The production of Palm oil Indonesia’s crude oil is expected to rebound in 2025 after an expected decline this year. However, prices are expected to remain elevated due to the planned expansion of the country’s biodiesel mandate, industry analysts say.
Malaysia’s benchmark palm oil price has already risen by more than 35% in 2024. The increase was driven by sluggish production and Indonesia’s plan to increase mandatory domestic biodiesel blending to 40% in January from the current 35%. With this move, the country aims to reduce fuel imports.
Meanwhile, palm oil production in Indonesia, the world’s largest producer, is expected to rebound by 1.5 million tonnes next year. By 2024, however, it is estimated to have fallen by just over 1 million tonnes, Julian McGill, managing director of Glenauk Economics, made the prediction at the Indonesia Palm Oil Conference on Friday.
In addition, Thomas Mielke, director of Hamburg-based research firm Oil World, estimates that Indonesia’s palm oil production could increase by as much as 2 million tons next year. As Mielke points out, this recovery should come after a drop of 2.5 million tons in 2024.
However, despite forecasts of recovery in Indonesian production, the supply of other vegetable oils is decreasing.
In Malaysia, palm oil production is expected to fall slightly in 2025, following an estimated increase of 1 million tonnes in 2024.
“We need a palm recovery in 2025 as combined exports of soybean, sunflower and rapeseed oils are declining,” Mielke commented.
“Scary” increase in prices
Mielke described the rise in palm oil prices over the past seven weeks as “scary” for buyers. He forecasts a 10% to 15% increase between January and March if Indonesia implements the B40 policy.
The Indonesian Palm Oil Association highlighted the need for additional raw material of around 3 million tonnes to meet the B40 mandate, which could reduce supply destined for export.
The current premium on palm oil has already caused the product to lose market share to other vegetable oils, Mielke added.
Malaysian palm oil prices are projected to range between $950 and $1,050 per tonne in 2025, according to estimates from Glenauk's McGill.
Malaysian palm oil hit 5,104 ringgit ($1,165.30) on Friday, the highest since mid-2022.
“The current sentiment is highly optimistic, but we need to be cautious,” said Dorab Mistry, director of Indian consumer goods company Godrej International.
Source: Bernadette Christina Munthe and Fransiska Nangoy | Notícias Agrícolas
