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Kuala Lumpur: Crude palm oil (CPO) prices are expected to remain high during the first quarter of 2025 due to low stock levels at the end of last year.
CGS International said global palm oil supplies will stay tight in the first quarter of 2025 because of low inventory levels, noting that the first quarter is typically the weakest period for palm oil production.
"As a result, we expect CPO prices to stay elevated in the first quarter of 2025 until palm oil production recovers in the second quarter of 2025, particularly in Indonesia, following the disruptions caused by El Niño in 2023. We also expect an increase in supplies of competing vegetable oils, such as soybean oil, in the second quarter of 2025," the firm said in a note.
The company kept its 2025 CPO price forecast unchanged at 4,000 ringgit per tonne, supported by an expected 3% rise in global output for 2025, driven mainly by Indonesia.
"With weather conditions stabilising, we expect a significant recovery in Indonesia's production during 2025. In contrast, we expect Malaysia's palm oil output to remain largely flat compared with the previous year, following a strong recovery in 2024," it added.
The firm also maintained its CPO price outlook, expecting demand rationing by some importing countries such as China and India given current high prices ranging between 4,200 and 4,700 ringgit per tonne.
"Note that palm oil remains more expensive than soybean oil and sunflower oil at present. We expect global demand for CPO to grow by 1% year-on-year in 2025, with demand coming mainly from Indonesia to support its B40 biodiesel programme," it said.
Most plantation companies are expected to post strong results for the fourth quarter of 2024, supported by higher CPO prices, which averaged around 4,840 ringgit per tonne during the quarter.
Despite expectations of strong performance and continued high CPO prices in the first quarter of 2025, the firm maintained a "neutral" rating on the sector, citing the potential for a price correction in the second quarter of 2025 driven by a recovery in palm oil production, particularly from Indonesia, and increased supplies of competing vegetable oils.
The firm recommended SD Guthrie Bhd and Hap Seng Plantation Bhd as its top picks in the sector.
Indonesia's Ministry of Energy and Mineral Resources expects the implementation of the B40 biodiesel policy to raise the biodiesel quota to 15.6 million kilolitres in 2025, up 16% from 13.4 million kilolitres in 2024.
Despite earlier plans for full implementation by 1 January 2025, the B40 programme has been delayed, with companies given a transition period of one to two months to meet the new blending requirements.
The note concluded: "We expect the higher palm oil blending ratio in Indonesia's biodiesel to help support strong global demand for palm oil."
Source: The Business Times