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Global

12th CPOPC Meeting Highlights Global Partnerships, Sustainability, and Market Expansion in Palm Oil Sector

The 12th Council of Palm Oil Producing Countries (CPOPC) Ministerial Meeting in Jakarta emphasized partnerships among major palm oil producers, including Indonesia, Malaysia, and Honduras, to expand market access and promote sustainability. The meeting welcomed the Democratic Republic of the Congo (DRC) and Nigeria as new observer states, while Colombia, Ghana, and Papua New Guinea are progressing toward full membership.

Key discussions focused on addressing global trade barriers, empowering smallholders, and leveraging palm oil for green energy initiatives like Sustainable Aviation Fuel (SAF), a renewable, low-carbon alternative to traditional jet fuel produced from sustainable feedstocks such as waste oils, agricultural residues, or non-food crops, to reduce aviation's environmental impact. Malaysia highlighted challenges such as protectionism and praised Indonesia's B40 biodiesel program, which reduced 32 million metric tons (mmt) of carbon dioxide (CO₂) emissions.

The ministers reaffirmed the CPOPC's commitment to sustainable practices, fair market access, and global food and energy security contributions. Indonesia handed over the CPOPC chairmanship to Malaysia for the 2024/25 period.

Rising Palm Oil Prices Face Challenges as Soybean Oil Becomes More Cost-Effective

Rising palm oil prices are challenging its position as the world’s cheapest vegetable oil, with soybean oil surpassing its affordability due to production curbs in Malaysia and Indonesia and the increased use of palm oil in biofuels. As prices surge, food and cosmetics manufacturers may face difficult decisions: absorb the higher costs, pass them to consumers, or substitute them with other oils. Some manufacturers, such as those in Brazil, have already shifted to soybean oil.

While the global soybean harvest is expected to be strong, palm oil’s production challenges persist. Limited replanting in Malaysia and Indonesia and anti-deforestation measures hinder expansion. Analysts predict that palm oil prices will eventually decline, but the long-term issues remain unresolved.

Bangladesh

Bangladesh Seeks G2G Palm Oil Supply from Malaysia Ahead of Ramadan

Bangladesh has requested that Malaysia supply refined palm oil under a government-to-government (G2G) arrangement to meet domestic demand, particularly before Ramadan. Commerce advisers appealed during a visit to Malaysia, highlighting Bangladesh's plan to provide subsidized edible oil to 10 million families through its social safety net program.

The Malaysian Plantation and Commodities Minister acknowledged the request and assured discussions with local stakeholders. Additional topics included collaboration in the rubber sector, trade opportunities, and the establishment of a 'Commodity Exchange' in Bangladesh. Malaysia is a key palm oil supplier to Bangladesh, which remains a major South Asian importer.

India

India's Palm Oil Imports Surge 60% MoM in Oct-24 Amid Festive Demand, Edible Oil Imports Decline Annually

India's palm oil imports surged 60% month-on-month (MoM) in Oct-24 to 845,682 metric tons (mt). This is driven by festive demand during Dussehra and Diwali and refiners replenishing stocks after recent lower imports, according to the Solvent Extractors Association of India (SEA). This increase could reduce inventories in top producers Indonesia and Malaysia, supporting global palm oil prices.

Furthermore, soybean oil imports fell 11% to 341,818 mt, while sunflower oil imports rose 56.5% to 239,116 mt. For the marketing year (MY) ending October 31, 2024, total edible oil imports declined 3% to 16.2 mmt due to robust domestic oilseed production and high prices dampening demand.

SEA projects India's edible oil imports may drop by 1 mmt in 2024/25, supported by expected record domestic production. India sources palm oil from Indonesia, Malaysia, and Thailand and imports soybean and sunflower oils from South America, Russia, and Ukraine.

Indonesia

Indonesia to Review 7.5% CPO Export Tax Amid Global Challenges and Domestic Priorities

Indonesia is reviewing its 7.5% export tax on crude palm oil (CPO) to balance farmers' welfare with global competitiveness through higher Fresh Fruit Bundle (FFB) prices. Conducted every 3 to 6 months, the review may adjust tax rates to address domestic and international market dynamics.

The current export tax policy, implemented on September 21, 2024, under Finance Ministerial Regulation No. 62/2024, also includes fixed rates for palm kernels and derivatives. Despite stable domestic production, Indonesia's CPO exports fell 26.39% year-on-year (YoY) in Aug-24 due to less competitive pricing and global economic challenges. The review aims to sustain industry health while supporting local producers and maintaining the Palm Plantation Fund Management Agency's (BPDPKS) financial stability.

Malaysia

Malaysia Targets 77,000 Ha for Oil Palm Replanting

Focusing on smallholders, the Malaysian government aims to replant oil palm on 77,000 hectares (ha) of land from 2025 to 2029 to ensure the palm sector's sustainability and competitiveness. The Ministry of Plantation and Commodities (KPK) emphasized enhancing research and development (R&D) to produce high-yielding oil palm plants using tissue culture techniques and conventional seed production.

