1. Weekly News

Indonesia

Indonesia's Ministry of Agriculture Develops Strategy to Balance B50 Biodiesel Program with CPO Export Stability

Indonesia's Ministry of Agriculture is developing a strategy to ensure the 50% Biodiesel Program (B50) does not disrupt exports of crude palm oil (CPO) and its derivatives. The acting Director General of Plantations emphasized balancing domestic biodiesel requirements with the stability of CPO exports, a key economic contributor. The government is conducting a comprehensive study to determine the necessary increase in CPO production without affecting exports. Efforts to boost palm oil productivity, including plantation intensification and rejuvenation, are expected to raise yields from 3 metric tons (mt) to 6 mt per hectare (ha). The Indonesian Palm Oil Entrepreneurs Association (GAPKI) has raised concerns about potential export declines due to the B50 program.

GAPKI Urges Stronger Palm Oil Export Market Diversification, Targeting India Amid EU Regulation Challenges

GAPKI has called for a stronger palm oil export market diversification strategy, mainly to reduce reliance on the European Union (EU) amidst the postponed European Union Deforestation Regulation (EUDR). India is highlighted as a potential alternative market due to its less stringent sustainability standards. In 2023, Indonesia exported 5.97 million metric tons (mmt) of palm oil to India, a significant increase from 2021. However, palm oil exports to India are projected to decline in 2024 due to higher tariffs and India's domestic palm oil development program, which aims to expand production. Experts emphasize the need for market diversification and increased domestic consumption through initiatives like the B40 biodiesel program.

Malaysia

Malaysia to Increase Crude Palm Oil Export Duty to 9.5% in Nov-24, First Rise in Over Three Years

In Nov-24, Malaysia, one of the world's largest palm oil producers, plans to raise the export duty on crude palm oil to 9.5%, marking the first increase in over three years. This decision follows a prior plan to maintain the rate at 8%, which has been in place since Jan-21. The export duty structure is complex, with rates varying based on the product's price. When the cost exceeds USD 921.26 (MYR 4,050), four tax categories are applied, with a maximum rate of 10%.

Malaysia's Palm Oil Prices Surge to Highest Levels Since Jul-22 Due to Supply Shortages and Geopolitical Tensions

Palm oil prices in Malaysia reached their highest levels since Jul-22, closing at USD 1,022.77/mt (RMD 4,486/mt) on October 23, marking a 22.6% increase year-to-date. This price surge was driven by a supply shortfall from Indonesia, the world's largest palm oil producer, due to the impacts of El Niño and reduced domestic production. In addition, Indonesia's plans for a B40 biodiesel mandate in 2025 are expected to tighten supply further. Malaysian palm oil exports remained strong, but stocks fell, increasing prices. Other factors, including a weaker Malaysian ringgit and geopolitical tensions, added upward pressure.

Russia

Russia's Palm Oil Imports Drop 8.7% YoY in 2024 Due to Logistics Delays and Price Increases

Palm oil imports to Russia decreased 8.7% year-on-year (YoY) to 638,000 mt from Jan-24 to Sep-24, with logistics issues, particularly longer delivery times, cited as the primary cause. Indonesia supplied 98% of the imports, while Malaysia, Italy, and the Netherlands contributed minimal amounts. Confectionery manufacturers, a key consumer of processed palm oil, have faced price increases of over 20% for palm oil-based fats since Aug-24. Despite challenges, some companies report no significant supply issues, while others have seen production declines due to logistics delays. The Oil and Fat Union expects palm oil imports to stabilize and return to previous levels in the near future.

2. Weekly Pricing

Weekly Palm Oil Pricing Important Exporters (USD/kg)

Yearly Change in Palm Oil Pricing Important Exporters (W44 2023 to W44 2024)

Indonesia

Indonesia's palm oil prices rose to USD 1.20/kg in W44, reflecting a 5.26% week-on-week (WoW) increase and a 31.03% YoY rise, partly driven by strong domestic demand and supply factors. Indonesia's Ministry of Agriculture has outlined plans to expand the area under oil palm cultivation, aiming to meet rising domestic biofuel requirements, particularly for the B50 biodiesel program. Expanding cultivation is a quicker alternative to replanting, which can take up to three years. Palm oil consumption in Indonesia has increased following the B35 biodiesel mandate. The government plans to raise biodiesel content to B40 by Jan-25 and eventually B50. The total area of oil palm plantations in Indonesia currently stands at 16.8 million ha, with further optimization required to meet production targets. In 2023, the country produced 50.07 mmt of palm oil, but additional land use improvements are needed to sustain domestic and export demand.

Malaysia

Palm oil prices in Malaysia saw a notable surge, reaching USD 1.20/kg in W44, reflecting a 4.81% WoW increase and a significant 35.06% YoY rise. Expectations of lower palm oil production and declining national stockpiles drove the increase. The Malaysian Palm Oil Board (MPOB) reported a 3.8% decrease in crude palm oil production in Sep-24, while exports grew slightly by 0.93%. In addition, rising prices in related oils, such as soybean oil, further supported the bullish trend in palm oil markets.

Thailand

Thailand's palm oil prices rose to USD 1.14/kg in W44, marking a 3.64% WoW increase and a substantial 37.50% YoY rise, driven by reduced supply and rising fresh palm nut costs. In response, Thailand's Ministry of Commerce has imposed an export ban on palm oil to boost domestic stock levels and is urging retailers to cap bottled palm oil prices, currently ranging from USD 1.26 to 1.41 per liter (L) (THB 43 to 48/L), to shield consumers from further price hikes. The Commerce Minister noted that drought conditions have pressured fresh palm nut supplies, leading to higher prices. To stabilize the market, officials are considering reducing the use of palm oil in biodiesel production, with current stocks at approximately 200,000 mt — sufficient until the next production season in Jan-25. The ministry also promotes price management strategies, with retail cooperation to maintain stable prices and potential cost-adjustment measures if necessary.

3. Actionable Recommendations

Strengthen Market Diversification Beyond the EU and India

To safeguard against potential export declines from regulatory and tariff changes, Indonesian palm oil stakeholders should prioritize market diversification beyond traditional destinations like the EU and India. Emphasizing growth in markets with less stringent sustainability standards, such as those in the Middle East and Africa, can reduce the impact of fluctuations in major import markets. Strengthening trade agreements with emerging economies and increasing promotional efforts in these regions will help stabilize Indonesia's export base and reduce vulnerability to policy shifts.

Invest in Sustainable Yield Improvements

To support increased domestic biodiesel demand without impacting export volumes, Indonesia should accelerate initiatives to raise palm oil yields through sustainable methods like plantation intensification and replanting programs. These efforts, targeting yields of 6 mt per hectare, will maximize productivity without extensive land expansion. Investment in modern farming practices, along with government incentives for smallholders to adopt high-yield varieties, will support the B50 biodiesel goal and enhance export capacity, meeting both domestic and international demand.

Foster Collaboration with Domestic Palm Oil-Based Industries

Expanding domestic consumption through partnerships with industries that utilize palm oil as an input, such as food manufacturing and consumer goods, can help absorb fluctuations in export demand. Encouraging product innovation using palm oil derivatives and aligning with biodiesel initiatives (B40 and B50) will strengthen the local market and reduce reliance on volatile export markets. Such collaboration can stimulate economic growth within Indonesia, build a resilient local market, and support price stability during export restrictions or external market disruptions.

Sources: Tridge, Rosng, Ukragroconsult, Wartaekonomi, Agro Investor, Grain Trade