KUALA LUMPUR (Dec 30): Fitch Ratings is expecting crude palm oil prices to retreat from the current level of over US$1,100 to US$800 (RM3,576) per tonne in 2025.
While Fitch Rating has tweaked its 2025 forecast for crude palm oil (CPO) spot benchmark to US$800 (RM3,576) per tonne amid expectation of “a slower rebound in yields and higher biodiesel consumption in Indonesia”, it expects the CPO prices to “weaken from 2024 due to higher supply and competition from soybean oil”.
Fitch had earlier assumed an average price of US$750 per tonne in 2025 and US$650 per tonne thereafter.
CPO prices surged past US$1,200 per tonne in early December 2024, driven by weaker output from Indonesia and Malaysia, where heavy rains hampered harvesting. Prices have since corrected, with the year-to-date average at US$925 per tonne, 10% higher than 2023, it added.
Looking ahead, Fitch anticipates an increase in CPO output in 2025, boosted by the end of La Nina conditions, according to its note dated Dec 27.
“The mild conditions should improve fruit yields with better rainfall, without causing disruption from flooding,” Fitch said.
Furthermore, it noted that rising availability of soybean oil is expected to weigh on CPO prices.
Fitch expects edible oil traders and manufacturers to buy less palm oil in favour of soybean oil.
Additionally, Indonesia’s new B40 biodiesel mandate, set to increase palm oil-based biodiesel blending to 40% from 35%, is projected to increase global palm oil consumption by 1% to 2% in 2025.
Fitch noted that this move will be implemented gradually next year, due to technical and cost challenges.
Source: The Edge Malaysia
