Palm oil futures slipped below the 4,500-ringgit mark this week, extending losses for a third consecutive session. The benchmark Malaysian crude palm oil contract settled at around 4,451 ringgit per ton, or roughly 937 US dollars.
The recent decline reflects a combination of a stronger ringgit, higher inventories, and cautious demand from key importers, even as Indonesia’s ambitious biodiesel expansion promises stronger structural demand ahead.
From a short-term market perspective, fundamentals lean mildly bearish. End-September stocks in Malaysia rose to about 2.36 million tonnes, the highest in nearly two years, up more than seven percent from August.
The surge in inventories has weighed on market sentiment, and futures traders are showing limited appetite for aggressive long positions.
India, the world’s largest palm oil buyer, remains a critical demand driver. Its imports fell by around sixteen percent in September to roughly 829,000 tonnes, and October arrivals may drop below 600,000 tonnes. The main reason behind this slowdown is the renewed competitiveness of soybean oil.
Argentine and Black Sea offers have become more attractive, with CIF and CFR prices near 1,100 to 1,120 US dollars per ton, compared with palm oil cargoes quoted closer to 1,150 to 1,170 dollars CFR West Coast India.
This narrow gap has encouraged Indian refiners to switch part of their requirements toward soyoil, capping palm oil’s upside potential in the near term.
Nevertheless, the medium-term outlook is more constructive, driven primarily by Indonesia’s biofuel strategy. The country’s current B40 mandate still leaves a portion of diesel demand covered by imports, but the government is pressing ahead with plans for a B50 biodiesel program to be launched in 2026.
The program will require a fifty percent palm-oil blend, which could absorb millions of additional tonnes of crude palm oil domestically. Officials estimate that the B50 rollout would create up to 2.5 million jobs, cut diesel imports to near zero, and save roughly 10 billion US dollars in foreign exchange annually.
If the B50 mandate is implemented as planned, Indonesia’s exportable surplus will shrink significantly, likely tightening global supply and lending long-term price support. However, there remains uncertainty around timing, as road tests and performance studies are expected to take six to eight months before nationwide approval.
In Malaysia, the government projects crude palm oil prices to average between 3,900 and 4,100 ringgit per ton in 2026. This forecast assumes stronger output not only from Malaysia but also from competing vegetable oil producers, including soybean and sunflower oil exporters.
Latin American producers, particularly Colombia and Guatemala, have also increased exports to Asia at discounted prices, offering buyers an alternative source and helping to contain global prices.
The Price-Driven Battle for Market Share
Palm oil does not trade in a vacuum. Its demand is intensely sensitive to its price relative to other vegetable oils, primarily soyoil, sunflower oil, and rapeseed oil.
Global Vegetable Oil Price Snapshot (Recent Averages)
Crude Palm Oil (CPO) approximately 1,075 US dollars per M/T ; key market drivers include biofuel mandates and Malaysian inventory levels.
Soybean Oil approximately 1,168 US dollars per M/T, driven mainly by Argentine export tax policy and US biofuel incentives.
Sunflower Oil approximately 1,182 US dollars per M/T, driven by Black Sea geopolitics and supply stability.
Rapeseed Oil approximately 1,270 US dollars per M/T, influenced by EU production prospects and steady industrial demand.
The recent surge in India’s soyoil imports, at palm’s expense, was triggered by competitive Argentine offers around 1,100 to 1,120 US dollars per M/T CIF or CFR.
This narrow price gap makes refiners highly sensitive to small changes in relative costs. Any reversal in Argentina’s export tax stance or a rally in the South American soy complex could quickly restore palm’s competitiveness.
Sunflower oil, once constrained by Black Sea supply disruptions, has seen increased shipments, making it a viable substitution option in certain markets. Rapeseed oil consistently trades at a premium, positioning it as a niche, higher-end product rather than a direct mass-market competitor to palm.
On the logistics side, CFR offers for Malaysian palm oil into India currently hover between 1,150 and 1,172 US dollars per M/T for October shipment. That implies an ocean freight cost of roughly 20 to 40 dollars per M/T, depending on vessel size, route, and congestion levels.
Freight rates on longer routes, such as South America to India, remain considerably higher, yet discounted FOB prices from those origins have kept delivered costs competitive. Freight markets in general are volatile, affected by tanker availability and broader geopolitical tensions, so traders are advised to secure freight early and monitor Baltic and regional shipping indices closely.
In the broader vegetable oil complex, soybean oil remains palm oil’s main competitor. Argentina’s government has recently adjusted its export tax system, enabling exporters to quote more aggressively into India.
Sunflower oil availability from the Black Sea region has also improved slightly, although logistics and risk premiums continue to fluctuate. These cross-commodity substitutions create a moving ceiling for palm oil prices, as refiners and traders optimize blends according to landed cost and refining margins.
For industrial buyers, the near-term strategy should remain cautious. With stocks high and import demand soft, there is no urgent need to chase prices upward.
Tactical sellers can take advantage of any short-covering rallies to lock in margins, while buyers may prefer partial coverage of near-term needs and flexible options for later months.
A layered hedging approach covering perhaps half of projected requirements and keeping the rest open for potential dips remains prudent.
Over a three to twelve-month horizon, the key market driver will be Indonesia’s B50 implementation. Should the program proceed smoothly and domestic offtake rise as expected, export restrictions or domestic market obligations could tighten international availability, creating a structural bullish scenario.
GrainFuel Nexus therefore monitor policy announcements and test results carefully. Options or deferred purchase agreements can be used to maintain upside participation while limiting exposure if the rollout is delayed.
Risk factors remain in play. Indonesia’s B50 timeline could slip; Indian demand could weaken further if soybean oil maintains its price advantage; and freight disruptions or geopolitical shocks could alter arbitrage dynamics between origins.
Conversely, any weather-related supply disruptions, export curbs, or stronger biodiesel mandates could flip sentiment quickly back into bullish territory.
In summary, palm oil prices have softened in October but remain underpinned by the prospect of rising biodiesel demand in Indonesia. The current trading range between 4,400 and 4,600 ringgit per M/T is likely to hold until a decisive signal emerges from either Indonesia’s B50 roadmap or a shift in India’s import behavior.
For now, the market tone is neutral to slightly bearish in the short run, but structurally supportive in the longer term as biofuel policy continues to reshape the demand landscape across Southeast Asia.
GrainFuel Nexus – Market Intelligence Division - End of Report – 16 October 2025
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This is a general market analysis for informational purposes only and does not constitute financial or professional advice. The author assumes no liability for any actions taken based on this information.