BMI Raises Palm Oil Outlook Amid Strong India Demand

Research firm BMI, a Fitch Solutions company, has raised its 2025 average annual crude palm oil (CPO) price forecast to RM4,320 per tonne, up from RM4,150 previously, citing stronger-than-expected Indian import demand that supported prices through the third quarter of the year.

According to BMI’s latest commodities outlook, front-month CPO futures on Bursa Malaysia closed at RM4,335 per tonne on October 27, bringing the year-to-date average to RM4,332 per tonne — broadly consistent with the revised full-year forecast.

“Indian palm oil imports surged 43.1% quarter-on-quarter in Q3 2025, exceeding expectations and driving prices higher,” BMI said, noting that palm oil captured 56.9% of India’s edible oil imports during the quarter, up from 52.4% in Q2.

“The strong uptake was driven by palm oil’s favourable pricing versus soy and sunflower oils, particularly during India’s festive season,” the report added.

However, BMI cautioned that palm oil’s competitive edge is narrowing. Since August, global soy oil prices have declined while CPO prices edged higher, reducing the import price gap that favoured palm oil. As a result, India’s palm oil share of total edible oil imports is projected to moderate to around 50% in Q4, as soy oil regains some market share.

BMI projects global palm oil production to reach 80.1 million tonnes in the 2025/26 season, up 1.8% year-on-year, led by Indonesia — where output is expected to rise 3.3% to 47.5 million tonnes.
Malaysia’s production is forecast to grow 0.5% to 19.5 million tonnes, after a strong third quarter in which output rose 7.0% quarter-on-quarter. The increase boosted domestic stockpiles by 16.2%, even as demand climbed 8.2%.

The firm expects Malaysian production to peak in October before tapering seasonally toward year-end. “With robust supply and moderating demand, Malaysian stockpiles are likely to stay elevated through early 2026,” it noted.

Global consumption is expected to expand 2.5% in 2025/26 to 78.5 million tonnes, narrowing the global supply surplus to 1.6 million tonnes from 2.1 million tonnes in the previous season.

Despite a near-term slowdown, India’s palm oil consumption remains a key driver, with the USDA forecasting 11.5% growth in imports this season to offset lower domestic stockpiles.

BMI expects palm oil prices to remain sensitive to production developments in Indonesia and Malaysia, as well as shifts in demand from India and China.

While the research house forecasts a slight easing to RM4,300 per tonne in 2026, it believes structural supply constraints will keep prices elevated over the medium term.

Global production growth has slowed markedly — from an average of 6.1% annually in the early 2010s to just 1.9% between 2020 and 2025 — due to limited land expansion, environmental restrictions, and lagging productivity investments.

BMI highlighted that Indonesia’s planned B50 biodiesel mandate could further tighten exportable supplies and add upward pressure to global prices if implemented as scheduled.

BMI also cautioned that environmental and regulatory developments could pose downside risks.

The EU Deforestation Regulation (EUDR), which restricts imports linked to deforestation, could reduce palm oil demand in Europe, while supply disruptions or new trade policies in Indonesia and Malaysia could add volatility.

“With Indonesia and Malaysia accounting for roughly 85% of global palm oil production and 90% of exports, the market remains highly exposed to regional weather patterns, policy shifts, and biofuel mandates,” BMI warned.

BMI’s upward revision reinforces expectations that palm oil prices will remain firm through early 2026, supported by strong Indian demand, resilient edible oil markets, and structural supply limits.
However, with global output improving and the pricing advantage over rival oils narrowing, analysts foresee a period of price consolidation before any further rally.

Tags: imports, China, futures, price, stockpiles, Indonesia, consumption, Crude palm oil, demand, Production, India, Malaysia, biodiesel, palm oil, forecast