Executive Summary

  1. Prices in August 2025 reached RM4,529/tonne, up 18.4% year-on-year and expected to average between RM4,250–RM4,500 for the year.

  2. Demand from India, China, and the EU remains robust, while supply faces El Niño disruptions, labor shortages, and aging plantations.

  3. Policy shifts—including India’s import duty cut and Indonesia’s B40 biodiesel mandate—are major drivers of price momentum.

  4. Risks such as climate volatility, economic headwinds, and widening price premiums could temper growth, but long-term demand signals remain strong.

Crude palm oil (CPO) continues to stand as one of the most influential commodities in the global vegetable oil sector. Its price movements in 2025 reflect the delicate balance between growing demand, production challenges, shifting policies, and wider global uncertainties. For traders and companies alike, staying ahead of these shifts is essential to navigating volatility and capturing market opportunities.

By August 2025, CPO prices climbed to around 4,529 Malaysian Ringgit (MYR) per tonne, marking an 18.4% increase year-on-year and a 6.2% rise compared to the previous month. In dollar terms, prices hovered between $930 and $1,190 per metric ton, showing a steady 5% lift in recent weeks. Analysts now expect average prices for the year to range between RM4,250 and RM4,500 per tonne, though short-term surges could occur in response to biodiesel policies and supply disruptions. This bullish momentum underscores the resilience of palm oil despite ongoing challenges.

Demand and Supply: A Tightrope Balance

Global demand for palm oil remains strong, driven by its versatile use in edible oils, industrial products, and biofuels. India, China, and the European Union remain top importers, with demand particularly fueled by the expansion of the biodiesel sector. On the supply side, however, both Indonesia and Malaysia—the world’s largest producers—are grappling with issues ranging from El Niño-driven erratic weather to labor shortages and aging plantations. Harvesting delays and reduced yields have further tightened supply, ensuring upward pressure on prices through much of 2025.

CPO pricing this year is also shaped by global policy moves and geopolitical tensions. India’s decision in May 2025 to cut its Basic Customs Duty on CPO imports from 20% to 10% significantly boosted buying activity, lifting trade flows and market confidence. At the same time, Indonesia’s push to accelerate its B40 biodiesel mandate has absorbed a larger portion of domestic supply, tightening availability for exports. Broader geopolitical uncertainties, particularly conflicts in the Middle East, have indirectly influenced global commodity markets, adding another layer of complexity to palm oil pricing.

Despite the upward trend, risks remain. Production recovery has been slower than anticipated, and any prolonged adverse weather or delays in biodiesel policy execution could inject fresh volatility. Global economic headwinds also loom large; should financial conditions tighten further, speculative demand may soften. Additionally, palm oil’s growing price premium over rival vegetable oils and fossil fuels could eventually trigger corrections, potentially cooling demand momentum.

Opportunities for Traders and Businesses

For palm oil traders, this environment demands agility and insight. Regional variations—such as differences between Indonesian and Malaysian CPO prices—create opportunities for strategic sourcing and arbitrage. At the same time, the continued rise of biofuels and global sustainability targets point to enduring structural demand. For companies with the right market intelligence, this presents avenues to hedge against price risks and strengthen their supply chain strategies.