factors include demand for biodiesel and a weaker US dollar, underpinned a higher average CPO price in 2025 compared to 2024 – supported by elevated prices of competing vegetable oils.

It noted demand dynamics are supportive with the US Department of Agriculture forecasting global palm oil consumption to grow but at slightly below total production.

Major destination markets like India are expected to maintain purchases, supported by CPO’s price competitiveness against other vegetable oils.

The Food and Agriculture Organization of the United Nations is projecting a 2.1% increase in the utilisation of oils and fats in 2026, mainly for biofuels.

Indonesia’s move to increase its biodiesel blend rate to 40% (B40) from 35% (B35) helped CPO prices in 2025.

MARC Ratings stated a 10% increase in the biodiesel blend rate could raise annual palm oil consumption by above four million tonnes or around 5% of global production.

Jakarta intends to raise the blend rate further to B50 in 2026, according to reports.

CPO production has been supported by yield recovery with the improved weather conditions after the 2023-2024 El Niño event. Total output in Indonesia had risen by 11.3% year-to-date as at September, while Malaysia posted a modest 1.8% increase as at October, it added.

Drier weather in Canada and Europe may hinder yield recovery in rapeseed oil production there, but Brazil’s soybean production is set to grow in 2026, which could offset any drop in production in Argentina or the United States.

“Collectively, these mixed conditions for competing oils suggest that CPO may struggle to revisit the price highs observed in late 2024 and early 2025,” MARC Ratings forecast.

CPO also faces challenges in raising long-term supply. Replanting of aged acreages in Malaysia is slow, with replanting rates averaging only about 2% over the past decade, well below the recommended 4% annually.

“High upfront costs continue to deter both smallholders and commercial estates from undertaking large-scale replanting.

“Indonesia faces similar challenges; while corporate estates under the Indonesian Palm Oil Association achieve a replanting rate of around 4% to 5% annually, smallholder replanting has only reached slightly above 20% of the government’s target for 2024,” MARC Ratings noted in its release.

It added regulatory pressures, such as the European Union Deforestation Regulation which is scheduled for enforcement in 2026, will add further compliance burdens and constrain potential plantation expansion.

Read more at https://www.thestar.com.my/business/business-news/2025/12/05/palm-oil-consumption-forecast-to-increase