Fitch Ratings has revised its forecast for Malaysian crude palm oil (CPO) prices, expecting higher prices in 2025 and beyond.
The new forecast pegs palm oil prices at $800 (RM3,578) per tonne for 2025 and $700 per tonne for the following years, up from previous estimates of $750 and $650 respectively.
The revision is due to two main factors: a slower recovery in yields in Indonesia, the world’s largest palm oil producer, and expected growth in demand for biodiesel.
Indonesia’s decision to increase the blend of biodiesel in diesel fuel to 40% (B40) from January 2025, up from 35%, is expected to boost global palm oil consumption by 1% to 2%.
While prices are expected to increase in the long term, they may ease in 2024 due to improved palm oil supplies and stiff competition from soybean oil.
Currently, CPO prices are higher than soybean oil, which is likely to encourage traders to switch options.
Fitch also highlights limited expansion in oil palm acreage, particularly in Malaysia, where some plantations are being sold for other uses.
However, improved farming methods and seeds are expected to gradually increase yields over time.
Favorable weather conditions in 2025, following an expected short-lived La Niña, are likely to support a recovery in production.
