Malaysia: December Palm Oil Output Declines, Prices Projected To Strengthen

Malaysia’s palm oil production fell 8.3% month-on-month and 4.2% year-on-year in December 2024, while exports dropped 9.9% month-on-month and 1.4% year-on-year to 1.34 million tonnes. Despite the declines, export levels remained consistent with figures recorded in 2018, 2019, and 2023, ranging between 1.3 to 1.4 million tonnes, even as palm oil traded at a US$200 per tonne premium over soybean oil.

Combined exports and domestic consumption in December surpassed production levels, leading to a sharp decline in palm oil inventories, which ended the year at 1.71 million tonnes.

Looking ahead, exports are expected to decline seasonally in January and February, influenced by reduced production and fewer harvesting days due to public holidays. However, palm oil consumption is likely to rise during the Chinese New Year and Ramadan celebrations.

For 2025, Malaysia’s palm oil production is projected to remain steady at 19.5 million tonnes, while Indonesia is expected to recover by 2 million tonnes to reach 48 million tonnes. However, Indonesia’s increased production will likely be absorbed by demand for B40 biodiesel blending, limiting export supply growth from both countries.

Malaysia’s palm oil imports from Indonesia dropped by 72% in 2024 to 253,000 tonnes, contributing to the current low stock levels. This trend is expected to continue, keeping inventories below average at around 1.7 million tonnes in the first quarter of 2025 before the peak production season.

Palm oil prices are projected to trade between RM4,250 and RM4,550 in the first quarter, supported by declining production until February and tightening supplies of sunflower oil. Demand is expected to rise after March.

In the US, soybean oil prices have stabilised between US$950 and US$1,050 per tonne since August 2024, despite bearish factors such as increased soybean production estimates. Policy changes on biofuel blending tax credits and proposed tariff hikes on imports from Canada and China are expected to boost domestic demand, supporting a bullish trend for soybean oil prices.

Key factors influencing palm oil prices in the coming months include export supply dynamics from Malaysia and Indonesia, as well as biofuel policies under the Trump and Prabowo administrations.

Tags: imports, consumption, soybean oil, Indonesia, prices, Production, Malaysia, palm oil