CPO prices expected to remain firm in 2025
PETALING JAYA: Crude palm oil (CPO) prices remain supported by bullish fundamentals and higher demand from price-sensitive markets like Pakistan and India, despite signs of production and stock levels rising.
Indonesia's plans to roll out a B50 biodiesel mandate in 2026 and call on local producers to raise sales in the domestic market are supportive of CPO prices, CGS International Research (CGSI Research) noted.
'We view the recent price support from Indonesia's biodiesel and Domestic Market Obligation measures is likely to be temporary, while ample global vegetable oil supply and sluggish demand fundamentals should continue to cap meaningful upside in CPO prices,' the research house stated in a report.
It expects sustained earnings from pure upstream plantation players given current CPO is holding around the RM4,200 per tonne price level.
Malaysia's CPO stock level rose to a 19-month high of 2.1 million tonnes in July as production rose 7.1% and exports eased to 1.3 million tonnes, down some 22.9% year-on-year (y-o-y).
The fall in exports came despite a widening price premium over soybean oil in July at US$332 per tonne.
Furthermore, MBSB Research noted that despite the July discount premium being 55% above the three-year average of US$214 per tonne, demand for CPO remained muted.
It expects the premium risk to ease as fresh fruit bunches and CPO output continue to recover amid ample stock levels.
It expects the CPO price to average at RM4,100 a tonne for 2025.
Malaysia's CPO production is forecast to rebound in 2025, as the year-to-date production of 10.77 million tonnes is running at 4% above the 10-year January-to-July output of 10.35 million tonnes.
Oilworld, a source of independent global market analyses and forecasts, is expecting the country's total production to hit 19.3 million tonnes while the US Department of Agriculture is forecasting 19.4 million tonnes output.
Kenanga Research is of the view that Malaysia's 2025 CPO production will hit 19.2 million tonnes, which is above the historical 10-year average of 19 million tonnes.
It expects demand supply fundamentals of the global edible oil market to support CPO prices in 2025 and 2026.
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