CPO Price Should Hold At RM3,900, Production Concerns However Remain

BusinessToday

22-04-2025

Oil palm trees
After six consecutive months of decline, Malaysian palm oil stocks increased in March 2025, reaching 1.56 million tonnes. The Malaysian Palm Oil Council (MPOC) attributed this rise to a 16.8% month-on-month increase in palm oil production. This production recovery follows delays in February caused by heavy rainfall and flooding.
However, the MPOC also noted that despite the March rebound, total palm oil production in the first quarter of 2025 was the lowest in three years. The council predicts that year-on-year production declines are likely to continue until September, potentially leading to a total palm oil output of around 19 million tonnes in 2025, below the 19.3 million tonnes produced in 2024.
In terms of pricing, palm oil has recently regained its price competitiveness against other soft oils, after being priced at a premium in the global market since August 2024. The MPOC considers palm oil to be reasonably priced at RM3,900 per tonne. This price point is expected to drive increased palm oil imports from China in May and June, as the country replenishes its inventories during the higher consumption summer season.
India is also expected to capitalise on the current lower palm oil prices to rebuild its depleted inventories, driven by a narrowing price gap between palm oil and soybean oil in the domestic market.
Global soybean oil prices have been relatively high, with CBOT exchange prices hovering above 42 cents per pound (USD920 per tonne), despite bearish sentiment in the U.S. market. The recent removal of tax credits for canola oil and imported used cooking oil in the U.S. is expected to boost demand for tallow and soybean oil to fill the feedstock shortfall. This suggests that global soybean oil prices may have found a bottom and could see a strong recovery pending clarification of U.S. biofuel policy.
While Malaysian palm oil stocks are projected to continue increasing from April onwards, the growth is expected to be moderate. This is due to weak year-on-year production growth, particularly in Sabah, where palm oil production declined by 10% from January to March 2025, reaching a five-year low. The production shortfall in Sabah is expected to limit inventory accumulation and support palm oil prices.
Looking ahead, palm oil prices are anticipated to remain supported at RM3,900 per tonne. This price stability is supported by recovering soybean oil prices, which enhance palm oil's competitiveness. However, the ongoing production decline in Sabah is a concern, likely to constrain any significant production recovery in the coming months. Overall, while supportive factors exist, a strong rally in vegetable oil prices is considered unlikely due to escalating trade conflicts and soft crude oil prices, which increase risk and price volatility. Related