Palm oil expected to hold at RM3,900 amid tight supply

Palm oil prices are anticipated to stay firm at around RM3,900, supported by the rebound in soybean oil prices, which improves palm oil’s competitiveness.

The Malaysian Palm Oil Council (MPOC) expects Malaysia’s palm oil stocks to keep increasing from April onwards, though the rise will likely be moderate due to sluggish year-on-year production growth, especially in Sabah.

It noted that palm oil production in Sabah dropped by 10 per cent between January and March 2025, marking the lowest level recorded in the past five years.

“This production shortfall will limit inventory accumulation and help support palm oil prices.

“The ongoing decline in palm oil production in Sabah remains a concern and is likely to limit any significant production recovery in the coming months.

“Despite these supportive factors, a strong rally in vegetable oil prices is unlikely, as escalating trade conflicts and soft crude oil prices imply higher risk and price volatility,” it said in a statement.

MPOC said palm oil stocks in Malaysia rose to 1.56 million tonnes in March 2025, ending a six-month streak of declines.

The council attributed the increase to a 16.8 per cent month-on-month surge in production, as harvests previously delayed in February due to heavy rainfall and flooding were carried out.

“Despite the recovery in March, cumulative production for the first quarter of 2025 (1Q25) remains the lowest in three years and year-on-year production declines are likely to persist until September.

“As a result, total palm oil production in 2025 could fall to around 19 million tonnes, below the 19.3 million tonnes recorded in 2024,” it said.

According to MPOC, palm oil has recently regained its price edge over other soft oils, after being priced at a premium in the global market since August 2024.

At RM3,900 per tonne, it said palm oil is now considered reasonably priced.

“As a result, China is projected to increase its palm oil imports in May and June to replenish inventories, coinciding with the onset of the summer season, which typically sees higher palm oil consumption in the country.

“Similarly, India is expected to capitalise on the current low palm oil prices to replenish its depleted inventories, as the price gap between palm oil and soybean oil has narrowed in the domestic market,” it added.

Meanwhile, the council said soybean oil prices on the Chicago Board of Trade (CBOT) exchange have remained above 42 cents per pound (around US$920 per tonne), despite prevailing bearish sentiment in the US market.

It said that with the recent removal of tax credits for canola oil and imported used cooking oil from the US biodiesel supply chain, the resulting feedstock gap is likely to be filled by higher demand for tallow and soybean oil.

“This suggests that global soybean oil prices may have bottomed out and are poised for a strong recovery once US biofuel policy becomes clearer in the months to come,” it said.

Tags: inventories, soybean oil, prices, Production, Malaysia, palm oil, stocks