PETALING JAYA: Crude palm oil (CPO) prices are expected to average at RM4,000 a tonne this year, compared with the current market price of RM4,450 a tonne, on more bearish demand supply dynamics.
CGS International (CGSI) Research expects CPO production to rise by 3% this year on the back of a recovery in Indonesia production levels from the second quarter of 2025 (2Q25) onwards, following the El Nino impact of 2024.
“With climatic conditions stabilising, we anticipate a significant recovery in Indonesian production in 2025.
“In contrast, we forecast Malaysia’s palm oil production to remain largely flat year-on-year (y-o-y) in 2025, following a strong recovery in 2024,” the research house said in a report.
It expected global demand for CPO to rise by 1% y-o-y in 2025, driven by demand for the B40 biodiesel programme in Indonesia.
Indonesia expects the implementation of the B40 policy to raise its biodiesel quota to 15.6 million kiloliters (kl) in 2025, up 16% from 13.4 millon kl in 2024.
Supply of competing edible oils is projected to rise this year with the availability of more soyoil in the market.
Citing the Malaysia Palm Oil Board, the research house said local palm oil production grew 4% y-o-y in 2024, while exports surged 12% y-o-y thanks to lower production in Indonesia.
This resulted in Malaysia’s palm oil inventory dropping to a low of 1.7 million tonnes by the end of 2024.
That aside, the high CPO prices, averaging RM4,840 a tonne, over 4Q24 has led CGSI Research to anticipate most local plantation companies to deliver strong 4Q24 results.
While CPO price is expected to continue to remain high in 1Q25, it has maintained its “neutral” call on the sector as it saw a potential CPO price correction in 2Q25, driven by recovery in palm oil production, especially in Indonesia and higher supply from competing vegetable oils.
That said, it favoured SD Guthrie Bhd
and Hap Seng Plantations Holdings Bhd as its top sector picks.
“We like SD Guthrie for its proactive monetisation of its large land bank through industrial park developments and renewable energy projects.
“We believe Hap Seng Plantations will announce 4Q24 results that outperform its peers due to its higher CPO average selling price and superior cost management.”
