Palm oil price could exceed RM5,000 due to supply shortage

Palm oil prices, the world’s most widely used vegetable oil, could rise by about 15% to more than 5,000 ringgit ($1,191) per tonne by the end of the year, said veteran trader Dorab Mistry, director of Godrej International Ltd. He predicted that if Indonesia, the world’s largest palm oil producer, increases the proportion of biofuels in diesel to 50%, prices could hit 5,500 ringgit in the first quarter of next year, the highest since June 2022. Mistry made the remarks at a conference in Colombia on September 23.

Palm oil production is stagnant, and productivity growth has fallen to zero or even negative, said Mistry, who has traded vegetable oils for more than three decades. Soybean, sunflower and rapeseed crops are not expanding due to the low attractiveness of oilseed prices. In addition, in Indonesia, a policy of seizing “private but not fully legal plantations” is leading to a decline in productivity, and in Malaysia, palm trees are aging without proper renewal.

If Indonesia implements the B50 standard (50% biofuel in diesel), it will cause a shortage of palm oil, which will sharply increase prices, warns Mistry. He also called on the country to lift the moratorium on new plantations, which has led to stagnation in production. At the same time, soybean oil, palm oil’s closest competitor, could rise in price by more than 40% due to demand for biodiesel in the United States, reaching 70 cents per pound.

Mistry’s forecasts point to palm oil supply growth of just 1 million tonnes in 2025/26, compared with 1.5 million tonnes a year earlier. India, one of the largest importers, could increase palm oil imports to 9.3 million tonnes in 2025/26 from 8.2 million tonnes, while total vegetable oil imports would rise 5% to 17.1 million tonnes. Meanwhile, sunflower oil could become competitive by mid-2026, thanks to higher harvests in the Black Sea region and Argentina.

Palm oil prices remain volatile due to trade tensions and supply instability. As palm oil is used in both the food and biofuel industries, weaker-than-expected production or increased fuel use could push up global food inflation and increase industrial costs.

Tags: Indonesia, prices, Malaysia, palm oil