To boost productivity, the Malaysian Palm Oil Board (MPOB) has introduced three commercial clones such as CPS1, CPS2, and CPS3, that are high-yielding, disease-resistant palm oil varieties designed to improve productivity and sustainability in the industry and are promoting adopting automation and Industry 4.0 technologies. Additionally, the MPOB is working with the Malaysian Communications and Multimedia Commission (MCMC) on the AgriNXT program to implement digital solutions to enhance oil palm estate management and increase output.

2. Weekly Pricing

Weekly Palm Oil Pricing Important Exporters (USD/kg)

Yearly Change in Palm Oil Pricing Important Exporters (W48 2023 to W48 2024)

Indonesia

Indonesia's palm oil prices rose to USD 1.29 per kilogram (kg) in W48, reflecting a 2.38% weekly increase and a 44.83% YoY surge. This price uptick follows Indonesia's ongoing review of its 7.5% export tax on CPO, which aims to balance farmers' welfare with global market competitiveness. Conducted every 3 to 6 months, the review could lead to tax rate adjustments based on domestic needs and international market conditions. If export tax changes occur, it may improve the price attractiveness of Indonesian CPO, boosting demand and stabilizing global prices. However, these decisions must also support local producers and ensure the financial sustainability of the BPDPKS.

Malaysia

Malaysia's palm oil prices decreased to USD 1.11/kg in W48, reflecting a slight 0.89% week-on-week (WoW) decline but still showing a 40% YoY increase. Despite this dip, palm oil futures have seen an upward trend, with the benchmark FCPOc3 for Feb-25 delivery rising 2.82% to USD 1,131.31/mt (MYR 5,023/mt), marking a weekly gain of 8.21%, the highest since Jun-23. Concerns over supply shortages drive the price recovery, as heavy rains in Malaysia exacerbate already weak production levels. The MPOB reported a 6.32% MoM drop in palm oil stocks and a 1.35% decrease in production in Oct-24. These supply constraints and global price movements in rival oils like soybean oil will likely support Malaysian palm oil prices in the short term. Malaysia's palm oil prices may remain volatile, influenced by weather patterns, production challenges, and global edible oil market competition.

Thailand

In W48, Thailand's palm oil prices rose to USD 1.19/kg, a 1.71% WoW increase and a 39.29% YoY surge. These gains are driven by heavy rains and flash floods disrupting palm oil production across Southeast Asia, including Thailand. The unusual intensity of monsoon-related precipitation has affected plantations, power supplies, and transportation infrastructure, creating supply concerns. Southern Thailand, a key agricultural region, faces heightened risks of flash floods, further threatening palm oil output. Similar weather conditions in neighboring countries are likely to constrain regional supply, indirectly supporting Thailand's palm oil prices. If adverse weather persists, supply disruptions may sustain upward pressure on Thailand's palm oil prices in the short term. However, easing rainfall or increased regional production could stabilize prices. These dynamics, alongside global competition and demand shifts, will significantly influence Thailand's future pricing trends.

3. Actionable Recommendations

Strengthen Market Diversification and Trade Alliances

Palm oil producers should prioritize expanding trade partnerships with emerging markets such as Africa and South Asia to mitigate challenges from rising protectionism and ensure stable market access. Collaboration through CPOPC and observer states like the DRC and Nigeria should focus on reducing trade barriers and establishing preferential trade agreements. Producers can also target regions with increasing demand, such as Bangladesh and India, by negotiating G2G supply arrangements and ensuring long-term contracts that stabilize demand and pricing.

Enhance Sustainable Practices and Biofuel Integration

Producers should accelerate the adoption of green energy applications, such as SAF and biodiesel, to align with global sustainability goals. Leveraging programs like Indonesia's initiative, which has demonstrated significant carbon emissions reduction, can showcase palm oil's environmental benefits. Simultaneously, industry stakeholders should invest in R&D to improve yields through high-performing oil palm clones and sustainable farming practices, balancing environmental concerns with production growth.

Adopt Weather-Resilient Strategies and Automation Technologies

Producers should invest in automation and Industry 4.0 technologies, such as IoT sensors, drones, and AI analytics to counteract adverse weather disruptions and optimize estate management. Initiatives such as Malaysia's agriNXT program can help monitor weather patterns, streamline operations, and enhance productivity despite challenging conditions. Additionally, implementing replanting programs with weather-resilient oil palm varieties can ensure the sector's long-term sustainability while minimizing supply volatility caused by climate variability.

Sources: Warta Ekonomi, Ukragroconsult, Vinanet, the Edge Malaysia, Hellenic Shipping News, Business Times