KUALA LUMPUR (Oct 18): Palm oil prices are expected to moderate next year as production in Malaysia rises with an increase in harvesting activities amid better weather and labour conditions, the Ministry of Finance said.

Crude palm oil (CPO) is expected to average RM3,500 to RM4,000 per tonne in 2025, according to its Economic Outlook Report. That compares to the projected average of between RM3,800 and RM4,300 per tonne for this year at a time of global palm oil supply constraints, it noted.

“In addition, higher global output of soybean oil and steady demand for CPO from major importing countries are anticipated to contribute to the price stabilisation,” the report said.

Prices of the edible oil used in everything from lipstick to diesel have remained strong so far this year, averaging RM3,938 per tonne as poor weather conditions in Malaysia and Indonesia, which together account for more than 80% of the global supply, stoked concerns over output and tighter supply.

Dry weather conditions that began in the second half of 2023 and intensified in early 2024 have also shrivelled fresh fruit bunches (FFB). CPO prices, however, are off peak as sharp appreciation in the ringgit weighs on demand from abroad.

Still, the benchmark CPO futures is still nearly 16% higher than at the end of 2023.

“The low FFB yield, anticipated to be noticeable as early as the fourth quarter of 2024, is forecast to affect CPO production in the second half,” the Finance Ministry said.

A labour shortage in the sector largely reliant on foreign workers for harvesting has also contributed to the strong prices this year, though the ministry said labour supply is expected to improve and boost output, along with better fertiliser application.

Click here to read more about the Economic Report 2024/2025.