KUALA LUMPUR (Nov 21): BMI, a Fitch Solutions company, has forecast an annual average palm oil price of RM3,900 per tonne in 2025, down from an estimated RM4,050 per tonne in 2024.
BMI commodity analyst Matthew Biggin attributed the projection to ample alternative supply, competition from other edible oils, and an uncertain import demand outlook in major consuming markets.
“This will exert downward pressure on palm oil prices over the next 12 months. One of the bearish factors will be the soybean oil price premium over palm oil, which has narrowed significantly throughout much of 2024.
“In September, India’s decision to raise its import tariffs on crude and refined edible oils, including palm oil, has also clouded the import demand outlook,” he said during a webinar on Thursday.
Biggin also forecast a 1% decline in Malaysian palm oil production to 19.6 million tonnes for the 2024-2025 period.
“The decline reflects both the impact of a high base following an outperformance in the 2023-2024 season and the lagged effects of reduced rainfall in Southeast Asia in the first quarter of this year,” he said.
On broader industry challenges, Biggin emphasised that Malaysia’s palm oil sector must pivot to a growth model focused on consistent productivity improvements to achieve sustainable production growth.
He said the shift is necessitated by rising labour costs, land constraints, and increasing environmental concerns
“This shift will require increased and redirected investment in the sector, focusing on replacing ageing trees with new plantation stock and adopting labour-saving mechanisation.
“Additionally, investments in climate change adaptation practices, technologies, and other resilience measures will become increasingly important, posing a challenge for the Malaysian palm oil sector,” he said.
Biggin also noted that reduced exports from Indonesia could present an opportunity for Malaysia to reclaim market share in the global palm oil market.
Additionally, he said the rising demand for low-emission transportation fuels in international markets, coupled with domestic mandates and environmental legislation, could boost Malaysian palm oil’s role as a feedstock for biodiesel and other sustainable fuels.
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