PALM OIL prices are expected to climb by 10 to 15 per cent in early 2025 following a strong price surge this year , primarily driven by Indonesia ’ s biofuel mandates and ongoing supply challenges , particularly in production and fertiliser availability . The cost of palm oil has surged over 34 per cent this year , reaching over RM5,000 ( US $ 1,141 ) per tonne on the Bursa Malaysia Derivatives ( BMD ) market . The rise in prices is expected to continue due to key factors such as Indonesia ’ s ambitious biofuel mandate and global supply disruptions .
One major factor influencing the price hike is Indonesia ’ s biodiesel programme , which began with a B35 blend in February 2023 , requiring 35 per cent palm oil content .
In 2025 , the blend will increase to 40 per cent , or B40 , which will further tighten the demandsupply equation , experts predict . SUPPLY STRAIN If the B40 programme is enforced , palm oil prices will likely rise by another 10 to 15 per cent between January and March 2025 .
A senior member of the Indonesia Palm Oil Association ( GAPKI ), Joko Supriyono , pointed out that the shift to B40 would require an additional three million tonnes of palm oil each year .
Despite a slight drop in Indonesian palm oil production to 48 million tonnes in 2024 , it is
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expected to rebound to 50 million tonnes in 2025 .
In Malaysia , where palm oil production is also constrained , the situation is exacerbated by ageing oil plantations in need of replanting .
According to Malaysian Palm Oil Board ( MPOB ) Chairman Mohamad Helmy Othman Basha , Malaysia faces a replanting challenge , and the high palm oil prices have made small producers hesitant to cut down their ageing palms for new growth . This lack of expansion will likely limit production growth
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in Malaysia .
Beyond biodiesel , fertiliser shortages , linked to the ongoing geopolitical situation in Ukraine , also add pressure to the palm oil market . The geopolitical disruptions have hindered fertiliser supplies , raising costs for plantations in both Indonesia and Malaysia .
While some analysts predict that prices will stabilise to around US $ 1,000 per tonne by late 2024 , others expect palm oil prices to remain strong in 2025 , ranging between US $ 950 and US $ 1,050 per tonne .
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Thailand ’ s palm oil halt THAILAND ’ S Department of Internal Trade has implemented a temporary ban on the export of raw palm oil to stabilise local prices and ensure sufficient stock levels following a decline in production due to drought and plant diseases .
The restrictions , set to last until December 2024 , aim to protect both farmers and consumers from soaring prices .
According to Commerce Minister Pichai Naripthaphan , the ban was necessary due to the sharp decline in palm oil production , which could lead to price hikes .
Goranij Nonejuie , the department ’ s deputy director-general , reassured that current prices are stable at 8-9 Baht per kilogram but emphasised the importance of closely monitoring bottled palm oil costs .
The ministry has also worked with the Palm Oil Extraction Mills Association and retailers to control stock levels and prevent price surges . Both associations have agreed to suspend exports and collaborate with the government to manage the domestic supply .
Retailers and wholesalers have also committed to maintaining affordable bottled palm oil prices and offering promotions to help ease consumer burdens .
With a stock of over 200,000 tons of crude palm oil , the export ban will be revisited in January 2025 . However , those found guilty of price gouging could face severe penalties , including fines or imprisonment .
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