The oil palm market in 2025 is expected to maintain elevated CPO prices, particularly in the first half, driven by robust demand from biodiesel mandates, festive seasons and geopolitical factors affecting some substitute oils. However, supply-side improvements, particularly from favourable weather conditions, may temper prices in the latter half of the year. Locally, we expect prices to remain elevated on account of rising demand and elevated FX rates, which bodes well for the local players.
In 2024, the global palm oil market experienced a supply squeeze and policy-driven demand growth, leading to higher prices. Indonesia's transition from B35 to B40 biodiesel reduced export volumes, while severe flooding in Malaysia lowered production estimates from 19.8 MMT to 19.2 MMT. These disruptions propelled crude palm oil (CPO) prices to a peak of $1,200/t in December, bringing the annual average to $925.78/t—an increase of 10.66% from the previous year.
In 2025, our outlook for CPO prices remains bullish, driven by strong global demand and limited substitutes. On the former, Ramadan activities, coupled with the higher summer demand from India, are likely to propel demand in the first half of 2025. Additionally, demand in India and China is likely to improve on the back of better macroeconomic conditions. The United States Department of Agriculture (USDA) has projected consumption to reach 46.3 MMT, a 2.1% increase from the prior year.
