Malaysian crude palm oil futures are expected to average higher in 2025 than last year as Indonesia, the world's top producer of the product, boosts domestic consumption of palm oil-based biodiesel, although competition from other, cheaper vegetable oils is likely to serve as a factor limiting price increases, Reuters reported, citing a staff survey.
According to the median estimate based on forecasts from 11 traders and analysts, the benchmark palm oil price will average 4,350 Malaysian ringgit ($972.07) per tonne this year, up 5.4% from 2024. The average selling price of crude palm oil in 2024 will average 4,128 ringgit ($922.46) per tonne, up 8.7% from a year earlier, as adverse weather conditions adversely affected supplies, bringing prices to their highest in 2.5 years in November.
Indonesia plans to increase the share of palm oil in biodiesel to 40% in 2025. This will require an additional 1.2-1.7 million tons of palm oil. Declining palm oil exports from Indonesia, coupled with unfavorable weather conditions in Southeast Asia, could contribute to higher prices.
However, palm oil price increases are likely to be contained as supplies of competing soybean oil from South America, which has recently been selling at a lower price than tropical vegetable oils, expand. Palm oil production in Indonesia and Malaysia is expected to increase slightly in 2025. Adverse weather conditions, persistent labor shortages, and low rates of oil palm planting renewal remain factors that limit the growth of palm oil production in Malaysia.
Meanwhile, Indonesia has welcomed the World Trade Organization's decision in a case against the European Union over palm oil-based biodiesel. Indonesia filed a case with the WTO's dispute settlement body in 2019 after the EU ruled that palm oil-based diesel would not be considered biofuel because the process of producing it was directly linked to forest destruction. Indonesia argued that the EU was using climate concerns as a pretext to impose protectionist trade policies.
The Commission found flaws in the way the EU prepared, published and applied its measures. Indonesia's Trade Ministry said the EU will have to adjust its policies in line with the WTO ruling, adding that the country's authorities intend to closely monitor changes in EU legislation to comply with WTO recommendations.
