Palm Oil Sector Holds Steady In 2025 As Golden Crop Spared From Debilitating US Tariffs

By Danni Haizal Danial Donald

KUALA LUMPUR, Dec 17 (Bernama) -- Malaysia’s palm oil sector heaved a huge sigh of relief after it was exempted from the 19 per cent import tariff imposed by the United States, as it maintained a steady momentum this year despite being weighed down by soft external demand and high inventories.

Crude palm oil (CPO) traded at RM4,089.50 per tonne in November 2025, down from RM5,011.50 in November 2024, but prices are forecast to be higher early next year at around RM4,500. As of Dec 10 this year, CPO was trading at RM4,000 per tonne.

Exports were stagnant this year. Volume totalled 22.55 million tonnes in the first 11 months of 2025 with a value of RM103.01 billion compared with 26.66 million tonnes with a value of RM109.39 billion for the whole of 2024.

As the country’s largest commodity export, palm oil remained a central pillar of the sector, with the yield of fresh fruit bunches (FFB) for the estates sector increasing to 14.45 tonnes per hectare during January-October 2025, up from 13.96 tonnes per hectare in the same period last year.

The year under review saw stronger output being offset by softening external demand, rising stockpiles and intensifying sustainability pressures in key markets especially China, as buyers sought cheaper alternatives such as soybean oil.

The weaker demand contributed to a build-up in domestic inventories, which surged to more than 2.7 million tonnes -- the highest level in over six years.

The higher prices led to palm oil shipments to major markets, particularly China, to contract sharply by almost 30 per cent in the first 10 months of the year as buyers turned towards comparatively cheaper alternatives such as soybean oil.

The imbalance between high production and slowing overseas purchases continued to pressure CPO prices, limiting upside potential despite supportive fundamentals in the first half of the year.

ART Saves Commodity from Tariff Turmoil

Malaysia’s commodity sector endured a turbulent 2025 as on-off US tariff announcements fuelled persistent uncertainty, starting from the 24 per cent tariff announced on April 9 to reports of a 25 per cent rate from Aug 1.

A turning point came on Oct 26 with the signing of the Agreement on Reciprocal Trade (ART) during the 47th ASEAN Summit in Kuala Lumpur.

The pact exempted 1,711 tariff lines, including major commodity exports such as palm oil, from a 19 per cent tariff, covering about US$5.2 billion (RM22 billion) in exports and delivering much-needed relief after months of volatility.

EUDR Postponement, MSPO Recognition another relief for Malaysia

Beyond trade, the commodity sector enjoyed stronger market access and improved global standing in 2025 following key developments on the EU Deforestation Regulation (EUDR) and the recognition of the Malaysian Sustainable Palm Oil (MSPO) standard.

On Nov 26, the European Parliament approved a one-year delay to the EUDR. This gives large operators until Dec 30, 2026, and small enterprises until June 30, 2027, to comply, allowing more time for a smoother transition and upgrades to the EU’s digital due diligence system.

The EU’s official recognition of the MSPO on Sept 10 as a credible, traceable sustainability certification further strengthened Malaysia’s position.

The endorsement reduces compliance barriers for Malaysian exporters, supports smoother trade flows and reinforces the country’s leadership in sustainable palm oil.

Higher Budget Allocation and Outlook for 2026

There was good news for smallholders in Budget 2026 as the government gave allocations to modernise agribusiness and support smallholders.

An allocation of nearly RM2.4 billion was announced to safeguard over 720,000 settlers, smallholders and their families under the Federal Land Development Authority (FELDA), the Rubber Industry Smallholders Development Authority (RISDA), and the Federal Land Consolidation and Rehabilitation Authority (FELCRA).

Some RM20 million would be used to support start-up companies in producing mechanisation and automation products in collaboration with the Malaysian Palm Oil Board and major palm oil companies so as to reduce reliance on foreign workers and encourage local innovation.

Looking ahead, the palm oil sector is expected to continue to show strong potential, albeit within a highly competitive landscape, with key industries facing recovery in exports and bullish momentum.

The rebound in soybean oil prices will narrow the large price gap between the two oils, as recovery in soybean oil prices would strengthen the sector.

The Malaysian Palm Oil Council said CPO prices could trend higher towards RM4,500 per tonne in 2026, driven by stable import demand ahead of the Chinese New Year and Ramadan, while Indonesia’s policy uncertainty continues to lend support to palm oil prices.

-- BERNAMA