Palm oil prices continue to rise as demand remains strong
Palm oil futures have been on a rocket ride since the summer of 2024.
Tight supplies have supported prices, making palm oil less competitive with its main rival, soybean oil, according to the Council of Palm Oil Producing Countries (CPOPC).
Palm oil traded as high as $1,250 per tonne at the end of 2024, but demand remained resilient due to the lack of alternative vegetable oils, the organization said in its Annual Report Market & Outlook 2025.
That strong demand supported prices during the second half of 2024 and so far in 2025. Futures are up 31 per cent since late-August.
CPCOC is optimistic palm oil will continue trading at $1,000 to $1,250 per tonne during the first quarter of 2025 due to increased biodiesel use in Indonesia, lower stocks in producing countries and seasonally low production in the coming months.
“However, palm oil prices are expected to be traded lower in the second half of 2025 due to the seasonally high yielding production cycle and harvesting season for rapeseed and sunflower seed,” it said.
Glacier MarketsFarm analyst Mike Jubinville said soaring palm oil prices are supportive for canola values.
“Palm oil is the dominant vegetable oil,” he said.
“The influence is there, (although) we don’t necessarily compete head to head in most markets.”
Jubinville said the canola market has been more heavily influenced by Canada’s tight carryout and strong global demand for the product.
“Usage to date is still continuing at a pace that we just can’t sustain, both for export and for domestic crush,” he said.
“That’s the linchpin issue here for our canola market.”
Possible U.S. tariffs and questions surrounding canola’s ability to participate in U.S. biofuel markets are two potential bearish market factors.
The European Union is a good candidate to pick up the slack if canola needs to be rerouted to other markets.
The EU purchased 304,147 tonnes of Canadian canola in December compared to the 104,890 tonnes sent to China.
“We do have that emerging demand element out of Europe,” said Jubinville.
But it is nice to have that underlying support from palm oil.
He noted that production of the commodity is floundering in Indonesia and Malaysia due to labour and supply chain issues and the reluctance of plantation owners to replant trees when vegetable oil prices are so strong.
CPOPC estimates production in Indonesia, the world’s largest palm oil producing nation, was 48 million tonnes in 2024, down from 50.07 million tonnes the previous year.
Production in Malaysia is estimated at 19.34 million tonnes, up from 18.55 million tonnes in 2023.
CPOPC is forecasting “marginal growth” in global palm oil production in 2025, mainly in Indonesia.
The organization is confident demand will remain strong in 2025 due to increasing domestic biodiesel requirements in Indonesia, the need to replenish stocks in importing countries such as China and India and tight supplies of competing products such as sunflower and canola oil.
Indonesia expects its B40 biodiesel program will reach full implementation in March, which means the country will start using a 40 per cent palm oil fuel blend, up from the previous mandate of 35 percent.
That should mop up any increase in production in Indonesia in 2025.
In the meantime, soybean oil is undercutting palm oil in world markets.
Soybean oil from Argentina sold at a US$70 per tonne discount to Malaysian palm oil and a $110 discount to Indonesian palm oil on average in the August to December period of 2024, according to Oil World.
Indonesia’s price was influenced by an increase in export taxes in that country.
Oil World estimates global production of biodiesel and renewable diesel at 64.14 million tonnes in 2024, an 8.4 per cent increase over the previous year.
Palm oil accounted for one-third of total biofuel feedstock use.
CPOPC expects continued growth in the biofuel sector in 2025, primarily due to increased use of sustainable aviation fuel.
Palm oil feedstock use in the biofuel sector is expected to grow by 3.5 per cent in 2025.
CPOPC ended its annual report with a word of warning for the industry.
“The key challenge of stagnating yield of oil palm industry has to be addressed in order to enhance productivity to ensure the competitiveness of the industry in the longer term,” it said.
Further development of the grain sector in the Black Sea and Danube region will be discussed at the 23 International Conference BLACK SEA GRAIN.KYIV on April 24 in Kyiv.
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