Lang
Malaysian palm oil production fell 8.3% month-on-month and 4.2% year-on-year in December 2024. Exports also declined, dropping 9.9% from the previous month and 1.4% year-on-year to 1.34 million tonnes. Despite these declines, December's export volume was in line with levels recorded in 2018, 2019 and 2023, which ranged between 1.3 and 1.4 million tonnes. This is notable given that palm oil traded in December at a premium of US$200 per tonne over soybean oil. Furthermore, total Malaysian palm oil exports and domestic consumption reached 1.65 million tonnes in December, exceeding production of 1.48 million tonnes by 164,000 tonnes. As a result, palm oil stocks fell sharply, ending the year at 1.71 million tonnes.
Palm oil exports are expected to decline seasonally in January and February owing to lower production. While the monsoon rains that had constrained harvesting activity in Malaysia and Indonesia began to ease in the last week of December, three public holidays in January are expected to reduce harvesting days and, consequently, output. This comes as palm oil consumption is set to rise in January and February owing to Chinese New Year celebrations and Ramadan.
The direction of palm oil prices in 2025 will depend heavily on export supply dynamics from Malaysia and Indonesia, alongside policy changes in the United States and Indonesia. Malaysian palm oil production is expected to remain steady at 19.5 million tonnes in 2025, while Indonesian output is forecast to recover by around 2 million tonnes to reach 48 million tonnes. However, this recovery is expected to be fully absorbed by rising demand from the B40 biodiesel blending mandate, making growth in export supply unlikely.
Before 2024, the build-up of Malaysian palm oil stocks relied heavily on imports, with the country importing around one million tonnes of palm oil from Indonesia annually. However, import volumes fell sharply to just 253,000 tonnes in 2024, a decline of 72%, which is reflected in the current low stock levels. This trend is expected to continue in 2025 as import volumes remain subdued, keeping Malaysian palm oil stocks below average at around 1.7 million tonnes during the first quarter of 2025, ahead of the peak production season.
US soybean oil prices have fluctuated between US$950 and US$1,050 per tonne since August 2024, despite several bearish factors such as revised soybean production estimates and uncertainty over soybean oil demand for biofuel blending under the Trump administration. Price stability suggests the market has reached a support level and may be poised for a recovery. The current lower price level is expected to temporarily boost export demand, pushing prices higher and narrowing the gap between palm oil and soybean oil prices.
The United States is currently undergoing a transition in its biofuel blending tax credit policy under the Trump administration. Clarity on this policy, together with proposed tariff increases on imports from Canada and China, is expected to have a significant impact on domestic soybean oil demand. Canada and China are major exporters of canola oil and used cooking oil (UCO) to the United States, both key feedstocks for biodiesel production. If these tariff increases are implemented, they are likely to support an upward trend in soybean oil prices.
Palm oil prices are expected to trade between 4,250 and 4,550 ringgit per tonne during the first quarter of 2025. Demand for palm oil is expected to rise after March, driven by tighter sunflower oil supplies resulting from heavy exports out of the Black Sea region. The key factors influencing palm oil prices in the coming months will remain the availability of export supplies from Malaysia and Indonesia, as well as developments in biofuel policy under the Trump and Prabowo administrations.
Source: Malaysian Palm Oil Council