Palm oil imports to hit 5-year low on price and production gains

A recovery in palm oil production and reduced imports by price-sensitive consumers are expected to push prices lower and narrow the premium for the tropical oil over its main rivals.

Palm oil futures, which jumped 20% to a two-year high in 2024, are already losing ground as major importers such as India switch to cheaper alternatives such as soybean and sunflower oils. Palm oil has traded at an unusual premium to other oils in recent months due to flood-related supply disruptions in top producers Indonesia and Malaysia. But palm oil stockpiles could start to rise in coming months as demand falls, industry officials and analysts said at a conference in Kuala Lumpur this week.

Weakening demand, rising production

High palm oil prices are prompting buyers to switch to soybean oil, which could lead to stockpiling once production picks up, according to Thomas Mielke, chief executive of the Hamburg-based forecasting firm.

India’s palm oil imports in 2024/25, which ends in October 2025, could fall to 7.5 million tonnes, the lowest in five years, Sanjeev Asthana, president of the Oilseed Extractors Association of India (SEA), said earlier.

“The production slump in Indonesia is over and the recovery period has begun. After Ramadan, I expect a significant increase in production,” analyst Dorab Mistry said. He said the recovery in production and lower demand could push prices lower, with palm oil likely to trade in a range of 3,600 to 4,100 ringgit ($814.5 to $927.6) a tonne from April to November.

Palm oil’s premium over soybean oil is already narrowing. It was trading at a $50 a tonne premium in India this week, compared with more than $100 a month ago. Analysts say Indonesia’s crude palm oil output is likely to rise to 50 million tonnes in 2025 from 48.16 million tonnes a year earlier, while Malaysia’s output is set to rise to 19.5 million tonnes.

Despite the rise in output, Indonesia’s palm oil exports are set to fall 7.3% from a year earlier to 27.35 million tonnes as Jakarta ramps up biodiesel production. Indonesia expects its B40 biodiesel programme, aimed at reducing the country’s reliance on imported diesel, to be fully rolled out next month after delays earlier in the year. Indonesia’s palm oil consumption for biodiesel production is likely to increase to 13.6 million tonnes from 11.44 million tonnes a year earlier, Business Standard reported.

Tags: export, Indonesia, prices, Malaysia, palm oil