KUALA LUMPUR: Malaysia expects the price of crude palm oil (CPO) to average between 3,500 ringgit and 4,000 ringgit ($812 to $928) per metric ton in 2025, slightly lower than this year’s expected range due to better global production, the government said on Friday.

In an economic outlook report released alongside its 2025 budget, the government said the forecast reflected expected higher global output of soybean oil and steady demand for CPO from major importing countries.

“The oil palm subsector is poised to increase at a modest pace, underpinned by high fresh fruit bunch (FFB) production and yield following larger oil palm harvestable areas, favourable weather condition and better labour market,” the report said.

The report said CPO prices in 2024 were projected at between 3,800 ringgit and 4,300 ringgit per ton due to constraints in global palm oil supply. Malaysia’s benchmark crude palm oil futures hit six-month highs of 4,350 ringgit this month.

The contract has traded at an average of 4,025 ringgit a ton this year, and closed at 4,278 ringgit on Thursday. Low FFB yields were also expected to affect CPO production in the second half of 2024, the report said.

Palm falls on mix trading in rival oils

“This is due to dry weather condition, which began in the second half of 2023 and intensified further in the beginning of 2024, which will adversely impact the quality of fruitlets,” it said.

On exports, the report said increasing demand, particularly from India, Bangladesh, Germany, Iran and the Philippines, was expected to raise palm oil exports by 2.3% in 2024.

Malaysia is the world’s second-largest producer of palm oil.